Nowadays, lots of European employees, working across different countries, are afraid of paying taxes tow times: first, where they earn income, then where they’ve got residence. But fiscally, there are some different ways to avoid this risk.
Are you an English worker moved to Italy? Or are you an Italian employed in England? Make sure to not suffer a double taxation!
Here below an easy and rapid guide to what you’ve to do to pay taxes only one time.
What’s the risk?
If you work in a different country than where you have residence, it’s probably that, sooner or later, two tax inspectors will knock your door, saying: “Hey man, pay our taxes!”.
If that happens, don’t worry! Almost in all Europe exists a fundamental fiscal principle that every Europen worker should know: “One person pays taxes only in one country”.
Now, the million dollar-question is… In which one?
In 1991, 6th of April, UK and Italy signed an historical agreement, called UK-Italy: Double Taxation Convention. It’s possible to check the entire text of Convention on UK Government web site at this link:https://www.gov.uk/government/publications/italy-tax-treaties
So, let’s summarize: what does this agreement talks about?
The document is formed by 31 articles. Today, we analyse article 24, titled Elimination of double taxation. First of all, one thing: income is taxed where working activity is settled. For example, Bob works as a barman in Rome? Bob has to pay taxes in Italy. Vice versa, Marco is working as a banker in London? He has to pay taxes in UK. But… If Bob or Marco has got an another income in their own country – a rental income, capital gains, dividends, interests –, will these incomes be taxes in Italy, England or what!?
Remember one rule: every kind of income has got a specific taxation for each European country. For example, corporate tax amounts at 24% in Italy (IRES), while in England is 20%. Anyway, today we deal with taxes on employs’ income.
How much taxes an English worker moved to Italy has to pay? Have a look at this case-study focused on lower incomes (< 25.000 £):
|
Income
|
Italian Tax Rate
|
Tax
|
Tax Credit Relief in England
|
|
10.000 €
|
23%
|
2.300 €
|
1.020 £
|
|
25.000 €
|
23%, 27%
|
6.150 €
|
3.230 £
|
What about an Italian that is employed in England?
|
Income
|
English Tax Rate
|
Tax
|
Tax Credit in Italy (Self Employed)
|
Tax Credit in Italy (Employee)
|
|
10.000 £
|
10%
|
1.000 £
|
- 50€
|
-1.040 €
|
|
25.000 £
|
10%
|
2.500 £
|
- 425 €
|
- 2.950 €
|
So… What’s the point? Well, if you’re English and work in Italy, your income will be more taxed, but returned home you’ll mature a tax credit.
Otherwise, an Italian employed in England will pay taxes two times… But not always. In Italy there’s plenty of other tax relief and deductions that can help to decrease taxation. If you work across more European countries and you want to know in which way your taxable income could decrease, write me at my office email:
francesco.studiomondardini@gmail.com
I’ll be ready to help you!
Francesco Mondardini
@FranzMondardo
Business & Tax Consultant