Retiring to Italy

by Jose Marc Castro on August 6, 2009

italyFLAG200Think of art and you think of Italy. Leonardo da Vinci, Michelangelo, Botticelli, Verdi, and Puccini, Italians all, are among the best known giants of painting, sculpture, and opera.  Living in cities like Rome, Venice and Milan takes you back centuries to more heroic ages. Even today, modern Italy and its people seem larger than life, like the tragic-comic characters in a Fellini film.

Aside from this, Italy has cast a long shadow in the realm of politics, culture, science, education, art, archaeology, religion, cuisine, architecture, design, music and finance.

Climate in Italy Government in ItalyTax System in ItalyMedical Care in ItalyReal Estate in ItalyShopping in ItalyCost of Living in Italy

A New Life in Italy

Climate in Italy

Italy has three unique and distinct geographical regions: the mountainous border of Italy-France-Switzerland-Austria, the northern plains and the Po valley, and the elongated peninsula in central and southern Italy.

The weather in the Italian Alps is like the weather in its Swiss and Austrian counterparts. Rains and thunderstorms are frequent during spring, summer and autumn.  The plains of Italy are thickly populated and centers of agricultural production. The weather is hot and sunny but rains fall the whole year round and it is quite cold during the winter months.  The peninsula is characterized by rain and snow in high elevation areas and mild winters with hot and dry summers in the coastal areas. Weather in Italy can be very volatile during spring, autumn and winter with strong winds, rain, and heavy snow in vivid contrast to the consistently sunny and hot summer season. There are areas with humid subtropical areas in Liguria and Florence. Other areas have mild winters and dry summers as their year round weather.

Government in Italy

In World War II, Italy was a member of the Axis alliance together with Germany and Japan. After World War II, the execution of the Italian dictator Mussolini, and the victory of the Allied powers, Italy became renowned for corruption and political instability, characterized by sudden, dramatic and frequent changes in government. There were, for some time, numerous high profile cases of kidnapping for ransom. Corruption was exposed at the highest levels of government and business in the 1990s. There have been some changes and improvements since then.

Italy’s current president, former Communist Party member Giogrio Napolitano, was elected in May 2006. He is the head of the country’s armed forces and has the power to veto laws, disband parliament, and call for elections.

The current government is a republican democratic parliamentary system which is led by a President or called the Prime Minister. There is a bicameral legislature, with the Council of Ministers and the Parliament, which holds most of the power. The present Prime Minister, Silvio Berloscuni, is one of the richest heads of state in the world. Italy’s economic problems include a large budget deficit, slow growth rate, inflation, and the lowest birth rate in Europe. If there is no change, Italy’s population will decrease by one third within 50 years.

Tax System in Italy

In Italy, the richer you are, the higher the tax you are supposed to pay. An individual pays taxes on his or her global income if s/he is a  permanent Italian resident. The tax resident lives more than 183 days out of every year in Italy. Those who pay taxes in other countries are give a “tax credit” which is deducted from the tax s/he is supposed to pay. An individual’s income tax varies from 23% to 43%. This is reflected in a post at the Italy Expat Forum last June 24, 2009:

“resident” means that you pay income tax on whatever income is allowing you to reside in Italy – where that income comes from is not important, it’s where you reside while you’re making it. What’s worse is that if you’re resident, you’re also expected to pay Italian social insurances on your income so that you’re eligible for whatever health care, retirement and whatever other social services they have there.

Depending on what country you are coming from, there are usually tax treaties or special provisions to make sure you don’t get double-taxed on your income from elsewhere. But it’s one of those facts of life that you wind up having to pay your taxes someplace. (Usually – there are a few tax havens left in this world, but not many.)

Since 2004, the Italian government has been taking steps to make its tax system more efficient so that it can compete with other EU countries through tax exemptions on dividends and capital gains. However there are still many problems with the proposed reforms.

