Have Tax Questions? Ask a Tax Expert for Answers ASAP
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.
You are being paid by an UK organisation, presumably through PAYE. If you move to Italy this will continue. If you live in Italy more than 183 days in any one tax year you will be subject to Italian Income Tax (IT). These rates are rather more onerous than their UK equivalents, up to some 38% on your level of salary. Under the Double Taxation Convention between the UK and Italy the same income stream can only be taxed in one jurisdiction. This is achieved by means of tax credits, the tax paid in one country being allowed as a credit against the liability in the other. As the Convention does not protect you from differences in rates of taxation you will finish up having to pay out a little more to Italy.
If you become non resident in the UK through the P85 procedure you can only enter the UK for 91 days in any one tax year to maintain your non residential status. Not that this matters a fig as if you are going to pay Italian IT you are going to have an additional liability anyway. If you live under the 183 days in Italyyou are only liable for Italian IT on the money earned in Italy.
You may find the following advice from Your Europe of assistance.
I do hope that you find my reply of assistance.
If you are present in Italy for less than the 183 days then you only pay Italian IT on the income you earned in Italy. You must pay tax somewhere, that is a general principle. You cannot swan about the globe simply avoiding tax from country to country by being non resident. In your case, as you are paid by an UK based organisation, your tax base will be deemed to be the UK and the P85 non residency process would be a dead duck. If you overrun the Italian 183 day rule (this sort of rule is very common world wide) then you will be liable to tax in both countries and the Double Taxation Convention will kick in to protect you.
Please be so kind as to rate me before you leave the Just Answer site.
1. Yes, you must be taxed somewhere. The 93 day rule (actually 91) only comes into play if you seek to have non residential UK tax status through the P85 process which in your situation will not be tolerated.
2. As you are being paid by an UK organisation through PAYE then there will be an element of double taxation, but the tax credit system under the Convention will smooth out the process. You, not your company, would have to make the necessary declaration to the Italian tax authorities.
Thank you for your support.
And your generous bonus.