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I am British but resident and working in Italy in a rented

flat.I will be moving to...
I am British but resident and working in Italy in a rented flat.I will be moving to Saudi soon,employed as an English language instructor at University.At the moment,I pay tax in Italy and have been informed that all earnings worldwide are liable for Italian tax.
1) Does this mean that being resident in Italy,I must pay tax to the Itallian state?
2)Am I able to change tax domicile by changing my residence to my father's address in Uk? What does this entail if I work for more than 190 days pa in Saudi and the rest is spent at my father's home in Uk?
If possible,how can I do this?
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Answered in 30 minutes by:
11/15/2013
TaxVince
TaxVince, Accountant
Category: UK Tax
Satisfied Customers: 965
Experience: Chartered Accountant >20 years + Qualified IFA
Verified

TaxVince :

Hello, my name is XXXXX XXXXX it is my pleasure to assist you with your question today.

TaxVince :

Individuals resident in Italy are subject to worldwide income tax liability on their income. Individuals are deemed as tax residents if they permanently reside in Italy e.g.


• if they are registered for more than 183 days (184 days in leap years) with the municipal registration office as resident in Italy;


• if they are domiciled for more than 183 days in Italy and have established their habitual residence in Italy.


 


This is determined by the number of days you spend in Italy. If you are leaving Italy to work in Saudi and keep the number of days you spend in Italy to a minimum then you shouldn’t be taxed in Italy. Uk has similar regulations however the rules are quite strict here..if you are move to UK during the times you are not in Saudi and you spend more than around 90 days or so in UK, then you become UK tax resident and become subject to UK tax (the exact number of days depends with individual cases – you can check it up of HMRC website- statutory residence test).

TaxVince :

Hence its ideal to spend most of the year in Saudi – which you should if you are permanently employed there and try to keep the number of days in any other country below 3 months in a tax year. IF you could manage to this then you need to tell your Italian tax office that you are no longer resident in Italy and you are moving to Saudi and you wont be spending the minimum number of days required for residence in Italy, then you wont be liable for tax in Italy on your Saudi or worldwide income. This has nothing to do with domicile.

Customer:

so the 'tax free' appeal of Saudi is a myth? How would I prove to Italy that I am out of the country for more than 190 days? If Italian law states that there is a worldwide tax on income,how does my being out of the country for more than 90 days exempt me from Italian tax?

Customer:

so can I keep my rented flat and bank account in italy?i will be spending ost of the year in saudi but would like to keep up flat and bank account.excuse my ignorance,but can you explain the difference between domicile and residence

TaxVince :

The rules in most countries including UK and Italy is if you spend more days in that country than any other country -usually 180 days min (in UK depends on other factors but generally 90 days) then you become tax resident in that country and taxed on your worldwide income in that country. Therefore its possible to be tax resident in more than one country and you can claim double tax relief if such is to happen.

TaxVince :

This means in order to avoid being taxed in Italy on your worldwide income you need not be a tax resident there and this is determined mainly by the number of days (plus other factors) you spend there. That is why I said if you keep the days to minimum they you shouldn't be taxed in Italy.

TaxVince :

Also to clarify rental income and income earned in Italy will generally continue to be taxed there. This concerns your employment income as it will be earned in Saudi and if you are not a tax resident in Italy you cant be taxe on WORLDWIDE INCOME except income generated in that country.

Customer:

so I just have to inform local council that I will be out of the country for more than 180 days without having to give up my flat? I read the bilateral agreement for teachers but ,like all legalese,difficult to fathom.I am concerned that my Saudi wages will be hammered here in Italy,especially as they are currently trying to claw as much back as they can from taxpayers.

Customer:

I am renting my flat,not receiving any income from tenants

TaxVince :

One of two tests must be passed to be considered an Italian resident: a life centered in Italy, or being registered in the Population Registry as living more than 183 days a year in Italy.

Customer:

do you know anything about AIRE'? is it just for Italian nationals and does it help me avoid taxation?

TaxVince :

Ofcourse if you don't spend time there like most British people who own Italian property their UK employment income is not taxed in Italy because they have properties in Italy. You can a property in Italy and still spend time there as long as you don't trigger the above tests. The same with coming to spending time in UK -minimise the time as low as possible. The AIRE is the registry of Italians Residents Abroad - I know a bit but im based here in UK but deal with a number of Italian tax payers.

TaxVince :

I understand you need to get your details updated on the registry but Im not familiar with the nitty gritty details - you can read more here: http://www.esteri.it/MAE/EN/Italiani_nel_Mondo/ServiziConsolari/AIRE.htm

Customer:

yes,my problem is that I am British but without a permanent residence in Uk.Is it possible to change my permanent residence to Uk ? and would that make my position more advantageous

TaxVince :

Tax residency is determined by the time spent in the country and your way of living eg where family is; home; address for correspondences etc. Hence only the above factors will determine whether you are taxed in a country or not -except if you were American where tax residency is determined by whether you carry a green card or not. You can read more HERE.

Customer:

oK.it seems that going to Saudi may not be a good idea after all.I am separated,one son lives in London,the other studies in UK AND MY ex-husband's address is in UK but it seems that if I keep on my rented flat and have my mail sent there,I will have to pay Italian tax.Thanks,Vince.....I may have to reconsider Saudi despite having a signed contract in hand

TaxVince :

I don't think you will be taxed in Italy just because of the rented property as you are going to be spending most of the year outside Italy. However Iif you need the assurance that you wont be taxed you can write to the local tax office with your plan and ask them to reply in writing if you will be considered tax resident or not, stating how you plan to spend the days of the year. Once you decide to go you should inform the municipality of your departure and inform the officials if you are registered at the office Ufficio Anagrafe (Registry office) and check if you owe any tax before you leave for Saudi.

And to be honest there are a number of Italian residents who work in Middle East and North Africa; and are not considered tax resident.

Customer:

thanks,Vince.I will do what you suggest.The problem in Italy is that there are many who evade taxes and if you go through official channels,you will get a wide variety of very different answers.I know that many Italians just presume they won't get caught but I am terrified of getting a huge tax bill in 5 years time(how long it takes before they catch up with you !!!).

Customer:

I will sign off now after giving my rating.Thanks a lot for your help.Edwina

TaxVince :

You are welcome Edwina. All the best

TaxVince
TaxVince, Accountant
Category: UK Tax
Satisfied Customers: 965
Experience: Chartered Accountant >20 years + Qualified IFA
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