When you move to Italy, you'll have to navigate the wonderful world of banking and taxes in Italy for expats! It's a wild and wacky ride, so buckle up.
Banking in Italy
If you haven't seen it, I've written a post about opening a bank account in Italy. I'll summarize here.
You can't open a bank account in Italy while you're still in the U.S. The Catch-22 is that for several visas, you have to demonstrate that you have a certain amount of euros in a bank account. So...if you can't open an Italian account that holds euros, how can you show this? I'll get to that in a sec.
Each Italian bank may have slightly different requirements for what you need to open an account, but likely you will need your Codice Fiscale, your passport, an Italian housing contract, your Social Security number, and possibly U.S. bank statements.
I will also say that if you happen to know someone who knows someone at the bank, it can go much smoother! My landlord, who I had a good relationship with, put in a good word for me at the bank. But another American, who didn't have a great relationship with her, was denied an account when she applied, despite having lots of money to deposit.
How You'll Use Your Bank Account
Obviously, you can use your Italian bank account the way you'd use an American one. You'll get a debit card you can use when you buy things. I'm not sure if this is the deal only with the credit union where I opened my account, but there's a limit for how much you can spend each month (€2.000) before you have to pay a fee for debit card transactions. Here in Calabria, I never, ever spend that much in a month. Things are cheap, and cash is king down south.
Another way you'll use your bank account is to send money via IBAN, or. International Bank Account Numbers, This transfer service can be used both internationally as well as domestically. Here, at least in the south, no one uses PayPal or Venmo, so when you need to send a person or business money, you send them an IBAN. They give you their account number and you make the payment from your bank account.
I pay €17 a year (yes! a year!) for my bank account and with that, I can make instant IBAN transfers. Otherwise, they can take a few days.
You can set up automatic payments, like for your wifi and cable, using your IBAN.
Banking When You Need to Transfer Money
If you work in Italy but have American clients, or you simply have dollars you occasionally need to exchange into euros, you'll need a solution.
There are a couple of services you can use:
I have more experience using Revolut, though I have used Wise occasionally to accept business payments.
With Revolut, I instantly transfer dollars from my U.S. account to my Revolut dollars account. Then I exchange them for euros, minus a small fee. That money gets moved to a second Revolut account in euros. Then I transfer the money to my Italian bank so I can easily withdraw funds from an ATM.
Revolut does offer a debit card for its paid account, which I had for a year. The paid account also doesn't have fees for transfers and exchanges, but I don't make enough of them for the monthly fee of $10 to be worth it, so I have the free account that doesn't have a debit card now.
Getting Paid by American Clients
Most of my American freelance clients pay me in dollars, since I need more dollars for American expenses than I do euros for Italian expenses.
I have one client that pays me via Bill.com, and there, I discovered, I had the option to get paid in euros. There's a small fee for the conversion.
Now Let's Talk Taxes
As I said in the other post, American expats have to file taxes in both the U.S. and Italy. But the good news is, that doesn't mean you have to pay in both countries. There's an agreement in place that prevents double taxation, which means if you pay $5,000 in U.S. taxes, you will have $5,000 deducted from what you owe in Italy. Make sense?
Also in a lot of Italy, there are tax incentives to take advantage of! This was a big part of how I chose Calabria.
In the south, expats are only taxed at 7% for 10 years, versus the typical 23-43%. Woo hoo!
There's also a 70% personal income tax exemption in the north, and 90% in the south. All the more reason to move here and make lots of money!
Also, Italy and the U.S. have an agreement that says you don't have to contribute to Social Security in both countries. You do need what's called a Certificate of Coverage from the Social Security office in the U.S. to show when you file taxes in Italy, proving you already pay for your retirement in the U.S.
Filing Taxes
I'm currently in this phase, so I'm by no means an expert. Start by hunting for a commercialista who understands the accord between Italy and the U.S. and who understands how to file taxes for an expat. I'll be honest, I've hunted for a commercialista for a while. I may have finally found one, so stay tuned.
Taxes have to be filed by September 30/October 15 (I think there are two forms with two deadlines). However, and this is where I'm confused, if you owe more than €257.52, you have to pay 40% by June 30 and 60% by November 30.
But...how do you know how much you owe if you haven't filed??? Oh, Italy.
For my U.S. taxes, the first year, because it was a partial year in Italy and partial in the U.S., I hired Taxes for Expats. I paid quite a bit for the service ($800, I believe), but I felt confident, knowing the taxes were done correctly.
The second time around, I used TurboTax, the way I always did in the U.S. There's an option to say you don't live in the U.S., so the software understands how to work with you as an expat. And it's much cheaper, at $129. Plus, you don't have to file state taxes, unless you have property or other connections back in the U.S.
It took a while for me to get comfortable understanding banking and taxes in Italy for expats, but hopefully, thanks to this article (and maybe a Pick-My-Brain consultation), you'll have an easier time of it!
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