Tax-free retirement and low cost of living. This offers Portugal to Italian pensioners. But be careful because not all that glitters is gold. Obtaining the status of "tax resident abroad", to have access to the Portuguese relief, is not so easy. In fact, the administrative procedures to be completed in Italy and Portugal present various pitfalls and the technical times are quite long.
Let's start with the fact: the Portuguese government, in order to attract foreign capital, has promoted a law that offers all foreign pensioners, for 10 years, the non-taxation of the occupational pension. The Portuguese government's move appears to be interesting for foreign pensioners, not only for the tax benefits offered but also for the country's economic conditions. According to Numeo, in fact, around 2.629,914 euros would be needed in Lisbon to maintain the same lifestyle that one has in Milan with 3.900,00 euros (e.g. a liter of milk costs 0,64 euros in Lisbon against the 1,09 in Milan).
The mix of low cost of living and tax breaks are therefore very attractive. However, in order to enjoy these advantages, several requirements must be met. First of all, the Italian tax authorities must consider them "tax residents abroad". How can this status be achieved? You must not be registered in the register of persons residing in Italy for 183 days and at the same time you must be registered with AIRE You must not have a domicile in Italy for more than half of the year and it must not be a habitual residence, for more than half of the year in Italy. If even just one of these conditions is missing, you are considered tax resident in Italy and therefore you cannot access foreign tax relief regimes.
Requirements for accessing the pension tax exemption in Portugal
Once you have proven yourself to be a "tax resident abroad", there are other requirements that you must meet in order to access Portuguese tax advantages. The applicant must not have been taxed as a tax resident in Portugal, for any of the five years prior to the one in which the application is submitted. You must demonstrate that you have the necessary conditions to be considered a tax resident in Portugal. These are: having stayed in Portugal for more than 183 days, and if the period is shorter, you must demonstrate that you have a home on Portuguese territory in such conditions as to allow it to be habitable and that you intend to occupy it as habitual residence. Another fundamental requirement is not to be a public pensioner. In this case, due to the Convention for the avoidance of double taxation signed between Italy and Portugal, public pensions must be taxed at source in the country where the services were rendered (Italy). This leads to the consequence, therefore, that only retirees who have pensions of a private nature will be able to take advantage of the Portuguese tax breaks.
But the obstacles do not end here because the request for tax exemption must be made within the year preceding the one on which the effect will have to be produced. This is because the Portuguese tax authorities need time to review individual applications. In fact, the evaluation of each request takes place, on average, within six months. The consequence is that until then it will not be possible to enjoy the tax exemption regime.
Documents to avoid double taxation
Once the documents have been submitted to the Portuguese tax authorities and approval has been obtained, the pensioner will have to ask INPS to apply the Convention to avoid double taxation on the pension (one in Italy and the other in Portugal). To obtain the tax relief of the pension in Italy, the pensioner must therefore deliver the CI534-EP-I/4 form (Italian-Spanish) to the INPS office. The document can be found in the INPS section, Forms, International Conventions and is available in four versions. The Italian-French module, the Italian-German module and finally the Italian-Spanish one.
The model was prepared unilaterally by Italy and is accepted by almost all EU countries (Portugal is among them) and is important because it certifies the willingness to present an application to request the total or partial non-execution of the withholding tax Italian. In addition to presenting the document prepared by INPS, the pensioner must also present a paper certificate from the competent foreign authority, which demonstrates that the subject in question has a foreign tax residence. Once the administrative process is completed, all that remains is to enjoy retirement!
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