The most common ways for Americans to gain Italian citizenship are through naturalization or marriage. However, one lesser-known option is Italian citizenship by descent. In fact, if you have Italian heritage, you may very well qualify for it without even knowing. 

In principle, anyone of Italian descent — no matter how far back — could be eligible for citizenship by descent. Of course, as with all legal matters, there are some stipulations attached. Below, we’ll provide an overview of Italian citizenship by descent and break down some of the more important details and restrictions.

Jure Sanguinis

Italian citizenship by descent is based on the principle of jure sanguinis (which comes from the Latin jus sanguinis, “right of blood”). This means Italian nationals can pass citizenship onto their direct blood relations, regardless of birthplace.

There is no generational limit to jure sanguinis. Italian citizens may pass down citizenship over decades, or even centuries. Keep in mind, though, that your ancestor must have:

• Been born in Italy (or a place subsequently annexed by Italy) after March 17th, 1861, when the Kingdom of Italy was officially established
• A direct, unbroken line of descent to you. If your ancestor lost or forfeited their citizenship before having children, you are not eligible to apply

Even if your ancestor didn’t actively forfeit their Italian citizenship or have it revoked, they may have lost it by default or lost their ability to pass it down, including if:

• Your ancestor voluntarily acquired another citizenship before August 16th, 1992
  • Note that this does not apply to those who acquired citizenship by virtue of their birthplace (jus soli)
• Your ancestor naturalized in the US or another country before July 1st, 1912
• Your ancestor’s parents became naturalized citizens of another nation before they turned 21

You may also encounter complications if you trace back your Italian ancestry to a woman, although there has been some significant progress in that area in recent years.

As you can see, eligibility for Italian citizenship by descent can be complex. Often, it’s best to consult an Italian immigration attorney regarding your specific circumstances. 

The lawsuit that made obtaining Italian citizenship more accessible and equitable

Historic citizenship laws often reflect antiquated social norms and hierarchies. Case in point: For many years, children born to Italian women could not claim citizenship through their maternal line, however, children born to Italian men could.

In 1948, Italy changed that law, allowing children to claim Italian citizenship through an Italian father or mother. The rule only applied to those born after January 1, 1948, though, which still significantly limited descendants’ ability to claim matrilineal Italian citizenship. In 2009, however, an Italian supreme court case forbade gender discrimination in citizenship claims. 

The not-so-great news is that Italian consulates still refuse to process so-called “1948 cases.” Fortunately, those who trace their Italian heritage back to a female ancestor can still apply for Italian citizenship by descent — they just need to apply through the court system.

How to apply for dual citizenship by descent

So, how exactly do you apply for Italian citizenship by descent? Generally, you must follow these steps:³

• Confirm your eligibility (typically in consultation with an Italian immigration attorney who specializes in citizenship through descent cases)
• Gather all required documents, including:
  • A passport or other official ID
  • A completed application form
  • A copy of your Declaration of Intention/Petition for Naturalization
  • Your birth certificate
  • The birth certificate of your Italian ancestor
  • Birth, naturalization, marriage (and if applicable, divorce), and death certificates for all relatives linking you to your ancestor
    • If you can’t find naturalization records, you may present Census records and a certificate of the nonexistence of records⁴
  • A certificate from the Italian Consular Authority confirming your direct and unbroken Italian citizenship
  • A certificate of residence
• Submit your application to the appropriate Italian authority
• Pay a fee of €300 (~$318 USD)
• Receive approval

In some cases, such as if you trace your ancestry back to a female relative born before 1948, you must hire a law firm to represent you. Other times, it won’t be strictly necessary — but given the complexity of immigration law, consulting a lawyer is usually a good idea.

Other ways to get dual citizenship in Italy

As noted at the beginning of this article, two other primary ways to acquire dual nationality in Italy are through marriage and naturalization.

Marriage to an Italian citizen

After being married to an Italian for two years while living in Italy or three years abroad, the spouse of an Italian citizen may be eligible for Italian citizenship by marriage. If you and your spouse have minor children, those required years are halved.

Naturalization

Non-EU foreigners who move to Italy must legally live there for ten years before they are eligible for Italian citizenship. That requirement is shorter for some individuals, such as refugees or those who have worked for the Italian government abroad for at least five years.

