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Returning to Italy? Advice needed (residence, retirement, INPS, tax)

Returning to Italy? Advice needed (residence, retirement, INPS, tax)

Old Aug 11th 2020, 3:34 am
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Default Returning to Italy? Advice needed (residence, retirement, INPS, tax)

I am British and I lived in Italy for 10 years in the nineties. I had always planned to return in retirement, but returning now means giving up a very well-paid job in the Gulf. (However, I do plan to quit this job in the next 1-2 years).

I understand I can return before December 31 and I will have the same rights to residence as I did before (provided I register with the anagrafe). However, can anyone help with the following?

1. What will happen after December 31? Could I still return and work in Italy?

2. Are there options for a retirement visa? Will this change after December 31?

3. I paid INPS contributions for a decade. What will happen to them when I retire? I understand they are not enough for an Italian pension. When I enquired about transferring them the UK authorities just said “Come back to us when you reach retirement age” and “They will only count as 2 years for us”.

4. If I return to Italy would I have to declare rental income from UK property? I understand that it is taxed in whichever country has the higher taxation rate (in this case Italy).

Thanks for any advice.
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Old Aug 11th 2020, 10:10 am
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Default Re: Returning to Italy? Advice needed (residence, retirement, INPS, tax)

1. No idea, hopefully someone here does

2. I’ve read a lot of times there is elective residency, basically you need a good income.

3. Don’t know where you got your information, but last I knew (used to work for the government calculating such) any contributions in Italy would be used to calculate a pro-rata pension and for qualifying for any minimum year rule. In Italy the same would apply to any UK contributions. I would look into this very carefully if you need to benefit from these Italian 10 years. You may have more wealth than this is worth in effort, but as in thing like elective residency any small income you may make from this may make all the difference in terms of “income” as opposed to wealth” which Italy often seems to disregard. If you don’t have UK contributions, but possibly have entitlement to pay voluntary I would look at this as well as, although I’ve not checked it of late, I believe there is a minimum 10 year qualifying rule now. Brexit apart, whereby this may all change, I’m pretty sure your 10 years in Italy would be used to qualify you ( GOV site here seems to confirm) for at least this, “pro-rata” calculation. You really need to contact the DWP people doing these calculations (still in Newcastle I believe) and make sure you speak to a person that does the actual calculation and not their assistants. Personally I would follow up any call with a letter and get it in writing. But like I have said, anything could change between now and retirement in the future….

4. No idea… but suspect you are right.

Good luck!
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Old Aug 11th 2020, 10:15 am
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Default Re: Returning to Italy? Advice needed (residence, retirement, INPS, tax)

Originally Posted by 657 View Post
4. If I return to Italy would I have to declare rental income from UK property? I understand that it is taxed in whichever country has the higher taxation rate (in this case Italy).

Thanks for any advice.
Rental income from UK property is taxed in the UK.
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Old Aug 11th 2020, 10:39 am
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Default Re: Returning to Italy? Advice needed (residence, retirement, INPS, tax)

I was just looking out the DTA here on the very subject Margaret has replied on, Art. 6 indeed covers this. It may be of use to you for any other queries on taxation.



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Old Aug 11th 2020, 11:18 am
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Default Re: Returning to Italy? Advice needed (residence, retirement, INPS, tax)

In respect of a returning person having the right to reside this only applies I believe if you had applied for and were granted the certificate of "Soggiorno permanente " after five years of residence but if you leave Italy for more than 2 years you lose this right I assume that as you were in Italy in the 90s you had to get the dreaded Permesso di Soggiorno anyway
In respect of the pension the general rule in Europe is that the country in which you last worked and paid into its pension scheme is the country which actually pays your pension.As part of this process you will be asked to provide details of all the countries in which you have worked and the DWP will liaise with them to sort out your pension rights and I cannot see this changing after Brexit. In respect of the rental property the rule is that the country in which the property is situated is the country which has first dibs at taxation It has nothing to do with the rate of tax but is governed by the Anglo Italian tax treaty As an Italian resident you are required to submit a tax return and you must include the rental amount on it for which you will get a tax "credit" from Italy
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Old Aug 11th 2020, 11:37 am
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Default Re: Returning to Italy? Advice needed (residence, retirement, INPS, tax)

