If you are in Italy and thinking of working for an employer or client in the U.S. the tax and social security ramifications can be complex.
If you’re resident in Italy and hired as an employee of a U.S. corporation, then the U.S. company will likely need to register as an employer (via a social security representative) in order to pay the social security contributions. Under Italian law social security is due based on where the employment is carried out. Exemption from the Italian charge for the bulk of the contributions may be available under the U.S./Italy social security treaty, depending on nationality, the facts and your choice, and providing you remain covered in the U.S. The employee typically pays his or her Italian taxes, via a personal income tax return in Italy – Italy has the right to tax the income if the work is carried out in Italy. If you are a U.S. citizen you will need to file in the U.S. as well, although you may be eligible for exemption from U.S. tax up to the relevant threshold and/or credit for the Italian tax paid.
If you are hired as an independent contractor, then you need to register your activity and you will be liable to account for Italian tax and social security charges (unless you opt to remain in the U.S. system). There are number of options for the way that you set up as an independent contractor – one interesting option is the flat rate tax regime for the self employed. Again if you are a U.S. citizen then you will need to fie in the states. The social security treaty can also operate to keep you out of the Italian regime and remain with the U.S. system.
In both cases the U.S. company needs to consider whether its activities in Italy create a corporate income tax liability on the profit attributable those activities. Foreign corporations with a “permanent establishment” or fixed base in Italy need to register for taxes. Determining whether a certain activity constitutes a permanent establishment is generally a question for a professional as it involves a technical examination of the domestic legislation and interaction with the U.S./Italy treaty for the avoidance of double taxation.
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