Keep in mind that both of these pathways may carry additional requirements, such as proficiency in Italian.

Related: How to Move to Italy as an American

Benefits of dual citizenship in Italy

Once you get Italian citizenship, you receive all the legal rights, protections, and obligations of any other Italian citizen. You are also permitted to keep your US citizenship, meaning you can be a dual national of both Italy and the United States. Some benefits of Italian dual citizenship include:

International mobility

Holding citizenship in Italy allows you to permanently live, work, and study anywhere in the EU, the EEA, or Switzerland, with very few exceptions.

Social benefits

As an Italian citizen, you may benefit from public programs like Italian healthcare, Italian pension plans, and the ability to enroll your children in Italian public schools and universities. These benefits often extend to anywhere in the EU, EEA, or Switzerland that you move to.

An Italian passport

Being an Italian citizen gives you the right to apply for an Italian passport — the third most powerful in the world, by some measures. An Italian passport allows you to travel to 190 different countries without applying for a visa beforehand.

Purchase Italian property

Purchasing property as an Italian citizen is easier and more tax advantageous than purchasing it as a non-citizen, non-resident.

Other perks

Some other advantages of Italian dual citizenship include the ability to:

• Vote in Italian elections
• Pass Italian citizenship onto your children
• Receive Italian consular protection when abroad

Disadvantages of Italian citizenship

Of course, there are pros and cons to any decision, including applying for Italian citizenship by descent. These may include:

Italian dual citizenship cost

Applying for Italian citizenship by descent can be a costly process. Beyond the €300 application fee, you may also have to pay to:

• Retain the services of an Italian immigration lawyer
• Hire a genealogical researcher
• Obtain official documents
• Translate documents into Italian
• Add a Hague Apostille to your documents
• Apply for an Italian passport

If you take a DIY approach, Italian citizenship by descent may cost $1,500 to $3,000 USD in total. All-inclusive services, however, may reach up to $25,000 USD or more.

The time & effort

From initial research to application approval, receiving Italian citizenship by descent typically takes one to two years — or even more for particularly complex cases.³

Italian tax obligations

The Italian government considers anyone registered with the Records of the Italian Resident Population, domiciled in Italy, or maintaining a residence in Italy for more than 183 days of the year to be a tax resident. This is important to note because Italian tax rates tend to be higher than US ones.

Related: Taxes in Italy for US Expats Living La Dolce Vita: A Guide

Tax considerations of Italian dual citizenship as a US citizen

Italian taxes

All Italian tax residents must file tax returns, unless:

• They work for just one employer that withholds all income taxes via payroll
• They earn less than €8,000 (~$8,470 USD) in employment income, or €7,500 (~$7,940 USD) in retirement income

National income tax rates in Italy for the 2023 tax year are as follows:

You may also face regional income taxes (ranging from 1.23% to 3.33%) and municipal income taxes (0% to 0.9%). Other taxes you may encounter include:

• Capital gains taxes: Generally 26%
• VAT: Standard rate of 22%, with discounts of 10%, 4%, and 0% for certain goods and services
• Wealth tax on properties outside Italy: .76%

Of course, this isn’t an exhaustive list, so consult an Italian tax professional when in doubt.

Related: Dual Citizenship Taxes: A Guide for US Expats

American taxes

The US’s system of citizenship-based taxation means that all American citizens and permanent residents who meet the minimum income reporting threshold must file a federal tax return, regardless of where in the world they live. If you’re also an Italian tax resident, you’re technically subject to taxation by both governments, but don’t worry — this doesn’t necessarily mean you have to pay double taxes on the same income.

While a tax treaty exists between Italy and the US to prevent double taxation in principle, a tricky clause called the Savings Clause limits its ability to help you. Fortunately, Americans abroad receive certain tax breaks that those stateside don’t. However, those tax breaks come with some additional filing obligations. 

Here’s a quick breakdown of tax topics US expats may want to research further:

Foreign Earned Income Exclusion (FEIE)

Those who pass the Physical Presence Test or Bona Fide Residence Test qualify for the FEIE, allowing them to exclude up to $120,000 USD from taxation for the 2023 tax year (aka the taxes you’ll file in 2024). Furthermore, you may be able to write off certain housing expenses through the Foreign Housing Exclusion/Deduction.

