The process of obtaining Italian citizenship is an important milestone in the lives of many Italian-Brazilians, providing not only the right to dual citizenship, but also the possibility of living, working and... study in Italy and in other European Union countries.
However, with this new achievement, important questions arise, especially regarding tax obligations. One of the most frequently asked questions is: “Now that I am an Italian citizen, do I have to pay taxes in Italy?”
The concept of tax residence
To understand whether you, as an Italian-Brazilian citizen, need to pay taxes in Italy, it is essential to understand the concept of tax residency. According to Inland Revenue (the Italian IRS), a person is considered a tax resident in Italy if, for at least 183 days (more than half the year), he/she:
- is registered with Registry office (the register of the population residing in Italy), or
- You have your “domicile” (the center of your personal and economic interests) or your “habitual residence” (the place where you normally live) in Italy.
Essentially, if you spend more than six months of the year in Italy, the Italian Revenue Service may consider the country to be your main place of residence, leading to the obligation to declare and pay taxes on all of your worldwide income in Italy.
Citizenship and taxes: what changes?
After obtaining Italian citizenship, your tax situation does not automatically change. The obligation to pay taxes in Italy is more related to your residency status than to your citizenship.
If you live in Brazil and visit Italy occasionally, without exceeding 183 days per year, you will probably not be considered a tax resident in Italy and therefore will not have to pay taxes on your global income there.
However, if you decide to move to Italy and register with Registry office of your municipality, you become an official resident. Therefore, you must submit annual income tax returns in Italy, even if your income comes from Brazil or other countries.
Double taxation treaties
It is important to highlight that Brazil and Italy have a double taxation agreement, which prevents you from paying taxes on the same income in both countries. This treaty stipulates which income must be taxed in each country, such as pensions, salaries, investment income, among others.
For example, if you receive a pension in Brazil, the treaty may provide that this income is taxed only in Brazil, or that you are entitled to a tax credit in Italy to avoid double taxation.
Local taxes in Italy
Even if you are not a tax resident in Italy, you may still be subject to some local taxes, especially if you own property in the country. The property tax, known as IMU (Single Municipal Tax), is applicable to real estate, regardless of the owner's residence status.
Furthermore, if you generate any type of income in Italy, such as property rental or investment income, this income will be taxed in Italy, even if you are not considered a tax resident.
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