# Italian resident working in italy for Irish based company



## M_B (22 Mar 2012)

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: 

 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;
 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


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## bazermc (22 Mar 2012)

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?


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## M_B (22 Mar 2012)

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.


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## bazermc (22 Mar 2012)

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?


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## M_B (22 Mar 2012)

Ok will do, thanks.


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## sean.c (22 Mar 2012)

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


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## M_B (22 Mar 2012)

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.


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## smeharg (22 Mar 2012)

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.
> 
> ...


 
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.


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## M_B (22 Mar 2012)

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.


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## sean.c (22 Mar 2012)

<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.


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## M_B (22 Mar 2012)

Ok

This is the whole of Article 14

"*Article 14*

*Dependent personal services*



  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.
 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:
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
the remuneration is paid by, or on behalf of, an employer who is not a resident   of the other State, and
the remuneration is not borne by a permanent establishment or a fixed base which   the employer has in the other State.

  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.
"


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## smeharg (22 Mar 2012)

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.
> ...


 
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.


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## lizmacca (16 Sep 2013)

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


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