Foreign Tax Credit (FTC)

The FTC essentially allows you to subtract what you’ve paid in income taxes to a foreign government from what you owe the US government in income taxes, provided that you meet some basic criteria.

Foreign Bank Account Report (FBAR) & the Foreign Account Tax Compliance Act (FATCA)

If you’re an American with $10,000 USD or more in a foreign bank account at any point in the year, you must report it on FinCEN Report 114 (more commonly known as an FBAR). Meanwhile, those living abroad with $200,000+ USD in foreign financial assets by the end of the year — or over $300,000 USD in foreign assets at any point in the year — must report them on Form 8938 per FATCA.

Simplify your dual citizenship taxes with Bright!Tax.

Filing your taxes as a US expat doesn’t have to be complicated — if you hold Italian citizenship by descent, the professionals at Bright!Tax can help you optimize your US tax strategy and file your return with ease.

References 

1. Citizenship by descent (iure sanguinis)
2. Re-acquisition of Italian citizenship
3. ITALIAN CITIZENSHIP BY DESCENT: UNLOCKING YOUR ITALIAN ANCESTORS HERITAGE AND OBTAIN THE ITALIAN PASSPORT
4. Italy – Citizenship by Descent
5. How easy (or not) is it to get Italian Citizenship by descent?
6. How the 1948 rule really works
7. Citizenship by marriage
8. Citizenship
9. Benefits and Disadvantages of Italian Dual Citizenship
10. REVEALED: How much it really costs to get Italian citizenship via ancestry
11. Italy – Individual – Residence
12. Italy – Individual – Taxes on personal income
13. Italy – Individual – Income determination
14. Italy – Individual – Other taxes
15. Italian citizenship by marriage or civil partnership
16. Becoming an Italian Citizen

The post How to Get Italian Citizenship by Descent – Jure Sanguinis appeared first on Bright!Tax Expat Tax Services.

Below, we’ll go over everything expats from the United States need to know about dual citizenship in Germany: who’s eligible, how to get it, what the tax implications are, and more.

Let’s dive in!

Historical approach of Germany to dual citizenship

For many years, German residents who had naturalized, and their children, had to renounce their original citizenship before applying for German citizenship.¹ 

In 2021, the coalition government, which includes the Social Democrats, Greens, and Free Democrats, announced plans to modernize the citizenship laws.² By January 2023, they drafted a law. The Cabinet passed this law in August, and it will soon go to the Bundestag (federal parliament) for review.

While the final decision is anticipated around late November to mid-December 2023, it’s widely expected to pass, given it requires just a simple majority. After approval, President Frank-Walter Steinmeier, a member of the SPD party that initially proposed the law, will sign it.

Proposed changes to dual citizenship rules in Germany

If approved, the new citizenship law will still take some time to implement, with the changes likely to go into effect by April 2024.³ This would permit non-EU naturalized Germans and children born in Germany to foreign parents to hold multiple nationalities and eliminate the requirement to choose between their existing citizenship and German citizenship.

The proposed changes also aim to simplify the citizenship acquisition process by:

• Reducing the number of years of continuous residency required to apply for citizenship from eight years, (or, in cases of “exceptional integration,” six), to five, or just three years for those who show “exceptional integration” via work, education, volunteering, or language (C1 German level)
• Relaxing the language requirements for applicants ages 67 and over and certain groups who have faced hardships in learning German
• Granting children born in Germany to foreign parents automatic citizenship as long as their parents have lived in Germany for five years (previously, the requirement was eight years)

Benefits of dual citizenship in Germany

German citizenship is highly sought-after and with good reason. German citizens enjoy many rights and privileges as a result of their nationality. Some of the benefits of dual citizenship in Germany and the USA include the ability to live, work, and study anywhere in Germany, the EU, the EEA, or Switzerland (with few exceptions) indefinitely. Of particular interest to Americans interested in gaining German citizenship is that doing so makes one eligible for German social programs such as social security and healthcare. Additionally, German citizens are entitled to vote in German elections and may pass German citizenship to their children.