Originally Posted by Listen Very Carefully View Post
In respect of a returning person having the right to reside this only applies I believe if you had applied for and were granted the certificate of "Soggiorno permanente " after five years of residence but if you leave Italy for more than 2 years you lose this right I assume that as you were in Italy in the 90s you had to get the dreaded Permesso di Soggiorno anyway
In respect of the pension the general rule in Europe is that the country in which you last worked and paid into its pension scheme is the country which actually pays your pension.As part of this process you will be asked to provide details of all the countries in which you have worked and the DWP will liaise with them to sort out your pension rights and I cannot see this changing after Brexit. In respect of the rental property the rule is that the country in which the property is situated is the country which has first dibs at taxation It has nothing to do with the rate of tax but is governed by the Anglo Italian tax treaty As an Italian resident you are required to submit a tax return and you must include the rental amount on it for which you will get a tax "credit" from Italy
If what has been said here about the tax on rental income, then surely the calculation i.e. a tax credit would result in the OP paying the difference in rates between the two countries? In regards of the pension, this is wrong, both countries will calculate pensions based on both combined and their own insurance. The combined is then reduced by a pro-rata against the national rate, The higher of the two calculations made by them is then paid. Almost always this is the national contribution rate in the UK, not the pro-rata the exception being of course where UK alone contributions would result in zero due to something like the minimum number of qualifying UK conts not being present.
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Old Aug 11th 2020, 1:17 pm
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Default Re: Returning to Italy? Advice needed (residence, retirement, INPS, tax)

First, thanks to everyone for the helpful replies.

Regarding concern 3. Being told ten years of INPS contributions only count for two years in the UK, this was said to me over the phone when I contacted the UK national insurance folks. (I asked when I paid many years of backdated NI contributions). It certainly seems wrong to me. At the moment if I continue making voluntary contributions in the future I will end up with 34 years of UK contributions (I believe you need 35 years for the full UK pension, so I am not far off).

I think I have insufficient years of contributions to get a pension from the Italian government, but I am sure they must be transferable. I would imagine the last work I did since leaving Italy would have been a month's work in the UK before relocating overseas again. Whether that is sufficient to influence this I have no idea. Other countries I have worked in do not have reciprocal taxation as far as I know and/or pay tax-free salaries.
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Old Aug 11th 2020, 1:22 pm
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Default Re: Returning to Italy? Advice needed (residence, retirement, INPS, tax)

Originally Posted by Listen Very Carefully View Post
In respect of a returning person having the right to reside this only applies I believe if you had applied for and were granted the certificate of "Soggiorno permanente " after five years of residence but if you leave Italy for more than 2 years you lose this right I assume that as you were in Italy in the 90s you had to get the dreaded Permesso di Soggiorno anyway
In respect of the pension the general rule in Europe is that the country in which you last worked and paid into its pension scheme is the country which actually pays your pension.As part of this process you will be asked to provide details of all the countries in which you have worked and the DWP will liaise with them to sort out your pension rights and I cannot see this changing after Brexit. In respect of the rental property the rule is that the country in which the property is situated is the country which has first dibs at taxation It has nothing to do with the rate of tax but is governed by the Anglo Italian tax treaty As an Italian resident you are required to submit a tax return and you must include the rental amount on it for which you will get a tax "credit" from Italy
Thanks for your reply.. I had a ten-year permesso di soggiorno at the time (a fold out piece of blue card). Whereas, the first one (one year?) was just a sheet of paper. However, having been away for so long I have obviously lost the right to a soggiorno permanente.
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Old Aug 11th 2020, 1:49 pm
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Default Re: Returning to Italy? Advice needed (residence, retirement, INPS, tax)

This is from the gov.uk website

Your UK State Pension will be based on your UK National Insurance record. You need 10 years of UK National Insurance contributions to be eligible for the new State Pension.

You may be able to use time spent abroad to make up the 10 qualifying years. This is most likely if you’ve lived or worked in:
  • the EEA
  • Gibraltar
  • Switzerland
  • certain countries that have a social security agreement with the UK.
Example

You have 7 qualifying years from the UK on your National Insurance record when you reach State Pension age.

You worked in an EEA country for 16 years and paid contributions to that country’s state pension.

You will meet the minimum qualifying years to get the new State Pension because of the time you worked overseas. Your new State Pension amount will only be based on the 7 years of National Insurance contributions you made in the UK.


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Old Aug 11th 2020, 3:06 pm
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Default Re: Returning to Italy? Advice needed (residence, retirement, INPS, tax)

Originally Posted by 657 View Post
This is from the gov.uk website

Your UK State Pension will be based on your UK National Insurance record. You need 10 years of UK National Insurance contributions to be eligible for the new State Pension.

You may be able to use time spent abroad to make up the 10 qualifying years. This is most likely if you’ve lived or worked in:
  • the EEA
  • Gibraltar
  • Switzerland
  • certain countries that have a social security agreement with the UK.
Example

You have 7 qualifying years from the UK on your National Insurance record when you reach State Pension age.

You worked in an EEA country for 16 years and paid contributions to that country’s state pension.

