Taxation & Country of Residence - Living in Italy & Working for Agency in the UK
Thread poster: Peter Luntz

Peter Luntz  Identity Verified
Italy
Local time: 10:28
Italian to English
Aug 30, 2014

Hello all,

I am an American in Italy and will be doing translations for an agency in London.

I pay my taxes here in Italy as all my jobs have been for Italian clients. I also file my US taxes each year but I don't pay there due to laws that avoid double taxation.

Does anyone have advice on if and how I pay tax on work I do for a company in the UK?

As the client is based in the UK and I am based in Italy, do I not have to pay taxes? Seems too good to be true!

Thanks for any help!

Peter


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Tom in London
United Kingdom
Local time: 09:28
Member (2008)
Italian to English
Where your residence is (for tax purposes) Aug 30, 2014

Yes, it IS too good to be true. The only two inevitable things, as Mark Twain put it, are death and taxes.

If you are based in Italy "for tax purposes" (as the lingo puts it) then you pay tax in Italy, because the service you provide is provided in Italy - including if it's for a client in the UK or anywhere else.

UK tax law does not apply to you. You are subject to Italian tax law.

All of your invoices should be in Italian and set out as required by Italian law. It's irrelevant where your clients are. But you DO pay taxes on everything for which you issue an invoice.


[Edited at 2014-08-30 09:59 GMT]


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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
Tax in Italy (and the US) Aug 30, 2014

I almost agree 100% with Tom. You pay tax in Italy on worldwide income, and as a US citizen, you also have to declare everything in the US.

The place of taxation is where the activity physically takes, place, i.e. first and foremost Italy. This is written in the many bilateral double tax agreements.

The place of supply in the case of translations to a UK customer, for example, is in the UK, though, but that is only relevant for VAT. It means if you are VAT registered in Italy, then you must use the reverse charging procedure and invoice excl. of VAT and put the client's UK VAT number on the invoice if the client is also VAT registered. They are then responsible for declaring it for VAT purposes in the UK. If you sell to an individual customer or a business client that is not VAT registered in the UK, though, you must bill Italian VAT.


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Kirsten Bodart  Identity Verified
United Kingdom
Local time: 10:28
Dutch to English
+ ...
Reverse VAT was abolished in 2010 or so Aug 30, 2014

No VAT has to be charged anymore between VAT numbers in the EEA (or EU?). VAT is only charged if the client in the other country is not VAT-registered.

FOr the rest agree with Tom.


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Jane Phillips  Identity Verified
France
Local time: 10:28
Member (2013)
French to English
The rules for France Aug 30, 2014

I would assume that it is the same situation as in France, ie it is where the work takes place that governs where it is taxed. The French government got a bit cross with folk working in France for UK based companies and only paying UK company tax.

The rules would therefore change if you were to work for the UK company their side of the Channel and not in Italy.

And yes, no VAT would be added to your invoice.


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RobinB  Identity Verified
Germany
Local time: 10:28
German to English
VAT confusion? Aug 31, 2014

Kirsten Bodart wrote: No VAT has to be charged anymore between VAT numbers in the EEA (or EU?). VAT is only charged if the client in the other country is not VAT-registered.


It's not the case that "reverse VAT" has been abolished. The process of not charging VAT on the face of the invoice for intra-community transactions is known as "reverse charge", and it is this "reverse charge mechanism" that governs VAT invoices between member states (the rules for EEA countries may differ somewhat and are country-specific).

That doesn't mean that no VAT liability arises, of course, and if you issue an invoice governed by the reverse charge mechanism, you still have to add the applicable VAT ("output tax") to your VAT return. But you can claim it back on the same VAT return as input tax, provided the recipient also has a VAT ID.

@Peter Luntz: You pay your business and personal income taxes in Italy like all other Italian residents. It is irrelevant where your clients are located.


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Peter Luntz  Identity Verified
Italy
Local time: 10:28
Italian to English
TOPIC STARTER
Thanks! Sep 7, 2014

Thanks to all those who responded to this. It's been very helpful actually.

I have a full time job and do translations on the side. Most of my translation clients are Italian and I have a fair number. I think the best thing is to just stick to those... keep it simple for the time being.

Thanks again
Peter


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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
Reverse VAT alive and kicking! Sep 14, 2014

RobinB wrote:

Kirsten Bodart wrote: No VAT has to be charged anymore between VAT numbers in the EEA (or EU?). VAT is only charged if the client in the other country is not VAT-registered.


It's not the case that "reverse VAT" has been abolished. The process of not charging VAT on the face of the invoice for intra-community transactions is known as "reverse charge", and it is this "reverse charge mechanism" that governs VAT invoices between member states (the rules for EEA countries may differ somewhat and are country-specific).


