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Discussion Starter · #1 ·
We are planning for a relocation to Spain next year. My husband can't wait to get out of the US and wanted to leave around May. The problem is if we move to Spain and gain residency (husband holds Irish passport) in May/June we will become tax resident in Spain for the year. I would rather delay it for another year as we will have capital gain from the sale of our house in the US. So now I am looking for a lovely place in Europe to spend a couple of month until we can move to Spain in mid July or so. Italy is high on my list.

I would appreciate some recommendations as what location (region/town/city) we should consider and the cost to rent a two bedroom apartment for about 2 months (May-July) in the area that you recommend.

We are taking a year sabbatical with an intention to stay in Spain/Europe and are flexible with location. Given the short amount of time, we will most likely be playing tourists in Italy.

Many thanks in advance!
 

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Discussion Starter · #2 ·
We are planning for a relocation to Spain next year. My husband can't wait to get out of the US and wanted to leave around May. The problem is if we move to Spain and gain residency (husband holds Irish passport) in May/June we will become tax resident in Spain for the year. I would rather delay it for another year as we will have capital gain from the sale of our house in the US. So now I am looking for a lovely place in Europe to spend a couple of month until we can move to Spain in mid July or so. Italy is high on my list.

I would appreciate some recommendations as what location (region/town/city) we should consider and the cost to rent a two bedroom apartment for about 2 months (May-July) in the area that you recommend.

We are taking a year sabbatical with an intention to stay in Spain/Europe and are flexible with location. Given the short amount of time, we will most likely be playing tourists in Italy.

Many thanks in advance!
I could not edit the post so some follow up... We don't speak Italian so would need an area where people speak English but not too overly crowded with tourists. We hope to have some local experience as well. Our budget for housing is around 1500-1800 euros. I realize that the question is broad but unfortunately I have not been to Italy to know where to look for a 2 month stay.
 

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The problem is if we move to Spain and gain residency (husband holds Irish passport) in May/June we will become tax resident in Spain for the year. I would rather delay it for another year as we will have capital gain from the sale of our house in the US.
Are you sure that's a problem? Article 13 paragraph 1 of the U.S.-Spain tax treaty looks like it isn't a problem. (Please check that.)

Enjoy Spain. ;)
 

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Discussion Starter · #4 ·
Are you sure that's a problem? Article 13 paragraph 1 of the U.S.-Spain tax treaty looks like it isn't a problem. (Please check that.)

Enjoy Spain. ;)
Thank you for pointing me to the document. Since we will still file and pay taxes in the US (we will still have assets in the US after moving), we could assume that we are clear with the Spanish government due to US-Spain taxation agreement but I don't think it is the case. From what I understand, we need to file taxes in both the US and Spain and pay Spain for any difference. Capital gain on residence (one has to live in the house for at least 2 years of the last 5) is tax free up to $250K for a single person and $500K for a married couple in the US. Our gain will be no where near that but a gain is a gain. It just does not make sense that we are exempt in the US for the gain and end up paying a foreign country on this gain (if we stay for more than 183 days and become a tax resident in Spain).
 

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Make sense to whom?

The treaty says (as I read it anyway) that the U.S. taxes gains on property sold in the U.S. (if it wishes) and Spain taxes Spanish property sales. That makes perfect sense -- that's the sort of thing tax treaties are for, to resolve who taxes (or doesn't tax) what.

If you want to spend a couple months in Italy feel free, but avoiding Spanish tax on the sale of your home in the U.S. does not appear to be a valid reason to stop in Italy.
 

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I could not edit the post so some follow up... We don't speak Italian so would need an area where people speak English but not too overly crowded with tourists. We hope to have some local experience as well. Our budget for housing is around 1500-1800 euros. I realize that the question is broad but unfortunately I have not been to Italy to know where to look for a 2 month stay.
I almost moved to Italy after retirement, but never did because of concerns about my health insurance coverage. That was ten years ago, but recently I checked with my current health insurance and I found out that I could have had coverage if I had moved. However, now I'm ten years older and a little scare of taking just a one way trip. I have visited Italy in many occasions in the past and the area I love the most is Tuscany in the center of Italy. There are plenty of English speaking people living there, but I don't know too much about the cost of living. There are many little lovely villages where it might be more affordable.
 

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Discussion Starter · #7 · (Edited)
Make sense to whom?

The treaty says (as I read it anyway) that the U.S. taxes gains on property sold in the U.S. (if it wishes) ....
Not really. There is tax exemption granted by the irs:

"Maximum Exclusion

You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true.
...

You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return..."

Everyone can read tax treaty and tax codes but it does not mean that everyone understands how to apply it wisely and legally to one's tax situation.

If you want to spend a couple months in Italy feel free, but avoiding Spanish tax on the sale of your home in the U.S. does not appear to be a valid reason to stop in Italy.
Paying taxes when we don't have to is not our choice; leveraging the tax codes and exemption allowed under the tax codes is. People have a choice when they want to become a tax resident of a particular country by choosing the timing of their move. And we are exercising that choice.

