Several European countries that offer Residency-by-Investment programs, such as Greece, Italy, and Portugal, offer attractive tax models that allow affluents to manage their international income more efficiently while enjoying the stability, mobility, and lifestyle benefits Europe offers.

Double taxation treaties between the US and European countries make cross-border retirement planning effective and help investors avoid being taxed twice on the same income.

 

Tax Benefits For Americans

Tax Planning Considerations

Most tax regimes, including the US, operate on the principle of “the more you earn, the more you pay taxes”. For HNWI, this means that part of their income goes to the government each year. US investors looking to diversify their investment portfolio in Europe can take advantage of the tax regimes available in countries such as Italy and Greece, which adopt the lump-sum taxation model, also known as flat-rate taxation, where they pay a fixed annual tax regardless of how much they earn.

Americans living outside the US often owe taxes to both the US and the country where they live and work. This is because the US taxes its citizens on worldwide income regardless of where they reside, while other countries tax individuals who live within their borders. However, the Federal Law provides several tools, such as the Foreign Earned Income Exclusion, the Foreign Tax Credit, and bilateral treaties to eliminate the tax bill.

Before applying to any program, applicants should work with qualified agents in their target destination, because some tax models can deliver essential savings for the right profile, whereas a wrong choice can be expensive.

 

Lump Sum Taxation Model

Two European countries that offer residency by investment programs also provide tax benefits for Americans through lump-sum taxation models: Italy and Greece. The right choice depends on the investor’s wealth level, income sources, and lifestyle preferences.

 

Italy: €300,000 Flat Tax

Italy’s lump sum tax regime, also named “new resident” regime, is considered on of the main tax benefits for Americans and it allows investors to simplify and cap taxation of foreign-sourced income while residing in Italy. This model covers dividends, interest, pension, rental income, and foreign assets for inheritance purposes. Participants gain exemption from Italian wealth taxes on foreign real estate and financial assets held abroad. Italy originally set the flat tax at €100,000 annually, but in August 2024, it doubled the rate to €200,000. Then, with the approval of the 2026 Budget Law, it raised the rate again to €300,000. The program is available for up to 15 years.

To benefit from this tax model, applicants must have been non-tax residents in Italy for at least nine of the previous ten years and become Italian tax residents. The regime applies only to foreign income, while Italian-sourced income remains subject to ordinary taxation, including regional and municipal taxes. Income earned in Italy faces standard progressive rates up to 43%.

Family members can also benefit from this tax regime. The flat tax for qualifying relatives is €50,000 per person. If individuals transferred their tax residence before a rate hike took effect, they continue paying the rate in force at the time of their relocation for the full 15-year duration of the program.

The Italian flat tax makes financial sense for US citizens earning more than €1 million per year from abroad.

Read also: Italy Golden Visa for Americans : 10 Reasons It’s Becoming a Top Choice

Greece: Attractive Option for Investors

Greece has been offering a lump-sum tax regime for individuals moving their tax residence into the country since 2019. Qualified individuals are subject to an annual lump sum tax of €100,000, in addition to €20,000 for spouse and each child or parent. Any additional family member who wants to benefit from the lump-sum tax regime, such as children, can be added later through a supplementary application, provided that it is submitted within the 15-year duration of the principal application.

While this is considered one of the main tax benefits for Americans, investors are required to invest a minimum of €500,000 in Greek assets, including real estate, businesses, or shares of Greek companies to benefit from this tax regime. They must not have been a Greek tax resident for 7 of the 8 years before relocation. They must transfer their tax residence from a country with a tax treaty or administrative cooperation agreement with Greece. Beneficiaries will enjoy full exemption from the Greek gift and inheritance tax on foreign-located assets gifted or inherited by the Investor.

Read also Americans Appetite for Portugal Golden Visa Soars 60% in 2025

Tax Benefits For Americans: Double Taxation Treaties

Tax treaties are formal agreements signed between two countries to address the taxation of income earned across borders. They help prevent income from being taxed twice, support stronger economic relationships, and can offer important tax benefits for Americans with cross-border income or residency plans. The US has signed double taxation treaties with several European countries:

Portugal

The US-Portugal Tax treaty, known as the “Convention between the United States of America and the Portuguese Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income”, officially entered into force in 1995. It established the rules for taxing different types of income and determining which country has primary taxing rights.

