Professional resident in the UK and services in Italy: how to deduct taxes

The Lombardy Court of Tax Justice of the second instance ruled on the taxation of the British professional

Remuneration payable to a UK resident professional under the ‘resident but not domiciled’ scheme for his/her activity provided for an Italian client, shall be subject to withholding tax at 30%.

The Lombardy Court of Tax Justice of the Second Class has expressed itself in this sense, in its ruling no. 169 on January 18th.

Details below.

Professional resident in the UK and services in Italy: cause of dispute

The Revenue Agency sent an Italian taxpayer, in the specific case a SRL company, an assessment notice objecting toWithholding taxes are not applied Referred to in Article 25 of the Republican Decree, Paragraph 2 of Presidential Decree 600/73.

Except as provided in the last paragraph of this Article, if the fees and other amounts referred to in the previous paragraph are paid to non-residents, a withholding tax of 30 percent shall be levied, as well as on services performed in the conduct of business. Remuneration for self-employment services performed abroad and wages paid to permanent establishments in Italy for non-resident nationals are excluded.

According to the Revenue Agency, the withholding tax was based on the fact that the person performing the service and charging the relevant fee could not benefit from the provisions of Article 14 of the Agreement between Italy and the United Kingdom against double taxation.

Thanks to this provision, the freelancer is subject to taxation only in the country of residence, where the precluding condition of having a “fixed base” in Italy to carry out the professional activity is met.

Therefore, in this way, double taxation is interdicted, unless in the other Contracting State (the Customer’s State, Italy in the specific case) there is usually a fixed rule for the exercise of its activity.

Indeed, if a professional has such fixed basisIncome may be taxed in the other State but only to the extent that it is attributable to that fixed base.

In this context, when we talk about self-employment, we refer to the independent activities of a scientific, literary, artistic, educational or pedagogical nature, as well as the independent activities of doctors, lawyers, engineers, architects, dentists and accountants.

Appeal of the taxpayer

Against the Notice of Assessment, SRL appealed to the Court of First Instance of Tax Justice in Milan, which upheld it. Given that according to the court it is not attributed to any professional Solid working basis.

From here, the Revenue Agency, the defendant in the proceedings, appealed to the Court of Tax Justice of the second instance. For the reasons indicated above, on which the issuance of the Notice of Assessment is based and given that, according to the Agency itself, the professional in the specific case had a “firm base” in Italy.

The firm base was determined in the television studios and in the related materials and human resources provided by SRL which were appraisal recipients available to the professional.

The Revenue Agency also complained that the provisions of Article 17 of the same agreement were not considered in the Court of First Instance.

Income derived by a resident of a Contracting State from his personal services performed in the other Contracting State as an artist or entertainer in the theatre, cinema, radio or television, or as a musician, or as an athlete is subject to tax in that other State. .

Where income from services performed by an entertainer or athlete himself and in that capacity is attributed to a person other than himself, such income shall be taxed in the Contracting State in which the services of the entertainer or athlete are exercised, notwithstanding the provisions of Articles 7, 14 and 15 of this Agreement.

Therefore, non-residents are taxed on the basis of income produced in Italy only, by applying a withholding tax as a tax.

Judgment of the Tax Court of Justice of the second instance in Lombardy

Lombardy Tribunal of Tax Justice in the second stage, noting that the professional in question was subject to the ‘resident but not domiciled’ tax regime, envisaged in the United Kingdom, which entails that only income generated there shall be taxed in the country of residence (UK), and not taxed on income From foreign sources, except their move to the United Kingdomagreed with the Revenue Agency, but on the basis of “normative” assumptions different from those raised by the latter.

Given that, in the specific case, there was also no evidence of Income transfer UK local.

Indeed, according to the court, given the non-resident status of the professional to whom the fee was paid, Double taxation agreement. In particular, according to Article 4 of the same agreement, the term “resident of a Contracting State” does not include persons liable to tax in that State only on income from sources situated there. As in the case of “non-residents” in the United Kingdom.

Hence, in the specific case, since the anti-double taxation agreement did not apply, the merchant was not subject to any taxes. Neither in Italy nor in the UK. Given this, there was no evidence of our income being transferred to the UK.

In conclusion, in view of the reconstruction thus far carried out, the normal rules of taxation apply; Pursuant to Article 25 of the Presidential Decree, Paragraph 2 of Presidential Decree No. 600/73, SRL should have applied a withholding tax of 30% as tax.

Taxes and taxes

tags: judgments