If you are a US Citizen and you have the desire to start a new life in another country, this is the post for you: you can move to Italy with the Elective Residence Visa or with the Digital Nomad Visa and you can also get some interesting Italian tax breaks.
Let's see how you can do it!
In this post, co-authored with Italian Attorney Alessandro Zucca, we will show you how a U.S. Citizen who doesn't hold Italian Citizenship can move to Italy with the Elective Residence Visa.
We will go into details in the financial requirements to apply for this Visa, we will analyze the steps for application, and then we will analyze the tax implications and the way to get a tax break in Italy.
Our Tax and Legal Firms can give step-by-step assistance in each stage and for every aspect of your stay in Italy.
1. Why you may be interested in the Italian Elective Residence Visa?
The Elective Residence Visa (VRE) is a very interesting way to move to Italy for those American Citizens who do not hold Italian Citizenship, nor meet the requirements to come to Italy with other types of visas, such as Student Visa or Work Visa.
The Elective Residence Visa is perfect for US Citizens who want to move to Italy and live on their pension, saving and investments.
US Citizens who want to move to Italy and want to work as self-employment persons or as employees of their US Company should apply instead for the new Digital Nomad-Remote Worker Visa, which we have analyzed in the following post:
2. What is the Elective Residence Visa?
The Elective Residence Visa is a long-term administrative authorization for entry into Italy valid for more than 90 days, issued for the benefit of American Citizens and Citizens of non-EU Countries by Italian Diplomatic and Consular representations around the world. Therefore, the Elective Residence Visa must be applied for at the Italian Consulates and Embassies in America: it allows the US Citizen to travel throughout the Schengen Area to enter the territory of the Country that issued it.
We recall that the Schengen Area consists of those European Countries that adhere to the Schengen Agreements, namely: Belgium, Czech Republic, Denmark, Germany, Estonia, Greece, Spain, France, Italy, Latvia, Lithuania, Luxembourg, Hungary, Malta, Netherlands, Austria, Poland, Portugal, Slovenia, Slovakia, Finland, and Sweden.
3. What are the requirements to apply for the Elective Residence Visa?
3A. The Minimum Income Requirement.
In order to get the Elective Residence Visa, the US Citizen must show that he/she earns a certain stable income: to do this, he/she must have autonomous, stable and regular economic resources that can be reasonably assumed to produce a stable income in future years. The income requirements are the following:
- The annual income must be at least equal to:
31,000 euro per year if the Elective Residence Visa is requested by a single person;
62,000 euro per year if the Elective Residence Visa is requested by a married couple.
If there are also dependents children, it is necessary to consult the relevant Consulate to determine the minimum required income, that will be higher than 61.000 euro.
- The income must come from these sources:
- Private American or Social Security pensions;
- Distributions from pension funds like IRA, Roth IRA, 401K, Roth 401k, TIAA CREF, etc.;
- Royalties;
- Interest, dividends, and capital gains derived from brokerage accounts in the USA;
- Dividends from investments in US companies;
- Distributions from trusts;
- Rental incomes in Italy or in the US;
- Other stable incomes, including Italian incomes.
- The income cannot derive from work, whether employment or self-employment income.
The Italian Consulates in America will thus evaluate the possibility for the American Citizen to live on passive income, without having to engage in any work activities, even remotely. The Elective Residence Visa can also be issued to the cohabiting spouse of the American Citizen, as well as to dependent minor and adult children of the applicant American Citizen. Obviously, in the case of applying for the visa for the entire family, it is necessary for the incomes to be deemed adequate for the entire family: it is advisable to consult a Professional like our Tax and Legal Firm to understand the required income.
3B. The Housing Requirement.
The second requirement for the US Citizen is to have housing in Italy, either owned or rented.
In order to have housing available, it is evidently necessary for the US Citizen to come to Italy at least once before applying for the Visa, to purchase or rent the house. Similarly, to buy or rent the house, it is necessary that the US Citizen has requested the Italian Fiscal Code (Codice Fiscale Italiano).
For any information on the Codice Fiscale, please take a look at this post:
During this first trip to Italy the American Citizen can come with a standard tourist visa, obviously respecting its time limitations.
It's also important to understand that the housing in Italy must be suitable for the entire family, if one moves to Italy with spouse and children.
3C. Health Insurance Requirement
The third and final requirement is to subscribe to an insurance policy that gives health coverage for any medical expenses that may be necessary during the stay in Italy for the entire duration of the visa. The health insurance policy must have a minimum annual coverage of 30,000 euros.
However, after receiving the Permesso di Soggiorno (residence permit) — which we will explain in the chapter 4 — there is the possibility for a voluntary registration with the Italian National Health Service (Servizio Sanitario Nazionale).