The German passport is also incredibly powerful, allowing for visa-free travel to 190 different countries.⁴ In 2023, the German passport tied for second place in the world alongside Italy and Spain in the 2023 Henley Passport Index, which ranks the most powerful passports in the world.⁵ (For context, the US landed in eighth place.) 

How to get dual citizenship in Germany

With the new citizenship law expected to pass, some are even applying for citizenship now, hoping that in the 18 to 24 months it takes to process the application, the law will have kicked in. Experts largely agree, though, that it’s best to wait to apply until after the new law has been approved in the rare case of an exceptionally quick application review.

Once the law has taken effect, the process to apply for dual citizenship will generally include:

• Double-checking that you meet all of the citizenship requirements
• Passing the German Test for Immigrants, or DTZ (only for those applying to citizenship by naturalization)
• Gathering the following documents:
  • Proof of identity (e.g. passport, birth certificate)
  • Proof of parents’ German citizenship (only for those applying to citizenship by descent) 
  • Marriage certificate (if applicable)
  • Completed application form (available at your local immigration office, town/city council, or regional district office)
  • Relevant appendices for those applying for citizenship by descent (if applicable)
  • German residence records
  • Bank statements proving financial stability
  • A B1 German language certificate, such as a Zertifikat Deutsch or equivalent (if applicable)
  • A certificate of completion of the German citizenship by naturalization test, or DTZ (if applicable)
  • Proof of application fee payment (255€ fee per adult, 51€ per minor child)
• Submitting your application materials in person at the same office where you got your application form
• Receiving approval (typically after 18-24 months)⁶

After gaining German citizenship, you’ll receive a certificate of nationality to serve as proof, which you can use to apply for a passport. At that point, you’ll have all the same rights, protections, and obligations of all other German nationals.

Challenges when applying for German dual citizenship

The application process might seem straightforward when written out, but it’s not uncommon to run into hurdles along the way. These might include:

Navigating technicalities

Figuring out whether you’re qualified for German citizenship (and what kind you qualify for) isn’t always straightforward. Before 1975, for example, German law didn’t automatically grant citizenship to the children of all German parents — only to the children of German men. Those with German mothers and non-German fathers born before 1975 who have not already been granted citizenship, then, would have to apply for naturalization vs. citizenship by descent.

Overcoming bureaucratic challenges

Obtaining all of the documents you need to apply and then receiving approval can be tedious and time-consuming. In some cases, you may be required to provide extra documents or appeal a denial.

Mastering the German language

Many people who have been working and living in Germany for years will have already obtained a strong level of German, but reaching German language proficiency is notoriously challenging when starting from scratch as an adult.

Tax implications for US Citizens with dual citizenship

US citizens who seek to obtain dual citizenship as German citizens need to be mindful of the fact that they could end up responsible for filing tax returns with both the German and US authorities. Note that this does not mean that you are liable to pay taxes to both countries, however a certain amount of self-education is involved in understanding how to ensure international tax compliance if you are going to obtain your German passport and ostensibly move overseas. 

German tax obligations

Most expats living in Germany will be required to file a German tax return, or Einkommensteuererklärung, and pay German taxes. If they qualify as German tax residents, their global income is subject to federal income taxes at a rate between 0% and 45%, depending on how much they earn in total. If they aren’t tax residents, however, only German-sourced income would be subject.

In addition, they may also be subject to other taxes, such as property taxes, capital gains taxes, and even a church tax.

Related: Taxes in Germany vs the USA: What Expats Need to Know

US tax obligations

It might not seem fair, but all American citizens and permanent residents who meet the minimum income reporting threshold must file a federal tax return, even if they’re living abroad. As a result, US expats living in Germany could hypothetically be taxed on the same income by both governments. 

While a German/US tax treaty does exist, the Savings Clause limits its benefits. Fortunately, there are certain tax breaks available to Americans abroad. In addition to these tax breaks, though, US expats may also face additional reporting requirements. Below is a quick breakdown of some topics that lay a helpful foundation for taxes for Americans living abroad in Germany.

