Geordieborn

You could argue the UK state pension is never taxed as they have no means to do so other than indirectly. I always read the treaty as saying the state pension is taxable in the place of residence, but government pensions gained from working for them were not. This I understood was mainly to do with history related to the diplomatic service which spread. But every time I read this from the treaty I wonder if I’m reading it correctly….

I look at it differently every time!

Bomber Harris

I guess you wouldn't pay tax on a UK state pension if you fail to declare it on your tax return, but that of course can result in fines, back tax and interest.

Article 18 tells us that pensions will be taxed in the country where you reside. The exception to that being what is written in Article 19.2.
Article 19.2a states public service pensions will be taxed in the country that is paying that public service pension.
Article 19.2b then says EXCEPT where the recipient is both a resident AND a national of the other contracting state.
So an Italian citizen who worked for a UK government service then retired to Italy on their UK public service pension would have that pension taxed in Italy and not the UK.

jiminalpago

[QUOTE=Geordieborn;13127870]You could argue the UK state pension is never taxed as they have no means to do so other than indirectly. I always read the treaty as saying the state pension is taxable in the place of residence, but government pensions gained from working for them were not. This I understood was mainly to do with history related to the diplomatic service which spread. But every time I read this from the treaty I wonder if I’m reading it correctly….

I am definitely paying tax on my state pension in UK, via an adjustment to my tax-free allowance in the calculation of my tax code.
However, i am disappointed by what Listen and Bomber say, having been assured by Entrate (Belluno) that i am in the clear from 2015 to 2020 on tax due; I paid a whack of 'sanzioni' for those years for not declaring the UK bank accounts.

Pulaski

To which I would add, is that if someone (non-Italian citizen) retires in Italy on a non-Italian public service pension, and pays tax on that pension in their home country/ country where they earned the pension but they then become an Italian citizen, then they need to notify the public service pension adminstrator of their change of circumstance (additional/ different nationality) so that tax is no longer deducted and they then need to start paying tax on their public service pension in Italy.

philat98

Yes that is the downside of Italian citizenship.

calman014

Facing a similar problem in NL.
I researched the tax agreements online and was able to download the UK and local agreements as a pdf and a link.
Plus there are lots of other articles online, including on gov.uk and HMRC sites.
I submitted this to the tax authorities as evidence of the rule.
Government Pensions are exempt from local taxation unless you are a national. Only 4 countries exempt, Australia, Canada and Nepal being 3 of them.
In EU you should be exempt.
See if you can find the Italian version online via EU or OECD sites.

Geordieborn

[QUOTE=jiminalpago;13128391] Yes you pay, but as you state via your tax code reduction, so it looks to the Italians that you don't pay on the state pension! I It just makes things a little harder to explain. So, is the general opinion the state pension is taxed in your country of residence (UK/Italy) and government private pensions are only taxed in the country of origin (unless you have nationality i.e. Italian)?.
It's perhaps not that odd, but many from the UK living in Italy have private government pensions. We both did/have and I guess fortunately no state pension when living there. Then there is the question of the difference in rates, can the Italian authorities claim the difference due to high rates there against any private government pension?

calman014

What the authorities in IT ( and in my case NL) seem to forget is that it’s a reciprocal agreement, affecting Italians in UK as well.
These rules have been around for a long time and are more or less standard across all international organizations such as OECD.
Other organizations such as EU have simply adopted the same rules with a few small tweaks.

jiminalpago

[QUOTE=Geordieborn;13128527] This is a most depressing thread. Can one of the moderators pull the plug, please? 😩

calman014

State pension is taxable in your country of residence. Government Pensions (UK) in the UK only.

All tax related threads are depressing, but this is a rule that applies to many expats, especially ex-forces!

C.2s

This thread is definitely in the depressing but necessary category!

