Tax Aspects
A transfer from the UK to Italy involves entrance into a world of the interaction of UK and Italian tax regulations within the framework of the Italy-UK Double Tax Agreement or Treaty (the DTA).
You do not have much of a choice as to where tax will be paid and how it will be paid. The analysis needs to be done on the basis of the rule-based framework.
The framework imposes two different tax year ends – 5 April for the UK and 31 December for Italy, requiring careful attention to the tax years impacted by the move itself.
Each country imposes its own rules rules – such as the definition of tax residence and categorisation of income for tax purposes. thus income which may be tax free if you are exclusively a resident of the UK (such as a pension lump sum withdrawal or income from an ISA ). Whilst Italy may have its own similar kinds of reliefs from tax, they, too, come, with her own specific conditions and requirements for accessing them.
Payment Methods
Direct Mandate/F24
Opening and maintaining an Italian bank account is, as a general rule, far the easiest way of paying Italian tax. If you have an Italian account and are using professional services to prepare the return, your provider can mandate the Tax Agency to take funds directly from your account. Otherwise you can use the From 24 payment section of your online banking to generate payments, or present the F24 in personal at the financial institution where you have an account.
Note however that payment of tax can only be made by an account holder. If, for example, only one spouse has an Italian bank account, the other spouse cannot make payment of an F24 by direct mandate or online banking. The transaction will generally need to be handled in the branch (if there is one), as a withdrawal of funds by the accounting holding spouse and transfer (gift?) to the other spouse to make payment of the latter’s tax.
Payment through PagoPA
For many taxpayers, particularly those who can and have obtained an Italian digital identity (SPID, CIE or CNS), an alternative method of paying Italian taxes and other public charges is through the PagoPA system.
PagoPA is the Italian government’s electronic payment platform and is available for payments to a wide range of public and semi-public bodies including:
* The Italian Tax Agency (Agenzia delle Entrate);
* Municipal authorities;
* Regions;
* The Motor Vehicle Department (Motorizzazione);
* Universities;
* Courts and other public administrations.
In many cases the taxpayer will receive a payment notice containing either:
* An IUV (Identificativo Univoco di Versamento); or
* A QR code.
The payment can then be made online through the PagoPA platform, through the taxpayer’s online banking system, or through a participating payment provider, e.g via bank or credit card.
One advantage of PagoPA is that the payment is immediately linked to the relevant notice or assessment. The taxpayer does not normally need to identify the correct tax code, IBAN or payment reference, as these details are already embedded in the payment request.
For relatively small amounts, many taxpayers may find PagoPA simpler than preparing an F24 or arranging an international bank transfer.
PagoPA is not a universal solution and not all taxes can be paid through the PagoPA platform. Some taxes continue to require payment by F24 or other specific procedures.
Using a Italian Tax Agency IBAN
If you do not have an Italian bank account, many (but not all) Italian taxes can be paid directly from a foreign bank account. Using the IBAN method. Especially where you have a series of payments for different types of tax, national income tax, regional, municipal taxes, substitute tax and wealth tax, can introduce further complexity and risk of error.
Italian Tax Agency List
The Italian Tax Agency (Agenzia delle Entrate) publishes a list of IBANs that may be used by taxpayers who are unable to make payment through the normal F24 system. This can be particularly useful for:
- Individuals who are resident outside Italy;
- Foreign property owners;
- New residents who have not yet opened an Italian bank account;
- Former residents who have closed their Italian bank account
The official list of IBANs is published by the Italian Tax Agency at:
If the particular tax you want to pay is not on the list, you should not use any old IBAN shown on the list. There is a risk that the payment will be deemed not to have been made and a lengthy refund process might ensure.
IBANS are also available for payment of some Regional and Municipal Taxes. You need to check the web pages for the relevant authority, or contact them directly as they are not shown on the Tax Agency Web Page mentioned above.
The correct IBAN depends upon the tax being paid. The Italian Tax Agency’s table identifies the appropriate account by reference to the relevant tax code (“codice tributo”).
For example, the table specifically includes tax code “NRPP”, which is the substitute tax payable by individuals who have elected for the Article 24-bis flat annual tax regime.
Take Care with the Payment Reference
Making the transfer to the correct IBAN is only part of the process.
The payment reference (“causale del bonifico”) is equally important. The Italian Tax Agency requires sufficient information to identify:
- The taxpayer making the payment;
- The tax code (“codice tributo”);
- The tax year to which the payment relates.
Before making a transfer, taxpayers should consult the Italian Tax Agency’s guidance on the information to be included in the payment reference.
A payment sent to the correct IBAN but with an incomplete or unclear reference may create difficulties in matching the payment to the taxpayer’s position.
The IBAN
What is an IBAN?
An IBAN (International Bank Account Number) is a standardized format for identifying a bank account in cross-border payments.
A typical Italian IBAN looks like:
IT60 X054 2811 1010 0000 0123 456
where:
IT = country code
two check digits
bank identifier
branch identifier
account number
An IBAN is not the same thing as a bank account number. It is an international format used to identify a specific account for cross-border payments.
Are IBAN’s used outside the EU?
The answer is yes and no.
IBAN is not an EU-only system. Many non-EU countries use IBAN, including:
United Kingdom
Switzerland
Norway
Turkey
United Arab Emirates
Saudi Arabia
Qatar
and many others.
However, the United States does not use IBANs. Nor does Canada.
Accounts in these jurisctions are identified instead by:
Routing Number (e.g. ABA)
Account Number
SWIFT/BIC code (for international payments)
Why does this matter?
Problems Sending From Non IBAN familiar countries
When an Italian tax payment must be made by wire transfer, the Agenzia delle Entrate typically publishes:
an IBAN
a BIC/SWIFT code
European banks understand this immediately.
A U.S. bank will generally require:
the beneficiary IBAN,
the beneficiary SWIFT/BIC,
the beneficiary name,
and often the beneficiary address.
Many U.S. clients become concerned because their online banking platform asks for an IBAN but they do not themselves possess one. The important point is that the taxpayer does not need an IBAN of their own in order to make the payment. The relevant IBAN is that of the beneficiary account published by the Italian Tax Agency.
Practical experience
We have found that the most common problem is not the absence of a pèrsonal IBAN, but the fact that many U.S. and other non Eur jusrisidction banks do not frequently process payments to government accounts overseas. The client therefore needs to be careful to:
- enter the IBAN exactly as published;
- include the correct SWIFT/BIC code;
- include a complete payment reference (“causale”);
- allow sufficient time before the payment deadline.
modern international transfers are usually fast, but there is still considerable scope for delays in compliance departments and payment operations teams.
Don’t Leave It Until the Last Minute
International transfers are generally much faster than they were in the past. However, delays can still arise due to:
* Bank compliance reviews;
* Anti-money laundering checks;
* Currency conversion procedures;
* Manual intervention by the sending or receiving bank.
We recommend initiating the transfer several business days before the relevant filing deadline and retaining evidence of the payment instruction and transfer confirmation.
The Italian Tax Agency may well take the date that funds are available on their account, rather than the date the initial transmission instructions were given, in calculating whether a payment has met a deadline, or not.
Need Assistance?
If you need assistance with Italian tax compliance, payment of Italian taxes from abroad, or the Italian Neo Resident (Article 24-bis) regime, please contact us.
We regularly assist clients who are resident outside Italy or who have recently moved to Italy and need to comply with their Italian tax obligations.