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Tax Advice - working for a UK Ltd company and in Italy

Tax Advice - working for a UK Ltd company and in Italy

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Old Dec 8th 2017, 3:33 pm
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Default Tax Advice - working for a UK Ltd company and in Italy

I shall be working for a UK Ltd company (of which I am the director and only employee) and I shall also be working part-time in Italy.

Can I pay tax separately? Or will my salary from the two countries need to be accumulated as my worldwide income?

The work for the UK Ltd company shall be carried out in the UK.

Any advice?
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Old Dec 8th 2017, 3:46 pm
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

Where will you be tax resident? ..... Which roughly equates to where will you be spending most of your time? Majority in the UK, or majority in Italy?
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Old Dec 8th 2017, 3:49 pm
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

Majority in Italy
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Old Dec 8th 2017, 5:16 pm
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

Originally Posted by rzm View Post
Majority in Italy
Generally speaking you need to pay income tax where you are physically located when you are performing the work. The complication in your case is that you are effectively self employed, working for your own corporation, which gives you the flexibility to determine your own salary and to hold income within the corporation and pay it out at a later date.

In short, things can be made as complicated as you like, and needless to say, the involvement of Italy and Italian taxes ratchets the potential complications up several more notches, so you are really going to need the advice of an accountant who understands both UK and Italian taxes.
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Old Dec 8th 2017, 5:38 pm
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

I would be physically located in the UK when performing the work as my clients are in the UK.

However, I am an Italian resident.

Does this mean that I do not even need to tell the Italian authorities about my UK income? Or advise them and say that I've paid tax at source, ie the UK.

The commercialista today was saying that I need to issue an Italian invoice to my UK clients and that they need to even pay 4% of cassa forense?!?!
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Old Dec 8th 2017, 5:52 pm
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

Originally Posted by rzm View Post
I would be physically located in the UK when performing the work as my clients are in the UK.

However, I am an Italian resident.

Does this mean that I do not even need to tell the Italian authorities about my UK income? Or advise them and say that I've paid tax at source, ie the UK.

The commercialista today was saying that I need to issue an Italian invoice to my UK clients and that they need to even pay 4% of cassa forense?!?!
Like I said, this is complex. If you are doing 100% of the work in the UK, then you must pay UK income and payroll taxes (NI - employee's and employer's) on all your earned income.

I am not certain how the Italians will see it, but if you are not working in a country then then typically you wouldn't pay tax on your earned income in the country on income earned while in another country, except to the extent that total income taxes exceed the income tax paid where you did the work. E.g. if you paid 20% income tax in the UK, where you did 100% of the work. You are tax resident in Italy, so are taxed on 100% of your worldwide income, at the Italian rate of 30%. You get credit for the 20% already paid in the UK, and pay an additional 10% tax in Italy. Maybe that is what the commercialista is describing?

If you are living in a country more than 50% of the time, then investment income is another matter entirely! Did you tell your commercialisation that you will not be working while physically present in Italy?
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Old Dec 8th 2017, 6:00 pm
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

You are explaining everything much better to me than he did.

I said that I would see my clients in the UK and would do some writeup work in Italy. I think he interpreted that as working for my UK company full time in Italy.

To be honest I would much prefer to pay the 20% in the UK and then the additional 10% in the Italy.

Is it also true that salaries over €30,000 incur a tax rate of 43% (social security) + 5% (income) - extortionate!

If possible I would lie to keep matters separate and pay the additional tax on Italian salary.

Ultimately if they see I M paying tax, they can't penalise me can they? How strict are they here?
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Old Dec 8th 2017, 6:07 pm
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

Originally Posted by rzm View Post
You are explaining everything much better to me than he did.

I said that I would see my clients in the UK and would do some writeup work in Italy. I think he interpreted that as working for my UK company full time in Italy.

To be honest I would much prefer to pay the 20% in the UK and then the additional 10% in the Italy.

Is it also true that salaries over €30,000 incur a tax rate of 43% (social security) + 5% (income) - extortionate!

If possible I would lie to keep matters separate and pay the additional tax on Italian salary.

Ultimately if they see I M paying tax, they can't penalise me can they? How strict are they here?
Well hopefully someone living in Italy will be along to advise, but personally, under the circumstances you describe, if you are spending close to 50% of your time in the UK anyway, I would bump that up to a clear 50% and take the Italian question off the table entirely. Certainly others have reported living in Italy for a chunk of the year, but remaining tax resident in the UK, and flying under the radar in Italy to a degree that I wouldn't be comfortable with, but they seem to get away with it.