Italy or France or any country for that matter does not lose out anything if we chose to spend two months there. And neither does Spain. We haven't lived there, we haven't consumed any social resources of benefits.
 

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I'm totally missing your point. You're asking about living in Italy in order to avoid paying tax in Spain on the gains from the sale of your U.S. home. I pointed you to the specific provision in the U.S.-Spain tax treaty in which Spain does not charge tax on U.S. property gains.

There is no Spanish tax. You're trying to avoid a zero tax. It's right there in the treaty (Article 13). Worse, actually, because you're trying to spend money on a two month Italian vacation to reduce your zero Spanish tax.

The U.S. IRS will do what the IRS will do, which in this case is exempt the first $250,000 in gains ($500,000 for a married couple). But there is zero Spanish tax according to the tax treaty between the U.S. and Spain. (Unless I'm reading the treaty incorrectly, but I don't think so.)

Why is this confusing? It shouldn't be.
 

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To follow up, you have to check first whether Spain actually would tax the gains on the sale of a home in the U.S. You would check the Spanish tax code, then check the tax treaty between the U.S. and Spain to see whether the treaty overrides the tax code. (And, upon quick search, even if there's no treaty relief I see that Spain has a tax exemption on the sale of a primary residence.)

Do not assume.
 

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Ciao Kimuyen
We live in Italy and love it!! I'd be happy to recommend locations and give you indication of costs in places that tourists have never heard of! Let me know if you're still interested and we can chat via email so I can provide more detail.
Great idea to spend a bit of time in another country before moving permanently to Spain.
Salute!
 

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Discussion Starter · #11 ·
To follow up, you have to check first whether Spain actually would tax the gains on the sale of a home in the U.S. You would check the Spanish tax code, then check the tax treaty between the U.S. and Spain to see whether the treaty overrides the tax code. (And, upon quick search, even if there's no treaty relief I see that Spain has a tax exemption on the sale of a primary residence.)

Do not assume.
Yes, no assumptions are made. I am dreaded that part of our lives will be spent on just filing taxes in both countries and figuring our to whom we still owe taxes. Fines are stiff if one does not do it right. whether intentionally or not. That is why we don't want to complicate our first year in Spain while we are trying to settle in and learn a new language. If we can just deal with US taxes straight for the next year it would give us time to learn and adjust to then deal with both bureaucracies the following year.

For anyone reading my post, the intention is not about avoiding paying taxes. It is about how to simplify our lives in the first year by dealing with one tax system first before dealing with both and this can be acchieved by choosing the timing the move. And hence the interest in another country (e.g., Italy) short term before calling Spain home.

OK, back to the original question ... Any recommendation for a 2 months stay in Italy?
 

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I'm sorry, I still don't get your point.

You're talking about spending significant money for a stay in another country (Italy) for alleged tax reasons. Some countries have "look back" tax rules, by the way. Spain might be one of them.

Don't complicate your first year in Spain -- no disagreement. Figure out the tax issues now, before you move. But how does a two month stay in Italy when you're moving to Spain make life simpler? It surely doesn't do that, does it? How does being in Italy help you learn the Spanish language more quickly?

I'm really, really not understanding your "logic" here, with all due respect. You're trying to engineer a tax savings -- and spend significant money to do it -- on what appears to be zero Spanish tax (and probable zero tax filing if you're on a sabbatical with no income). To do that you want to make a pitstop in a foreign country in which the language you want to learn isn't the one spoken, delaying your acquisition of Spanish language skills by two months?

I'm totally confused here, obviously.

You have to figure out the Spanish tax situation if you want to move to Spain -- no way around that. You've made one determination (tax residency) but have not figured out whether your U.S. home sale is Spanish taxable. It's theoretically possible that your U.S. home sale is taxable in Spain when you become a resident with a "look back" provision in their tax code. I don't think so, but possible. Do you know what the tax treatment of your home sale will be? Did you check? Check now, before you move. Once you know what the real answer to that question is, then you act accordingly.

Sorry, I don't see any shortcut here, but nor do I see any tax complexity that must occur exactly when you're unpacking boxes in Spain either.
 

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Discussion Starter · #13 ·
Don't complicate your first year in Spain -- no disagreement. Figure out the tax issues now, before you move. But how does a two month stay in Italy when you're moving to Spain make life simpler? It surely doesn't do that, does it? How does being in Italy help you learn the Spanish language more quickly?

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The point is that husband wants to get out of the US by May (as originally stated in the post). Where we land is less of an issue than when we leave the US. We will not be in Spain in May but rather in another country and then officially move to Spain in July (and by officially moving to Spain in July we will not be a tax resident for that year but until the following year). We are going to travel around Europe anyway so why not do Italy first and then make it home in Spain close to when the school year starts.
 

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I live in a little town near Sorrento (Meta) during the summer months. You don't need a car as there is public transportation and in walking distance to all. Not touristy at all. I would highly recommend this area (sorrentine peninsula). I have a 2 bedroom (fully furnished) garden apartment that will be available the month of May. A thought would be to try different areas of Italy. You would not be disappointed here. If you are interested we can communicate through email or phone.
Good Luck.
Mena
 
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