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Double Tax Treaties in Italy

Updated on Wednesday 18th July 2018

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The conventions for the avoidance of double taxation signed by Italy 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 the 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.

Below our company formation agents in Italy offer general information on the double taxation agreements signed by this country so far.

The provisions of a double tax treaty in Italy

In Italy, a 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 which is levied on individual residents in one of the contracting states;
  • - the corporate income tax which is applied to companies registered in of the contracting states;
  • - the regional taxes, income from immovable property, in case such tax is imposed in both contracting countries;
  • - the business profits of a company registered in one country and doing business in the other contracting state;
  • - dividends, interest, royalties, capital gains which are applied withholding taxes at different rates;
  • - independent and dependent personal services provided by individuals residing in the other state;
  • - director’s fees, pensions, artists and athletes' remuneration and other types of incomes.

The conventions 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.

The permanent establishment status in Italy

One of the most important provisions contained by all Italian double taxation agreements is related to the permanent establishment status which can be obtained by a company resident in a contracting country with operations in Italy.

The following types of activities can be completed under the permanent establishment status in Italy:

  • -       branches and subsidiary companies which have activated for a minimum period in Italy;
  • -       the management places established by foreign companies seeking to operate on the Italian market;
  • -       any office, workshop, factory or construction site set up by a foreign company in Italy under certain requirements;
  • -       sites for the extraction of natural resources, such as mines and quarries can also be considered permanent establishments.

Our company registration advisors in Italy can offer more information on the permanent establishment status under these double taxation treaties.

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 Italytax information exchange agreements are signed in order to regulate the 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 rates of the withholding taxes levied on dividend, interest, and royalties payments are usually influenced by several factors, one of the most important being the recipient’s shareholding ownership in the company paying them.

However, the taxes applied through the double tax treaties in Italy are usually lower than the ones applicable otherwise.

Find out more about the double tax treaties from our company registration agents in Italy who can provide you with customized support and services.

 

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