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This article will discuss possible scenarios of double taxation of your income. For example, when:
you work cross-border commuting;
you are posted abroad for a short period;
you live and look for work abroad;
you are on a pension and live in one country but receive assistance from another country;
purchase of real estate or business transactions.
Although you are always subject to the tax laws of your country of residence, you may also have to pay taxes in the other country.
Most countries adhere to agreements against double taxation, which prevent you from being taxed twice:
Under these bilateral tax agreements, the taxes you pay in the country where you work are deducted from the taxes you spend in your country of residence
In other cases, the income you receive in the country where you work may be considered taxable only in that country and exempt from tax in your country of residence.
NB: The tax rates in the two countries will most likely differ. If the tax rate in the country where you work is higher, that will be the one you have to pay, even if it is offset by the tax charged in your country of residence or if the latter exempts you from any other tax.
WHAT DO YOU HAVE TO DO?
To qualify for double taxation relief, you may have to prove where you are resident and that you have already paid taxes on your income.
Italy has bilateral Conventions with many foreign countries, EU and non-EU, to avoid double taxation on income and assets. These establish how the power of taxation is to be shared between the two contracting states, regulating the tax treatment of individual income categories. Depending on the types involved, these Agreements provide for both states to levy a tax on the same income (concurrent taxation) or sometimes for exclusive taxation by one state.
SUBJECTS NOT RESIDENT IN ITALY
Individuals not residents of Italy may file a refund claim on a form.
The form must contain the following:
The certificate of residence for tax purposes in the foreign country, issued by the competent tax authority
the declaration of the existence or non-existence of a permanent establishment (if it is a company) or fixed base (if it is a professional) in Italy, to which the income about which the tax refund is sought is attributable
the declaration of any other specific conditions provided for by the convention.
The appropriate documentation must accompany the form to prove the actual withdrawal of the tax.
SUBJECTS RESIDENT IN ITALY
Individuals resident in Italy, to obtain a refund of the foreign tax or the direct application of the reduced rates provided for in the tax treaty in force with the foreign state, must take action by producing, in principle, to the nonresident entity that pays the income (paying agency) and to the foreign tax authority, the form, if any, prepared by the foreign tax authority itself or a particular application.
The form generally contains a statement of residence for tax purposes in Italy, which the taxpayer must have signed and stamped by any Provincial Directorate of the Internal Revenue Service.
To facilitate the disbursement of the refund or the application of the reduced rate under the tax treaty, the Internal Revenue Service has prepared a model attestation of residence for tax purposes for residents, which the taxpayer may submit, if the foreign country, the source of the income, has not prepared any model.
Some foreign administrations do not accept the certificate of tax residence adopted by the Internal Revenue Service and require the completion of their ad hoc form, with the stamp and signature by the competent Internal Revenue Service office
IN THE CASE OF OWNERSHIP OF FOREIGN REAL ESTATE?
Possession of foreign real estate entails a number of reporting obligations for the holder of the right of ownership or other absolute rights, resident for tax purposes in Italy.
There are other obligations at the time when the Italian citizen subject decides to make the transfer of foreign property.
Such as determining the taxation of the capital gain from the transfer of property located abroad. In particular, it is possible to exempt from tax the capital gain arising from the transfer of property abroad. In some cases, a situation of legal double taxation of the capital gain generated may occur, which, however, can be eliminated, as indicated in the national and conventional rule.
It would help if you kept in mind, in case of the sale of an asset abroad:
Country where the property is located.
In this case, the country where the property is located is considered to check whether a double taxation convention is applied.
In addition, the seller's tax residence must be considered because if he is a tax resident in Italy, he is subject to taxation.
Rate to be applied according to the convention applied.
To sell the property abroad, you must provide translated documentation. In this case, I can help you; check my site with related services offered.
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I'm Natalia Bertelli, an English/Spanish to Italian legal translator. Since 2008 I have been working on contracts, judicial deeds, certificates, corporate translations for foreign clients who want to do business in Italy, get a dual citizenship or simply settle in my beautiful country.