4. Elective Residence Visa Application Steps
4A. The Application for the Elective Residence Visa at the Italian Consulate
The Elective Residence Visa application must be submitted to the Italian Embassy or Consulate in the U.S., by filling in a specific form, which is also available online here:
The Elective Residence Visa, like all visas, must be requested while the American Citizen is still in the U.S.
Along with the application it's necessary to submit also the required documents proving the fulfillment of the three above-mentioned requirements. The Italian Consulate may, however, request additional documentation.
The procedure for getting the visa must be completed within 90 days. If the Consulate determines that the requirements are not met, it will issue a written denial of the visa.
4B. The Electronic Residence Permit for Elective Residency (PSERE)
After obtaining the Elective Residence Visa, the first step is to arrive in Italy.
There is no specific deadline for entering Italy, but the arrival in Italy must occur within the validity period of the visa.
For example, if the Elective Residence Visa is valid from January 1, 2025, to December 31, 2025, the applicant must arrive in Italy within 2025.
It is strongly advised not to enter Italy if the Elective Residence visa is about to expire.
Once in Italy, within eight working days after the arrival, the American Citizen must apply for the Permesso di Soggiorno Elettronico per Residenza Elettiva (PSERE - Resident Permit) at the competent Questura (Police Headquarter) based on the location of the house where the US Citizens plan to reside in.
The application for the beginning Residence Permit is submitted by filling in the postal KIT available at the Post Offices.
To do so, we strongly recommend to get our professional advice.
The following documents must be attached:
- A copy of the passport (including the entry visa and the stamps).
- The rent contract or the deed of the property purchase.
- The dichiarazione di presenza (declaration of presence), to be formalized at the Questura within 8 days from the arrival in Italy, if the point of entry is a non-Italian Schengen border.
Once the KIT is mailed, the American citizen will receive a text message on their Italian mobile phone with the appointment details for the fingerprinting at the Questura.
For the appointment at the Questura, the following documents must be brought:
- 4 passport-sized photos.
- The passport.
- The original of all documents listed above.
The Permesso di Soggiorno per Residenza Elettiva lasts one year and can also be renewed for another year, year by year.
The renewal application for the PSERE must be submitted (again via the postal kit) at least 60 days before the expiration of the current residence permit, including:
- The Permesso di Soggiorno.
- The passport (only the pages with personal data, entry visa, and stamps).
- The Italian Codice Fiscale (Italian fiscal code).
- Documentation proving the income requirement. At this stage, income from Italian sources, such as INPS pensions or INAIL annuities, can be presented. It is also common practice for the Questura to accept the balance from an Italian bank account.
4C. Registration with the Municipal Register (Anagrafe)
Getting the Resident Permit - PSERE allows the American Citizen for registration with the Municipal Register (Anagrafe) of the town where he/she lives.
By submitting the application for Anagrafe registration, the American Citizen requests to be included in the Municipal register: if the application is accepted, the American Citizen obtains officially the residence in the Municipality and can request an Italian Identity Card, as well as certificates necessary for his/her stay in Italy.
4D. Health Coverage
Once the registration with the Municipal Register (Anagrafe) is completed, the American Citizen holding a PSERE (Permesso di Soggiorno per Elezione) is considered an Italian lawful resident and is required to have an insurance policy against the risk of illness, accidents, and maternity.
This can be done in two alternative ways:
- By subscribing (as mentioned above in the third requirement) to a specific insurance policy with an Italian or foreign insurance company, valid in the national territory. The health insurance policy must have a minimum annual coverage of 30,000 euros.
- By voluntary registration in the National Health Service (Servizio Sanitario Nazionale, SSN), which is also available for dependent family members.
In order to make the registration in the National Health Service it's necessary to pay an annual fee, that cannot be less than €2,000 per year per person.
Voluntary registration in the National Health Service grants the same health benefits as an Italian citizen and is valid for a calendar year (January 1 – December 31).
5. Can You Work in Italy while having an Elective Residence Visa?
One of the most important aspects to understand regarding the Elective Residence Visa is that this visa does not allow the American citizen living in Italy to work or earn income from employment or self-employment.
If you intend to work, please take a look at the Digital Nomad Visa here:
The non-working restriction for the Elective Residence Visa is quite broad, as it applies to any type of work activity, even if the work is performed remotely from Italy for an American Company.
Basically, a person holding an Elective Residence Visa is required to live off passive income as pensions, royalties, rental incomes and financial incomes.
6. Tax Aspects of the Elective Residence Visa
The tax aspects of the Elective Residence Visa can be summarized in the following points:
A) Acquiring Italian tax residency;
B) The possibility of applying the Neo-Residents tax break;
C) The possibility of applying the 7% Flat tax break for foreign retirees;
D) The prohibition of doing any work activity.
