Italian resident working in italy for Irish based company

M

M_B

Guest
Hi

Any help would be very much appreciated. I did search around but couldnt find any post from someone in my situation. Apologies if this has been answered before.

So I am shortly to begin permanent employment for an Irish based company. However I am an Italian resident and I will be working from home in Italy.

As I understand it, my income tax will be affected by the double taxation treaty between Ireland and Italy. Looking at the Irish Tax revenue website that details the treaty between the two countries the relevant section seems to be Article 21;

"In the case of a resident of Italy, the Italian Republic in determining its income taxes specified in Article 2 of this Convention in the case of its residents or companies may, regardless of any other provision of this Convention, include in the basis upon which such taxes are imposed all items of income; the Italian Republic shall, however, deduct from the taxes so calculated the Irish tax on income (not exempt in Ireland under this Convention) in the following manner:
  1. if the item of income is, according to Italian law, subjected to the tax on income from movable wealth the tax paid, directly or by deduction, in Ireland shall be deducted from the tax on income from movable wealth, and from the taxes imposed in respect of the same income, but in an amount not exceeding that proportion of the aforesaid Italian tax which such item of income bears to the entire income.
    Where the tax paid in Ireland on such income is higher that the deduction so calculated the difference shall be deducted from the complementary tax or from the tax on companies, as the case may be, but in an amount not exceeding that proportion of such complementary or company tax which the item of income bears to the entire income;
  2. if the item of income is subjected only to the complementary tax or to the tax on companies, the deduction shall be granted from the complementary tax or from the tax on companies, as the case may be, but only for that part of the tax paid in Ireland which exceeds 27 per cent of such item of income. The deduction shall not, however, exceed that proportion of the complementary tax or of the tax on companies which such income bears to the entire income."


Is anyone able to explain what this means? I admit I am confused.



Many thanks
 
Has the Irish based company informed you that they will be deducting Irish tax.

From my perspective if you are Italian based working in Italy why would you have any Irish tax liability?
 
No not yet.

I have only received an offer so I am investigating my tax liability. I assumed I would have an Irish tax liability because the company is Irish and its office is in Ireland not Italy, so I assumed as the income is technically generated in Ireland that I might be liable.

You can probably tell I'm not a tax professional.
 
I think the reference to a "PAYE exclusion order" on the link from the Irish tax authorities could be relevant for you

http://www.revenue.ie/en/tax/it/residence.html

However the basic principles of your non Irish resident or domicilied status will apply

In summary you need to talk to your new employer as they are responsible for deducting PAYE if they need to?
 
I lived in Italy for 4 years, but never applied for residency, in order to avoid just this complication. All my taxes were paid in Ireland. And also because of the ridiculous rules in place for residency [1]

But my reading of the code was that tax is due in the jurisdiction where the benefit of the work is felt.

i.e. if you are working for an Irish company, for Irish clients, you will pay tax in Ireland.

If you are working for an Irish company, for Italian clients, you will pay tax in Italy.

In this way, they are hoping to avoid "tax regime shopping", where someone working for Italian clients can just establish an Irish company and get paid in Ireland.

Depending on how much tax you pay in Ireland, you may end up with a tax-bill in Italy as well, i.e. if the taxes due in Italy are higher than those paid in ireland.

As you are taking on permament employment, I would expect that your employers will pay for professional tax advice.

[1] Proof of €5k in current account required to apply for residency, but proof of residency required to open said account, being one of the stupider ones
 
Ok thanks - not as easy as I'd hoped then.

Yes getting residency is a pain, but I do have it now and it is illegal not to have it. Also getting car insurance or infact buying a car without it is pretty much impossible. However as I will be living in Italy (I'm Welsh, my girlfriend Italian) for the forseeable I need to do everything properly. The clients will be Irish.

I've emailed the Irish revenue and the Italian embassy in Dublin to see what they say. My employer will have an idea too.


"Proof of €5k in current account required to apply for residency, but proof of residency required to open said account, being one of the stupider ones "

lol yes. Most banks however know about this and will open an account for you. Unicredit for example.
 
sean.c said:
I lived in Italy for 4 years, but never applied for residency, in order to avoid just this complication. All my taxes were paid in Ireland. And also because of the ridiculous rules in place for residency [1]

But my reading of the code was that tax is due in the jurisdiction where the benefit of the work is felt.

i.e. if you are working for an Irish company, for Irish clients, you will pay tax in Ireland.

