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Italy has signed conventions for tax regimes applicable to the pensions of private workers. These conventions are in force with France, Brazil and Canada.
Some agreements between states establish special rules, providing specific exemption thresholds or concurrent taxation in both contracting countries, recognising tax credits as a method of eliminating double taxation.
AGREEMENT WITH FRANCE
The Convention against double taxation concluded between Italy and France for the pensions of private workers provides that:
Pensions and other similar remuneration paid to a resident of a State in connection with a termination of employment are taxable only in that State.
Notwithstanding the provisions of paragraph 1, pensions and other similar remuneration paid under the social security legislation of a State shall be taxable in that State, thus applying the principle of concurrent taxation of the benefit in both Contracting States."
On 20 December 2000, the Italian and French tax administrations entered into an amicable agreement, available on the website of the Consulate General of Italy in Paris under 'Pensions - Italian-French Convention'. The deal indicates that all old age, retirement, survivor and invalidity pensions paid primarily by INPS, fall within the scope of paragraph 2 of Article 18 and are taxable in Italy and France (principle of concurrent taxation).
Therefore, INPS must apply to withhold tax to old age, retirement, invalidity, and survivor's pensions paid to beneficiaries resident in France by Article 23 of Presidential Decree No 600 of 29 September 1973. The Italian tax levied on the annuity is not deductible to calculate taxable income in France. Still, to eliminate double taxation, Article 24.2(a) of the Agreement between Italy and France provides that the beneficiary resident in France is entitled to a tax credit, corresponding to the amount of the tax withheld by Italy on a pension, within the limits of the amount of the relevant French tax.
AGREEMENT WITH BRAZIL
The Convention against double taxation in force with Brazil for pensions of private workers' social security schemes provides, in Article 18, an exemption threshold (the limit is to be checked on the INPS website) of USD 5,000, corresponding to EUR 4,227.61 for the tax year 2021, and, for the excess, taxation according to the rules of Italian tax legislation (ordinary IRPEF taxation).
AGREEMENT WITH CANADA
The Convention against double taxation in force with Canada for the pensions of private workers' social security schemes provides, in Article 18, for an exemption threshold corresponding to the equivalent sum of 12,000 Canadian dollars, equal to 8,093.88 euros for the tax year 2021. The application on the excess of the more favourable rate between 15% and that provided by Italian tax legislation. Currently, the 15% rate is applied, according to the indications of the Agenzia delle Entrate.(The amounts should be checked on the INPS website)
Legislative Decree, No. 175 of 21 November 2014 introduced the Single Tax Certificate (Certificazione Unica) to replace the CUD, which includes not only income from employment, assimilated income and pensions but also income from self-employment, commissions and miscellaneous income.
The Single Tax Certificate of Income form is required for submitting tax returns to the tax authorities.
Users with access credentials can download and print the Single Tax Certificate available online.
In the case of pensions exempt in whole or in part from taxation in Italy, because the recipient resides in a foreign State with which a convention for the avoidance of double taxation concerning direct taxes is in force, the income received is indicated as follows.
if the income is exempt, the relevant amount is indicated in the Single Tax Return for the year, within the section "Other Data - Exempt Income" at point 464, with code 21 at point 465 of the tax form;
suppose the income is partially exempt from taxation in Italy, as provided for pensioners in Brazil and Canada. In that case, the amount of the exempt income, corresponding to the exemption threshold expressly provided for by each of the Conventions in question, is indicated in the Single Tax Certificate of the year, in the section "Other Data - Exempt Income" at point 464, with code 21 at point 465. In contrast, the remaining taxable portion is indicated in the section "Tax Data" at point 3 relating to pension income. The relevant withholding taxes are reported in the 'Withholding Taxes' area.
The rates of regional, municipal and local authority additional taxes are determined according to the taxpayer's tax domicile.
The decree requires that non-residents have their tax domicile in the municipality where the income is generated. For pensions paid to non-residents, the place of production is the registered office of the social security institute paying the payment. For allowances paid by INPS, therefore, the rates set for the additional taxes of the Lazio Region and the Municipality of Rome apply.
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I'm Natalia Bertelli, an English/Spanish to Italian legal translator. Since 2008 I have been working on contracts, judicial deeds, certificates, corporate translations for foreign clients who want to do business in Italy, get a dual citizenship or simply settle in my beautiful country.