Foreign Earned Income Exclusion (FEIE)

The FEIE allows those who pass the Physical Presence Test or Bona Fide Residence Test to exclude up to $120,000 USD for tax year 2023 ($112,000 USD for tax year 2022) of foreign-earned income from taxation, as well as write off qualifying housing expenses like rent and utilities via the Foreign Housing Exclusion/Deduction.

Foreign Tax Credit (FTC)

In layman’s terms, the FTC allows you to deduct what you pay in foreign income taxes from what you owe in US income taxes, as long as your income meets certain basic criteria.

Foreign Bank Account Report (FBAR) & the Foreign Account Tax Compliance Act (FATCA)

Expats with $10,000 USD or more in foreign bank accounts at any point in the year must report the contents of those accounts to the Financial Crimes Enforcement Network (FinCEN) via FinCEN Report 114. 

FATCA, meanwhile, compels those with over $200,000 USD in foreign financial assets by the end of the year — or over $300,000 USD in foreign assets at any time during the year — to report them on Form 8938. Thresholds vary depending on your filing status and country of residence.

Optimize Your US Tax Strategy With Bright!Tax.

Don’t let any fears of double taxation hold you back from applying for German citizenship. With the right tax strategy, US expats can often significantly reduce (or even eliminate) their US tax bill. Learn more today!

Meet Your CPA

References 

1. KEY POINTS: What’s in Germany’s draft law on dual citizenship?
2. Germany to open up more to migrants under new coalition
3. TIMELINE: When will Germany push through the new dual citizenship law?
4. The Henley Passport Index
5. Henley Passport Index 2023
6. Paths to citizenship in Germany

The post Does Germany Allow Dual Citizenship? Change is in the Air appeared first on Bright!Tax Expat Tax Services.

And yet, one added responsibility associated with holding two passports is potentially dealing with two separate tax systems (in the smartest way possible!). Today’s article aims at dispelling the myths surrounding US taxes for dual citizens as well as what expats can do to reduce their US tax burden overseas. 

Do dual citizens need to file a US tax return? 

Yes! Even if you’re a passport holder of another country who hasn’t lived in the US for years, you must file a tax return with the IRS. The US applies citizenship-based taxation, which means that expats must declare their worldwide income regardless of their country of residence. 

Added pressure for those abroad to get (and stay) compliant with US taxes emerged when Congress introduced the Foreign Account Tax Compliance Act (FATCA) in 2010. Now, international banks are required to report US expats’ financial information to the IRS each year. 

Are there ways that dual citizens can avoid double taxation? 

Now, if you’re an American with dual citizenship living overseas, you may ask yourself: 

“Does this mean I must pay taxes twice on the same income?”

Fortunately, in most cases, that won’t be the case. The IRS has various tax relief programs to reduce your US tax burden. And even better — in many situations, you won’t even have to pay any taxes to the US!

Here’s a look at a couple of the most commonly used US tax tools:

Foreign Tax Credit (FTC)

The Foreign Tax Credit (FTC) allows you to claim tax credits based on the foreign taxes you’ve already paid, therefore reducing your US tax liability.  

Let’s say you owe $10,000 in US taxes to the IRS. However, as a dental surgeon in Chile, you’ve already paid $9,500 in Chilean income taxes. 

As a result, you can claim up to $9,500 in tax credits – bringing your US tax payable to $500. If you work in a country with a higher tax rate than the US (such as Finland), the FTC makes a great deal of sense, and you likely will not pay any US taxes at all.

Read More: How to Claim the Foreign Tax Credit (FTC) with Form 1116

Foreign Earned Income Exclusion (FEIE)

The Foreign Earned Income Exclusion (FEIE) is another provision aimed at relieving expats of the burden of double taxation. 

How? It allows you to exclude the first $112,000 of your income (and the maximum limit is adjusted each year to align with inflation). 

So let’s say, for example, that you’re a web developer in Germany making $80,000 a year. You can exclude all that foreign income from your US tax return when claiming the FEIE! In order to do so, however, you must pass either one of these two tests:

Physical Presence Test: 

You must prove to the IRS that you’ve spent at least 330 whole days outside of the United States (within any consecutive 365-day window). 