To be clear "doing write up work" is working, as would be "writing reports", taking business calls", "attending phone meetings", "researching recommendations", etc. even if those are tasks that you aren't billing clients for.
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Old Dec 8th 2017, 6:27 pm
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

I presume that you don't reside in Italy?

In any event I urgently need an accountant to help me.

Thank you for your advice,you've given me a lot to think about.
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Old Dec 8th 2017, 9:14 pm
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

Last I read the rates of tax in Italy were (Euro)...

23% 0 - 15,000
27% 15,001-28,000
38% 28,001-55,00
41% 55,001-75,000
43% 75,001 and over
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Old Dec 8th 2017, 9:34 pm
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

Thanks Geordieborn! Is this including 5% income tax?

Do you reside here?
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Old Dec 9th 2017, 5:20 am
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

If you are resdient in Italy, you must fill in a tax form yearly, which has a section for income earned outside Italy - you cannot just say nothing to the Italian tax authorities. Whether you will be liable for tax in Italy is anyones guess, especially after brevet, but if you really dont want to pay in ITaly, then dont be a resident.
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Old Dec 9th 2017, 6:18 am
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

There's two slightly different issues here - firstly, where are you tax resident, and secondly, where do you pay your tax on your various revenue streams. Establishing where you're tax resident is important because you declare worldwide income in the country where you're tax resident and normally there are DTAs to ensure you don't pay tax twice on the same income. If you are also liable for tax in another/other country(ies), those countries treat you as a non-resident taxpayer and you only declare to them income that's taxable in that country.

To decide where you'd classed as tax resident you need to look at both countries' rules, not just one. So you need to check Italy's rules, and also establish whether your proposed pattern of work would lead to HMRC considering tax resident in the UK or not.
https://www.gov.uk/government/upload...nal_078500.pdf

If you're tax resident in the UK under UK rules, and in Italy under Italian rules, then if you're a British national and up to now you've been resident in the UK then the UK will probably get you. If you're Italian and you have never lived in the UK (although I assume you have, or why would you have set up a business there) Italy will probably get you.

All these things are governed by national laws and international treaties based on various criteria, and you have to follow the rules that apply to your particular situation, you don't get any choice in the matter. So in effect the only way you can influence where you declare worldwide income is by adjusting your lifestyle to ensure you meet the criteria that will get that result.

Which is basically what the other posters have been saying, and I agree. Although if you remain UK resident you may find there's a limit to how long you will be able to stay in Italy post-Brexit. It will likely become harder to pick the cherries.
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Old Dec 9th 2017, 7:13 am
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

There's also the healthcare angle to consider, of course. If you end up being classed as resident in Italy but HMRC agrees to you continuing to pay NICs in the UK because that's where you essentially carry out your work, then the UK will also (at present at least) fund your healthcare in Italy. But this needs to be agreed officially. You can't unilaterally decide to carry on paying NICs if you live abroad, because basically the NHS is residence-based. Continuing to pay NICs when you don't live in the UK is permitted in special circumstance but the decision has to be made by HMRC/DWP.

If HMRC doesn't agree it, then under EU rules for cross-border workers your company, as a UK based employer employing a resident of Italy, would need to arrange to pay your health and welfare contributions to the Italian social security system.
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Old Dec 9th 2017, 9:43 am
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Default Re: Tax Advice - working for a UK Ltd company and in Italy

If you're resident in Italy it would be better for you to do all your tax reporting if possible, in Italy, rather than paying some in the UK and then off-setting that amount against your Italian return.

If you do end up off-setting, it works out more expensive than reporting it all "from zero" here. I know because I had to do that for a few years, my accountant called it "regime separate". Sorry, I'm not explaining that very well.

Anyway, since bank account interest is no longer taxed at source and rental income is not taxed at source if you are an "overseas landlord", it is easy to not be paying tax to the UK and instead declare it all in Italy. So, if you do a self assessment form you should tick Box 16, which says you come under Double Taxation, in this way, the UK won't take any tax from and you can then just report all your earnings here.

Well at least that's the way it worked out for me, but I'm not self employed so there might be different issues that I know nothing about.
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