I've been following this whole thread with a bit of dread. To explain, my wife had a private pension... well it's a monthly payment that she receives because her first husband passed away and it comes from his employer...so I assume that's still classed as a pension even though she's not quite at retirement age and it wasn't exactly her pension. We both live in Italy full time, but we're not yet citizens. We're approaching five years of residency so we could think about applying for citizenship. I worked part time here a bit, but never really earned more than€5000 a year. Some of that work was online for clients in other countries around the world. My wife also tried starting a part time business, but it wasn't really successful (as she started just before the pandemic). We have savings, which includes cash in banks in the UK and investment funds (which post Brexit are now based in Ireland) and shares (and we always use the dividend to buy more shares) . All the time we've been here we've tried to be totally honest and open about our situation, and to pay tax here. After all we chose to live here and we think it's morally right to therefore pay the tax in this country. But so far we've not paid a penny (apart from local comune taxes)...we keep being told by the AdE and our commercialista that we don't have to pay anything. I don't really believe that is correct. It just seems like common sense that we should pay tax here . Last year a friend of ours who had lived in Italy for over 30 years, been married to two Italians (not at the same time!) and has Italian kids was suddenly faced with a bill for property tax on a place they own in the UK... they couldn't find the money and so decided their only was to leave Italy.

Tomorrow we see our commercialista again to try and resolve our ongoing problems with healthcare (the ASL can't seem to find a category for us).

Now I sit here wondering if and when we'll get a bill for all the tax we have "avoided" (even though it's not been our intention to avoid it). And I begin to wonder if it wouldn't be better to give up the idea of living here as a resident, and instead just go back to this being a holiday home? Even with the hassle of having to change documents (such as driving licences) back to UK ones, what to do about cars etc, living with the 90/180 rules etc ...it stills seems easier than trying to live here.

So yes, this thread is depressing to read but it's still very useful

philat98

When I arrived in Italy my partner asked a local accountant if I had to pay tax. She said that since I was unemployed there was no tax to pay. I found out later she was wrong. I declared my UK investments to the authorities and I didnt get fined. They might be tougher now after the Covid.
It is certainly worth getting advice from another accountant just to check your situation is correct.

PSG2014

I agree, I would also suggest getting more than one view. One commercialista told me I must pay Italy taxes on my Local Government pension, another said, no I should not !!!

At the end of the day it will be YOU who gets the fine for any mistakes that your commercialist makes.

The agency here in Italy has written to say that the second commercialista is correct in that I should not pay the tax here.

PSG

C.2s

Hmmm... getting a second opinion from another commercialista is certainly a less 'nuclear' option than fleeing the country in the dead of night! :-)

In today's conversation, during which I was a bit more insistent about my worries, the commercialista said that in her view the AdE are much more concerned about monies being transferred out of Italy to other bank accounts abroad than transfers into Italy from abroad. because that's where there is the biggest scope is for avoiding Italian tax, and it's not really the AdE's job to monitor tax paid on money earned abroad ...I can sort of see the sense of this. Still I insisted that I feel one should pay tax in the country where you live. If you are going to have the benefits of the community, you ought to contribute... but that's more of an ethical argument than one about the tax laws. And so the commercialista argued that if we declare absolutely everything including bank accounts, investments (which after Brexit are now based in Ireland), shares, etc, on this year's return (we both have partita IVAs) wouldn't I feel that we had been completely honest and open with the AdE and therefore not have any ethical qualms? And thinking about it, I do think that's the best we can do.. If the AdE say we have zero tax to pay it's not exactly our fault... and if they come back in a few years and say that actually we need to pay them and claim back UK tax (and Irish tax?)... well I guess we can cross that bridge if/when we come to it.

37100

So, basically, your accountant is telling you to evade tax until they catch you. I'd be having nightmares, but then, I've had to deal with the AdE. Foreign bank accounts and incomes usually need to be declared. Doesn't mean tax is payable. We have foreign investment funds which we don't have to declare. However, they were bought in Italy and the AdE can see them.