One of the areas where changes have been made is in property transactions, as reflected in the Italy Expat Forum last May 22, 2009:

The reduced tax payable when you buy your house in Italy is subject only to the house being your “prima casa” in Italy and that you get your residenza granted by your comune. There is no time limit in reality, so long as you have your residenza and you will not be asked to pay the increased “stamp duty” on your house – so long as it is your one and only house in Italy. It does not matter in the slightest where else you live, or for how long.

Medical Care in Italy

The World Health Organization or WHO classifies Italy as one of the ten countries in the world that offers and deliver the best quality health services. (The US ranks 37th  (although it spends the most on health services). The system is called the Servizio Sanitario Nazionale or SSN, a system of state insurance founded in the Second World War. Unfortunately some public hospitals, although they have well trained doctors and adequate services, may lack the amenities that private hospitals offer. Public hospitals often require long periods of waiting due to overcrowding. If you are considered an Italian resident, you will receive health care via the national health plan. You will receive free hospital services and so will your dependents. Emergency services are available round the clock. Foreigners who may want more amenities such as TV and telephones can resort to private hospitals and take out private health insurance. Medicine can usually be purchased from small, family-run pharmacies.

Real Estate in Italy

Many Italians own a home and a vacation house.  Foreigners also invest in Italian real estate and congregate in colonies in such areas as Tuscany, Umbria, and near the lakes in Northern Italy.  The value of Italian real estate has risen consistently over the years because of strong domestic and foreign demand. There are properties that can be bought for relatively reasonable prices since they have been abandoned by former owners who moved to the cities and need a lot of renovation.

Despite these issues, the market has been stabilized and the full potential of this market can only be realized in 2010 according to market experts in the country.

Shopping in Italy

You can buy Italian high fashion in outlet stores and malls usually found around Milan, Florence and Turin.  The atmosphere is friendly and the staff friendly, multilingual and well trained. The best bargains can be had in January and July when the stores offer up to 70% discounts.  You have to be patient in choosing the best from among the available garments by Prada, Fendi, Valentino, Armani, Gucci and other sought after labels. You will have to allot enough time for your fashion shopping. The truly dedicated shopper may decide to hire a personal shopper to get the best buys possible.

Being part of the Eurozone, the common tender is the Euro. It is quite expensive as a country and you need to be sure of the costs so you won’t be surprised when footing the bill for later.

Cost of Living in Italy

Expatriates who want to make Italy their retirement home should consider the increases in the cost of living due to inflation. Of course it is still relatively cheap to live in Italy if you compare it with the cost of living in the US. As in other countries, it really depends on the lifestyle you are prepared to maintain. A single individual can get by on about US$2,000 a month; a couple on about US$3,000 a month; and four people on almost US$4,000 a month. This budget includes housing, food, utilities, leisure, transport including a car, insurance and clothing. Housing refers to rent or mortgage payments for a new or renovated apartment or house in a typical suburb.

This was reflected in a post at the Italy Expat Forum last February 15, 2009:

At the risk of sounding overly aggressive, I can only answer “it depends”.

Rent: It depends on where you want to live and the size of apartment you want, etc. An apartment in the centre of Milan might easily cost in excess of €10,000 per month, whilst a single room (monolocale) in Casserta would cost only a couple of hundred.
Electricity/gas/telephone: Again, it depends on how much you use. It is much more expensive than in the US, though.
Insurance: Home insurance is similar – depending on the area you are living.
Car insurance: Depending on car/ area you live. Much more expensive that the US. Most car insurance in Italy is third-party – not comprehensive.
Hair cut: It depends…
Health care: If you are employed, legally, health care is provide by the state – free. If you are not employed legally, or just here on vacation, the health care costs would depend on your insurance company.
Tax: Quite high, although it would all rather depend on your accountant and who/what he knows.
Grocery Bill: It depends on what you eat. If you want to eat American food, it is not cheap. If you want to eat local food, it is pretty good. How heavy are you – or do you want to be?


{ 1 comment… read it below or add one }

Debra Fiscus November 10, 2012 at 2:19 am

Are the US Social Security payments considered income and will be taxed in Italy. What is the tax rate on lower income(from my pension alone); a breakdown of tax rates for a full time retiree in Italy. Thank you.

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