If you are working for an Irish company, for Italian clients, you will pay tax in Italy.

In this way, they are hoping to avoid "tax regime shopping", where someone working for Italian clients can just establish an Irish company and get paid in Ireland.

Depending on how much tax you pay in Ireland, you may end up with a tax-bill in Italy as well, i.e. if the taxes due in Italy are higher than those paid in ireland.

As you are taking on permament employment, I would expect that your employers will pay for professional tax advice.

[1] Proof of €5k in current account required to apply for residency, but proof of residency required to open said account, being one of the stupider ones
Click to expand...

What code would this be? Whatever it is either completely wrong or your understanding of it is completely wrong.

OP: You are taxable where you are resident. If you are not resident in Ireland you won't be taxed in Ireland. If you are resident in Italy you will be taxed in Italy. Simple as.

There can be difficulties when the employer is Irish resident and the employee isn't. But as someone pointed out the employer can apply for a PAYE exclusion order from Revenue and pay the salary gross. You can even opt to continue to pay PRSI in order to retain social welfare benefits.

You also need to watch that you don't become Irish resident as well by spending too much time in Ireland. In that case you could end up with a liabiltiy in both countries, although you should be able to offset tax paid in one country against tax due in the other. If this situation arises you should get proper professional advice.
 
Thanks its much appreciated.

Ok so it does sound as simple as I'd hoped.

I will be spending about 10 days in Ireland per year, so no there won't be any complications.
 
<quote>
Article 14.1;

Subject to the provisions of Articles 15, 17 and 18, salaries, wages and other similar remuneration in respect of an employment exercised in one or other of the Contracting States derived by a resident of a Contracting State shall be taxable only in the latter State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
<unquote>

So, if one is resident in Italy, one pays taxes in Italy, unless the employment is exercised in Ireland (which it is).

But hopefully it is as simple as smeharg claims[1]

[1] simplicity is against the founding principles of the Italian beaurocracy, which is to make life as hard as possible for everyone.
 
Ok

This is the whole of Article 14

"Article 14

Dependent personal services


  1. Subject to the provisions of Articles 15, 17 and 18, salaries, wages and other similar remuneration in respect of an employment exercised in one or other of the Contracting States derived by a resident of a Contracting State shall be taxable only in the latter State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
  2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:
    1. the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the fiscal year concerned, and
    2. the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and
    3. the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.
  3. Notwithstanding the preceding provisions of this Article, a remuneration in respect of an employment exercised aboard a ship or aircraft in international traffic may be taxed in the Contracting State in which the place of effective management of the enterprise is situated.
"
 
sean.c said:
<quote>
Article 14.1;

Subject to the provisions of Articles 15, 17 and 18, salaries, wages and other similar remuneration in respect of an employment exercised in one or other of the Contracting States derived by a resident of a Contracting State shall be taxable only in the latter State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
<unquote>

So, if one is resident in Italy, one pays taxes in Italy, unless the employment is exercised in Ireland (which it is).

But hopefully it is as simple as smeharg claims[1]

[1] simplicity is against the founding principles of the Italian beaurocracy, which is to make life as hard as possible for everyone.
Click to expand...

Firstly, this is a double taxation treatment which comes into operation where both states have taxing rights. In this case only Italy has taxing rights as the tax payer is resident in Italy. In order for Ireland to have taxing rights the tax payer would need to be resident in Ireland or perform the duties of employment in Ireland.

Secondly, your understanding of "exercised in Ireland" is incorrect. The employment is exercised where the duties of employment are carried out, ie Italy in this case.

The DTA makes no reference to "where the work is felt". Where the clients of the employer are resident is also of no relevance.
 
Hi Sean C, could I ask for your help on this one. I am actually in the same situation as you were in. I own my own business but it is an Irish business, and I am moving to Italy (Italian boyfriend) and I need to understand my tax liability requirements. Also about residency requirements.

Any help on this would be much appreciated. I am currently travelling over and back and not here for longer than a 2 month period, so I am currently legal and have more than 183 days in Ireland, so I will okay in 2013. However, I want to have everything sorted for next year and know what I need so that I am legal here and paying tax correctly.

Thanks so much in advance.
Liz
 
You must log in or register to reply here.
Back
Top