I absolutely agree with RobinB: the reverse VAT charging procedure has NOT been abolished. The business issuing a reverse VAT invoice without VAT must put the client's VAT number on the invoice and verify online that the VAT number is valid - and keep the proof. Failure to do this could make you liable for paying the missing VAT yourself.

RobinB wrote:
That doesn't mean that no VAT liability arises, of course, and if you issue an invoice governed by the reverse charge mechanism, you still have to add the applicable VAT ("output tax") to your VAT return. But you can claim it back on the same VAT return as input tax, provided the recipient also has a VAT ID.


You got that inversed, RobinB. It is not the business that ISSUES the reverse VAT invoice that must account for the VAT but the business PAYING that invoice that must account for the VAT to pay, then deduct it again.


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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
The rules don't change Sep 14, 2014

Jane Phillips wrote:
The French government got a bit cross with folk working in France for UK based companies and only paying UK company tax.


Many Britons do indeed appear to evade French social charges and taxes by running a UK registered company while they actually live and work in France. Under the double tax treaty, such a company would be taxable in France, and under the EU regulations for coordination of social security, social security contributions would also be due in France. If it were that simple to avoid the sky-high French taxes and social charges, there would be no companies left in the French company register, but of course it is not so simple. Neither does it matter if revenue is credited to a British or French bank account: it is all taxable in France.

Some may do this in good faith, falsely believing they are doing things legally, others may just hope they will get away with it, but they are all sitting on a tax bomb, and if found out, they could be wiped out by taxes and social charges for previous years. Nul n'est censé ignorer la loi; claiming to be ignorant about the law is not a valid excuse.

The little guy doesn't have many options for legally avoiding such high taxes, contrary to large corporations who can employ top fiscal specialists to push revenue around, ending up in low-tax jurisdictions and off-shore companies.

Jane Phillips wrote:
The rules would therefore change if you were to work for the UK company their side of the Channel and not in Italy.


Maybe you'll say this is nit-picking, but the rules don't change: the rule that tax is due where the work takes place still applies.


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Sheila Wilson  Identity Verified
Spain
Local time: 09:28
Member (2007)
English
+ ...
Not nit-picking Sep 14, 2014

Thomas Frost wrote:
Jane Phillips wrote:
The rules would therefore change if you were to work for the UK company their side of the Channel and not in Italy.

Maybe you'll say this is nit-picking, but the rules don't change: the rule that tax is due where the work takes place still applies.

It's true, the rules don't change. But I think it would be clearer, Thomas, if you'd said that the tax is due where the invoice is issued i.e. where the business is located. In other words, if you are registered as self-employed in Italy then you can physically visit the UK (for up to three months at least) and work with UK-based and other clients, yet still invoice them from your Italian address, and you'd pay all taxes, including VAT, according to Italian law. UK business laws wouldn't apply to you at all, and in fact you'd have no right to issue a UK-based invoice.


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Tom in London
United Kingdom
Local time: 09:28
Member (2008)
Italian to English
Official meaning of 'residence' and how it affects your tax Sep 14, 2014

Here it is from the horse's mouth:

http://www.hmrc.gov.uk/international/residence.htm#5

NB tax evasion is a criminal offence, meaning: you can end up in prison.


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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
Correct - short work abroad may not cause tax liability Sep 14, 2014

Sheila Wilson wrote:

But I think it would be clearer, Thomas, if you'd said that the tax is due where the invoice is issued i.e. where the business is located. In other words, if you are registered as self-employed in Italy then you can physically visit the UK (for up to three months at least) and work with UK-based and other clients, yet still invoice them from your Italian address, and you'd pay all taxes, including VAT, according to Italian law. UK business laws wouldn't apply to you at all, and in fact you'd have no right to issue a UK-based invoice.


You're right about this, Sheila. It is, however, a minefield, and before visiting other countries to work, it would be in one's best interest to find out exactly which rules apply, and what the time limits are. This would include consulting both the host country's tax code, the double tax agreement, and the EU's regulations for coordination of social security. It also includes checking if the host country considers the work to be employment and not self-employment (IR35 in the UK). One should not be fooled into thinking that after more than 20 years of EU Single Market, these things are straightforward.

I seem to remember an occasion where the Rolling Stones cancelled the British concerts of a world tour because of Gordon Brown's tightening of these rules, but I don't know the fiscal details.


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Tom in London
United Kingdom
Local time: 09:28
Member (2008)
Italian to English
I imagine... Sep 14, 2014

I think it would be reasonable to assume that tax inspectors read these forums.

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Tom in London
United Kingdom
Local time: 09:28
Member (2008)
Italian to English
Och Sep 14, 2014

Thomas Frost wrote:

........I seem to remember an occasion where the Rolling Stones cancelled the British concerts of a world tour because of Gordon Brown.....


Well, I could understand that


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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
Here is that Rolling Stones story Sep 14, 2014

http://news.bbc.co.uk/2/hi/108785.stm

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