The Conventions for the avoidance of double taxation
are international treaties by which the contracting states regulate the taxation rights of the countries in order to eliminate double taxation on income
. The conventions are also intended to prevent tax evasion
and tax avoidance and they include some of provisions regarding administrative cooperation.
These treaties are based, primarily, on the model of the convention drawn up in the Organization for Economic Co-operation and Development and a further model of reference is developed within the United Nations.
The provisions of a double tax treaty
In Italy, the Convention for the avoidance of double taxation is subject to a process of ratification by the Parliament after which the Treaty can be implemented completely.
Double Tax Treaties in Italy enter into force as instruments of ratification between the contracting countries. The confirmation of the exchange of instruments of ratification is made through the publication in the Official Gazette.
Double Tax Treaties in Italy will usually apply for the following types of taxes:
- the personal income tax;
- the regional taxes, income from immovable property;
- business profits;
- dividends, interest, royalties, capital gains;
- independent and dependent personal services;
- director’s fees, pensions, artist’s and athlete’s remuneration and others.
The Convention for the avoidance of double taxation applies to the tax residents of one or both of the Contracting States. Residency is described in the treaty according to the specific laws in each country. It can be based on the fact that the company is incorporated in that country (for corporate taxes) or, in case of individuals, the taxation of the income can be levied based on a residency permit or a number of days effectively spent in that country.
Double tax treaties signed by Italy
Many states have concluded Double Tax Treaties
with Italy over the years. There are currently more than 70 agreements between Italy and other countries, including with: Albania, Algeria, Argentina, Armenia, Australia, Austria, Azerbaijan, Bangladesh, Belgium, Belarus, Brazil, Bulgaria, Canada, China, Cyprus, Congo, Croatia, Czech Republic, Slovakia, Denmark, Ecuador, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Ghana, Greece, Hungary, Iceland, India, Indonesia, Ireland, Israel, Ivory Coast, Japan, Kazakhstan, Kuwait, Latvia, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mauritius, Mexico, Morocco, Mozambique, Netherlands, New Zealand, Norway, Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russia, Serbia, Senegal, Singapore, South Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Syria, Tanzania, Thailand, Trinidad and Tobago, Tunisia, Turkey, Ukraine, Uganda, United Arab Emirates
, United Kingdom, United States of America, Uzbekistan, Venezuela, Vietnam, Zambia.
For Double Tax Treaties concluded with states that no longer exist (for example the treaties signed with Yugoslavia, Czechoslovakia and USSR), the same regulations and provisions, with certain amendments and actualization, are applied with their predecessors.
Along with the Double Tax Treaties in Italy
, Tax Information Exchange Agreements
are signed in order to regulate exchange of information between the partner countries and also to maintain the good application of the treaties for foreign investors
Each country applies different taxes
on dividends, interests and royalties. The rate of the withholding tax may be influenced by the percent own from the company’s capital or by the nature of the receiver or payer (usually there are no withholding taxes when a state body is the beneficial or provider). However, the taxes applied through the Double Tax Treaties in Italy
are usually lower than the ones applicable otherwise.