Does an employer relocating employees or sending employees on secondment to Italy have an obligation to register as an employer and pay payroll taxes in Ireland? If so, what are the filing requirements?
As provided by the Treaty against Double Taxation between Ireland and Italy, the payment of withholding tax in Italy by the foreign employer based on the foreign employee’s salary is mandatory if:
- The employee working in Italy is/becomes resident in Italy:
- The employee’s salary is paid by an Italian Permanent Establishment or fixed base of the foreign employer;
- The employee works in Italy for more than 183 days in one calendar year or any 12 month period.
In order to pay withholding tax in Italy, the foreign employer will need to be registered with the Local Tax Office of the Italian Inland Revenue (Agenzia delle Entrate) and apply for a Tax identification code (Codice Fiscale) which is issued immediately and free of charge. The Tax identification code in Italy is necessary for dealing with Italian Authorities and Administrations.
In addition, in order to fulfil the Italian payroll requirements, the foreign employer will have to open up a position with the National Insurance Institute and National Social Security Institute and engage a Labour Consultant who will manage the payroll services to be provided.
What are the income tax rates?
Currently income tax rates in Italy (IRPEF) are the following:
Income from € 0 to € 15.000
23% of income
Income from € 15.001 to € 28.000
€ 3.450 +27% on the part
Income from € 28.001 to € 55.000
€ 6.960 + 38% on the part
exceeding € 28.000
Income from € 55.001 to € 75.000
€ 17.220 + 41% on the part
exceeding € 55.000
Income in excess of € 75.000
€ 25.420 + 43% on the part
exceeding € 75.000
How would travel and subsistence expenses from home country be treated if employee is required to be in Italy
In the case of foreigners resident employees working in Italy for less than 183 days in a calendar year or a 12-month period, it will apply the national rules of the origin employer's company.
In the case of foreign resident employees who work in Italy for longer than 183 days in one calendar year or any 12 month period, then it will apply the rules of the abovementioned Convention against Double Taxation.
Generally, for travel costs and costs of board and lodging, if these expenses are pertinent with the working activities of the company, they don't represent elements for the employee’s income tax.
Restaurants vouchers, under the category of Subsistence expenses, no higher than Euro 5.29 per day are fully deductible by the employer and, from the employee’s perspective, they do not form part of the taxable revenue.
However, in order to give an accurate answers, we would need more details regarding the specific case of travel and the subsistence expenses.
Are there any exemptions for workers coming from abroad? The employees would generally be working in engineering or IT consultancy.
In Italy there is no a specific engineering or IT consultancy wage tax exemption. The only granted exemption is related to persons residing in one of the EU Member States, at the condition that the income produced by the foreign subject in the Italian territory is at least 75 percent of income by the total income. In that case, the subject enjoys the same benefits (deductions and detractions) that can enjoy an Italian taxpayer; for example health costs, passive interests on mortgages for the purchase of real estate etc. The condition imposed by the provision in question is that the foreign subject does not enjoy similar tax benefits in the state of residence.
For further information, please contact Luca Pacifico, PG & Partners
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