Under the agreement, dividends are subject to a 15% withholding tax, reduced to 5% for qualifying corporate shareholders. Interest and royalties are taxed at 10%, with exemptions available for certain government entities and long-term bank loans. Pensions are generally taxable only in the recipient’s country of residence. To avoid taxation, the US applies foreign tax credits, while Portugal may use both credit and exemption methods. Taxpayers must claim treaty benefits and file an IRS form when required.

 

Greece

The US signed a bilateral income tax treaty with Greece in 1950 to prevent double taxation and reduce fiscal barriers for individuals and businesses operating between the two countries. Under the treaty, taxpayers may benefit from reduced withholding tax rates on cross-border income and foreign tax credits to offset taxes paid in the other country. The US-Greece treaty contains a saving clause, which means US citizens remain subject to US taxation on worldwide income while residing in Greece, but the treaty provisions and foreign tax credits can mitigate overall tax burdens.

 

Italy

The bilateral income tax treaty between the US and Italy was signed in 1999 and entered into force in 2009, aiming to prevent the same income from being taxed twice and to facilitate cross-border investment and economic activity. Under this treaty, several forms of income may benefit from reduced withholding tax rates. Dividends are capped at 15% with a reduced 5% rate for qualifying corporate shareholders. Interests may be taxed at a minimum of 10% or exempt in certain cases. Royalties may benefit from reduced rates ranging from 0 to 8%, depending on the type of intellectual property. The treaty also protects against double taxation for residents of both countries.

Therefore, US citizens obtaining residency in these selected European countries can take advantage of tax treaties to prevent double taxation and optimize international wealth planning.

How US Citizens Benefit from Foreign Earned Income Exclusion?

The Foreign Earned Income Exclusion (FEIE) applies only to earned income such as salaries, wages, and self-employment income, not to passive income like dividends or capital gains. It allows US citizens living abroad to exclude up to $132,000 of foreign-earned income from US taxes. To qualify, individuals must live abroad for at least 330 days within 12 months or prove they are bona fide residents of another country for a full tax year.  The exclusion is claimed using IRS Form 255, but self-employed individuals must pay the US self-employment tax, even if their income is excluded under the FEIE.

 

Foreign Tax Credit

The Foreign Tax Credit helps US citizens avoid double taxation by reducing their tax bill for taxes already paid to a foreign country. Unlike FEIE, the FTC applies to both earned and passive income, including wages, dividends, interest, and rental income. Taxpayers claim the credit using IRS Form 1116 and must separate income into categories such as passive or general income. If foreign taxes paid are higher than the US tax liability, the excess credit can be carried forward for up to 10 years.

For instance, Portugal taxes a US citizen classified as a Portuguese tax resident on the worldwide income, and the US taxes him on his worldwide income. But by applying for FEIE, US citizens can avoid double taxation, and they end up paying the higher of the two systems, not both.

The US uses the credit method to prevent double taxation. For instance, if a US resident pays taxes to Portugal on income sources there, the US allows a credit against its domestic tax liability for the taxes paid to Portugal. This credit mechanism helps offset the US tax due on the foreign-sourced income. Portugal may also use the FTC and FEIE  methods to relieve double taxation. The treaty’s purpose is not to eliminate all taxes, but to ensure that the same income is not subjected to taxation by both countries.

US citizens can use the FEIE and FTX in the same year, but not on the same income. If the applicant excludes up to $132,900 of earned income, he cannot also claim a tax credit on the foreign taxes paid for that excluded amount. They can use the FTC for income not covered by the exclusion, such as income above the limit, dividends, or rental income. If the applicant claims an income credit that was excluded, the IRS may treat it as revoked, and he will not be able to use it again for five years. Therefore, FEIF and FTC can be combined, but they must be separated by income type carefully to avoid penalties.

For more information about European Residency programs that offers tax benefits for Americans, eligibility criteria, and requirements, please contact us via WhatsApp.

 

 

https://titanwealthinternational.com/learn/italy-lump-sum-tax/

 https://www.pwc.com/gr/en/Tax-Alert-Law-5222_2025_The-investors-tax-residence-regime.pdf

https://legalclarity.org/does-portugal-have-a-tax-treaty-with-the-us/?

 https://www.irs.gov/pub/irs-trty/greece.pdf

https://home.treasury.gov/news/press-releases/tg454?

https://legalclarity.org/do-expats-pay-taxes-in-both-countries-how-to-avoid-it/?