You will meet the minimum qualifying years to get the new State Pension because of the time you worked overseas. Your new State Pension amount will only be based on the 7 years of National Insurance contributions you made in the UK.
Yep that's correct and it works the other way around i.e. in Italy. I used to deal with various INPS offices and believe me they were bad, further South they were the worse they were.... So the process would likely not be too quick. I don't know the current Italian rules on pensions, but there will be a calculation they have to make under EU rules (same for all) whereby they use any UK (or other EU country) contributions along with your Italian contributions to get a theoretical amount which is then applied a pro-rata to get a payable amount. Under these EU pension rules there is NO minimum amount payable that can be disregarded, but they can pay a lump sum yearly if it is very small….

It sounds like you qualify for a UK pension without any Italian contributions and the use of them in the UK will make NO difference to your UK pension which will be higher and paid solely under UK legislation, but they will do the calculation and send you a very complex letter meaning nothing…
The basics of the UK calculation would be 7/23 * the current rate a total of 23 year gives you for a UK pension. If this example was say Italy as the other country, theirs would be 16/23 * the amount 23 years is worth there....
Only the EU could come up with this, little wonder there is little on the subject....

The UK state pension changed in 2016, basically reverting back to a flat (higher) rate. If you have only paid voluntary contributions, this will make no difference to you. However if you had contracted out contributions from working in the UK I would get a pension forecast from them if you don’t have a one since April 2016.

As to the “2 years” equivalent I can’t begin to guess who or what you were talking to….
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Old Aug 11th 2020, 4:04 pm
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Default Re: Returning to Italy? Advice needed (residence, retirement, INPS, tax)

Hi Geordieborn.

Thanks again for your valuable input. Apologies if I didn't acknowledge your earlier comments (I didn't know how to use the quote function). I have a real dilemma now about returning as the clock is ticking. My passive income from UK property may be sufficient for an elective residency while I am single (31K Euro), but it is not fixed, and there are currency fluctuations to consider. It probably won't be enough if I decide to get married and bring my spouse with me.

Now I need to think long and hard if I am prepared to leave my current job. Every month I probably save what would take many months to earn in Italy, so it is hard to walk away from it. But the job sucks and the idea of never having la dolce vita again is tough. I also don't like the idea of 10 years of contributi INPS being wasted. For some reason I am thinking this may all be different if I had paid INPS for 20 years. (I think that is the minimum qualifying period for an Italian pension and the retirement age is 67 like the UK). However, that is probably irrelevant anyway as I think the effect would be negligible.... I don't think you can claim for 2 full pensions (one UK and one Italian).

My current UK pension forecast is just under 9K per annum (roughly £170 per week which I believe is £5 less than the current full pension). Overall, I have 17 years in which I didn't pay enough, 10 of which were years when I paid in Italy.

I spent my time in the north but I have always wanted to retire in the south....I need the Sun (that is the one thing I will miss about the Gulf when I do leave).
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Old Aug 11th 2020, 4:54 pm
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Default Re: Returning to Italy? Advice needed (residence, retirement, INPS, tax)

No problem. I think you will (Brexit apart, and really even with it) get an Italian pension at 67 if that's what it is now. When I worked there (and I'm pretty sure it will not have changed for this bit) if you put on your UK claim you worked in Italy in addition to getting details of your Italian insurance regardless of it being no good for your UK pension, they will make a claim on your behalf at age 67 (they used to issue an form E202UK/I to them).
Don't forget it can be a lot cheaper living in Italy, certainly is being retired - again, best of luck.
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Old Aug 14th 2020, 4:38 am
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Default Re: Returning to Italy? Advice needed (residence, retirement, INPS, tax)

I am going to throw another issue out there. When I left Italy in 2004 (after 10 years of residency) I cannot recall cancelling my residency at the anagrafe and still have my old permesso di soggiorno and libretto di lavoro. Where doe that leave me now?
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Old Aug 14th 2020, 8:49 am
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Default Re: Returning to Italy? Advice needed (residence, retirement, INPS, tax)

Originally Posted by 657 View Post
I am going to throw another issue out there. When I left Italy in 2004 (after 10 years of residency) I cannot recall cancelling my residency at the anagrafe and still have my old permesso di soggiorno and libretto di lavoro. Where doe that leave me now?
I'm not sure what you mean by this ? Are you suggesting that you could return and take up residency as if you had never left ?
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Old Aug 14th 2020, 9:14 am
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Default Re: Returning to Italy? Advice needed (residence, retirement, INPS, tax)

Originally Posted by HADENOUGHPIZZA View Post
I'm not sure what you mean by this ? Are you suggesting that you could return and take up residency as if you had never left ?
No, I don't imagine that I could return as if I had never left. I wonder if there would be any problems if I had not followed correct protocol for cancelling residency in the past (should I decide to return in the future). I have returned briefly since I left, but only as a tourist.
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