Like many other Western countries, Italy has a totalization agreement with the United States. What this means in plain language is that if you contribute as a self-employed person to the social security system of the foreign country, you do not have to contribute to the American system, that is, you do not have to pay self-reliance tax. In Italy, the risk of double taxation can be combated in different ways: while the United States taxes the international income of its citizens and permanent residents residing abroad, it has specific provisions to protect them against double taxation, including: the risk of double taxation is managed by treaties of two countries (such as Switzerland or Germany). as regards the taxation regime of the two States on the basis of the principle of reciprocity. Italy signed its first double taxation agreement with the United States in 1984. The agreement was replaced in 1999 by a new U.S.-Italy income tax agreement. Italy granted important exemptions from the tax rates of the country of origin in order to obtain a partially foreign tax credit, which led to better economic cooperation between the two countries. The agreement now follows the model of the Organisation for Economic Co-operation and Development. The totalization agreement between the United States and Italy is an agreement on social security for dual citizens. This means that Social Security taxes are paid with respect to the place of residence, the length of time spent in both countries, the location of your employer, and your presumed future intentions. In some cases, choose between filing with Italian or U.S. Social Security.
With regard to double taxation treaties, residence for tax purposes is of fundamental importance, as it determines the application of international conventions and the eligibility of taxation of the countries concerned. The U.S.-Italy tax treaty covers double taxation with respect to income tax, corporate tax, and capital gains tax, but, as has already been said, the benefits are limited for most U.S. expats living in Italy. However, the agreement ensures that no one pays more taxes than the higher tax rates of both countries and also defines where to pay taxes, which normally depends on where the income is generated. There is a tax treaty between the United States and Italy. One of the main objectives of the agreement is to reduce the double taxation of Italians residing in the United States and American citizens living in Italy. This contract is important to understand where to pay taxes. Since every situation is different, it is advisable to speak with a competent professional tax person to ensure that the right country receives the right amount of tax. In particular, by analyzing in detail individual cases as well as international agreements between Italy and other countries, we advise them in the exercise of their tax obligations in the country where they work or in their country of residence for tax purposes, in order to avoid penalties According to the new provisions, this income is taxable only in the country of residence of the beneficiary.
Workers and employers in the United States and Italy will also benefit from deductions for cross-border pension contributions. For any relevant information on the taxation of foreign companies, please contact our law firm in Italy. In addition to income tax, there are other forms of taxation in Italy. .