The essential distinction
Taxation of an Italian pension received by a person living in Bulgaria requires distinguishing domestic rules from the double taxation convention between the two countries. The choice of residence alone does not justify concluding that the pension will be paid gross. For Italian benefits, the nature of the pension, the beneficiary’s status and treaty conditions must be checked before applying for tax exemption.
The clarification from INPS
In Message No 1270 of 3 April 2023, INPS updated the criteria applied to pensioners residing in Bulgaria. Exemption applications may be accepted only where the documentation unequivocally demonstrates Bulgarian citizenship, according to the interpretation of “resident” adopted for this Convention. INPS applies the criterion to pensioners under private and public schemes. Merely documenting a change of registered or tax residence is therefore insufficient.
Reviewing the pension and supporting documents
The Convention contains provisions on pensions and government service, which must be read together with the definition of the persons to whom it applies. The paying institution, origin of the pension, beneficiary’s nationality and residence, relevant tax periods and documentation already submitted must be identified. Any request for a refund or correction of withholding also requires checking the competent procedure and deadlines applicable to the specific application.
Assistance with your individual circumstances
The Firm can examine the case and coordinate the legal assessment with the appropriate tax professional. For an initial assessment, useful documents include the pension award decision, withholding tax certificates, documents concerning citizenship and residence, and communications received from INPS or the tax administration. The assessment should precede any relocation decision based on assumed tax savings. Bulgarian exemption rules do not, in themselves, remove any taxing rights allocated to Italy by the applicable rules.