6A. Acquiring Tax Residency with the Elective Residence Visa
The first point that we have to take into consideration from the fiscal point of view is that the American Citizen moving to Italy will acquire Italian tax residency.
Acquiring Italian tax residency means paying taxes in Italy on income from American sources as well. Therefore, the following US incomes will be subject to Italian taxation:
- Dividends, interest, and capital gains earned in the U.S.;
- American pensions;
- Distributions from American pension funds such as IRA, 401K, TIAA CREF, etc.;
- Rental income from American properties;
- Royalties received in the U.S.;
- Any other income from American sources or any other country, including Italy.
Let's now focus on a couple of points concerning Tax Residency in Italy.
- The timing of tax returns: the Italian tax return must be filed first, which will result in the payment of Italian taxes without any deduction of American taxes. The US tax return must be filed by the deadline of October 15 (after filing the extension with Form 4868), with the possibility of using the taxes paid in Italy as a Foreign Tax Credit in order to avoid double taxation.
- The process of acquiring Italian tax residency: the process of acquiring Italian tax residency is not trivial and we suggest you to read the following posts:
We particularly recommend watching the following video:
The key point about tax residency is always connected with the number of days spent in Italy: if an American Citizen spends more than 183 days in a calendar year in Italy, he/she will acquire Italian tax residency.
For example, if an American Citizen arrives in Italy on June 6 of a specific year (Year N) and stays in Italy for the remainder of the year, he/she will certainly have exceeded 183 days in Italy in that year, thereby acquiring Italian tax residency.
The most important consequence is that they will be required to file an income tax return in Italy for Year N as a resident, reporting all worldwide income, including income earned in the U.S. from January 1 to June 5, when they were still in the U.S.
Thus, the timing of the move to Italy is very important and should be planned carefully.
Our Tax and Legal Firm can give assistance on the whole matter and can also make a simulation of what the Italian tax burden can be.
If, for example, the same American citizen decides to move to Italy not on June 6 but on July 17 of the same year, he/she would spend fewer than 183 days in Italy and therefore would not acquire Italian tax residency for Year N. As a result, he/she would not be required to pay Italian taxes on income earned in the US for that year. The Italian tax residency would be acquired in Year N+1.
6B - 6C: The Possibility of applying for Italian Tax Breaks with the Elective Residence Visa
American Citizens who move to Italy with an Elective Residence Visa can benefit from two specific favorable tax breaks, both aimed at reducing Italian taxes on foreign incomes:
- The Neo-Residents Tax Break;
- The 7% Flat Tax Regime for Foreign Retirees;
The Neo-Residents Tax Break allows American citizens who have never been tax residents in Italy before to pay a flat tax of €200,000 per year, avoiding any other progressive tax rates. This tax break lasts for 10 years.
It's evident that the amount of the flat tax is attractive only to individuals with significant financial resources and large passive income.
The 7% Flat Tax Regime for Foreign Retirees is available, under certain conditions, for those who receive a US private or Social Security pensions and who move their residence to a small town in Southern Italy with fewer than 20,000 inhabitants.
This tax break allows retirees to pay a substitute tax of 7% on all foreign-source income for 10 years.
For more details on the 7% Flat Tax Regime, please see the following links:
It's important to understand that neither of these tax break applies to income earned in Italy. Therefore, rental income, pensions, royalties, or financial income earned from Italian sources will be subject to ordinary taxation in Italy. For more details, see the article:
6D. The Prohibition of doing any work activity.
This prohibition has several consequences.
First of all, this restriction means that the American Citizen holding an Elective Residence Visa cannot apply for the Regime Impatriati Tax Break and for the Regime Ricercatori e Docenti Tax Break, as these tax breaks are designed for individuals who acquire Italian tax residency and earn income from a job in Italy.
Second, it's not possible to engage in any remote work activity, even if the US Citizens work for an American Employer or Company. In both cases, the income would be considered as produced in Italy, which is in contrast with the prescriptions of the Elective Residence Visa.
See also the following posts:
Third point, the possibility for an American citizen who is a manager of an LLC or a U.S. Corporation (producing dividends) to continue managing the company from Italy is ambiguous. These are complex situations that need to be analyzed on a case-by-case basis. The main issue might not concern the Visa prohibition, but rather a potential issue of "Place of effective Management".
CONTACT US FOR MORE INFORMATION
If you need more information, you can send an email to:
enrico.povolo@dottcomm.net
or make a phone call to the following number:
+39 0444 322987
Enrico Povolo - Italian CPA - Vicenza
Alessandro Zucca - Italian Attorney at Law - Brescia