The IRS considers a whole day to be 24 hours, beginning and ending at midnight. Let’s say you are a resident of France, but on May 27, 2022, you decided to hop on a plane at noon to get to Spain. In this case, the IRS won’t count the day as a full day. 

Bona Fide Residence Test: 

The Bona Fide Residence Test requires you to prove economic and social ties to your new home country. Documents that can help confirm this include proof that you’re paying foreign taxes, utility bills, or your permanent residency card.  

Read More: The Foreign Earned Income Exclusion – What Is It? | Bright!Tax

Foreign Housing Exclusion (FHE)

The Foreign Housing Exclusion (FHE) allows an expat’s housing expenses to increase their excludable foreign income on their US tax return. 

Here’s a quick list of housing expenses you can exclude under the FHE:

• – Rent
• – Utilities 
• – Property insurance
• – Furniture rental

Pro tip: This is a great tool for US expats earning more income than the annual FEIE limit! Accounting for your housing expenses can help further reduce your taxable income. You file your FHE claim on the same tax form as the FEIE (Form 2555). However, you must qualify for either the Bona Fide Residence Test or Physical Presence Test to take advantage of this provision. 

Read More: The Foreign Housing Exclusion: A Brief Guide for US Expats

What other reporting obligations do dual citizens have? 

You may have to file more than just a tax return as a dual citizen overseas. If at any point during the year you hold more than $10,000 across all overseas financial accounts combined, you must also file the Foreign Bank and Financial Accounts (FBAR) report. 

You file the FBAR with Form (FinCEN) 114. The type of financial accounts you must declare in the form include:

• – Bank accounts
• – Mutual funds
• – Brokerage accounts

Read more: FinCEN Form 114: How to file the FBAR | Bright!Tax

What do I do if I’m behind on my taxes? 

If you’re reading this article and realize that you have never filed a US tax return as a dual citizen, this news might come as a shock. 

But there’s no need to worry — the IRS has an amnesty program called the Streamlined Filing Procedure to help expats who are behind on their taxes catch up without any penalties.

At Bright!Tax, we’ve helped thousands of US expats worldwide catch up on their taxes through the Streamlined Filing Procedures program with complete peace of mind. Feel free to reach out to one of our trusted CPAs to learn more! 

The post Dual Citizenship Taxes: A Guide for US Expats appeared first on Bright!Tax Expat Tax Services.

Non-Americans who are US residents also have to file US taxes. Those who move to or from the US in a year, or who spend part of the year in the US, will have to file a dual status US tax return after the end of the tax year.

What is a dual status tax return?

According to the IRS, anyone who has been both a US resident and a nonresident in the same tax year has to file a dual status tax return. Citizenship has nothing to do with it in this case – the requirement to file a dual status US tax return just relates to US tax residency.

Does a dual status tax return relate to dual citizenship?

No. Dual citizenship means having citizenship of both countries.

Do dual status non-US citizens have to submit two tax returns?

The answer is yes, but it’s a little more complicated than that: when you qualify as a US resident and a US nonresident in the same year, you’ll have to report income earned when you were a resident on Form 1040, and US sourced income received when you aren’t a US resident on Form 1040NR. However, in practice you just submit one tax return – either Form 1040 or Form 1040NR depending on your status on December 31 – and include a “statement” for the other part of the return. 

How do you know if you’re a US resident?

A non-US citizen is considered a US resident if they meet either the Substantial Presence Test, or the Green Card test.

The Substantial Presence Test is met if you spend 31 days in the US in a year as well as 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:

– All the days you were present in the current year, and

– 1/3 of the days you were present in the first year before the current year, and

What about offshore account filing?

If you are resident in the US, or if you reside outside the US but are a US citizen, Green Card holder, or dual status alien, then you may have to report any financial accounts that you have abroad by filing a Foreign Bank Account Report, commonly known as an FBAR. 

What If You Have Not Filed US Taxes?

If you fall behind in your US tax preparation filing through no fault of your own, for example by being misinformed, there is an amnesty program known as the Streamlined Procedures. It’s a mouth full, but this certifies that your tax delinquency was not a willful act, allowing you to get caught up on your US taxes without penalties. 

The post A Guide to Dual Status Tax Returns for Expats appeared first on Bright!Tax Expat Tax Services.