Remote international work from Italy: 2020 & beyond

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Remote international work from Italy: 2020 & beyond


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Old 14th August 2020, 06:33 PM
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Default Remote international work from Italy: 2020 & beyond

I've read previous posts such as on this thread, and understand the visa and tax issues.

Working Remotely in Italy for American Company

Here's one post from 2014:
From an Italian tax point of view the fact your work is "remote" is completely immaterial. You will be physically located in Italy, and it's highly likely (in the scenario you describe) Italy will deem you a tax resident. Consequently, I predict, you'll at least be subject to the Italian tax system and its associated financial reporting, including (quite possibly) Italian social insurance contributions since "contractor" status doesn't typically keep you within the bounds of the U.S.-Italy Social Security treaty on the U.S. side.


I'm inquiring for my cousin: An American, 61, who's self-employed (i.e. works on 1099s) with clients in the US.

We were thinking she apply for elective residency visa meeting all requirements and work “in the US.” But given the 2014 post, she would not be able to do so legitimately because she does not have a work visa. Furthermore, she’d be an Italian tax-resident and I don’t think she’s considered the implications of that (i.e. higher taxes)

A self-employment visa might be possible, but unlikely. Getting certification and work in her field (alternative medicine) would be difficult.

Any thoughts or experiences?

Italy's visa and residency laws aren't going to change anytime soon, but I thought I'd get this conversation going given the impact and implications of COVID.
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Old 14th August 2020, 08:27 PM
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It's not just Italy's tax laws. In general, tax residency is determined under what is "affectionately" referred to as the Butt Rule: you are tax resident where your butt is located while you are doing the work.

It doesn't matter where your "employer" is located, nor where your customers or clients are located, nor in what currency you are paid, or if your pay is deposited into a bank in another country. If you are living in Italy and doing the work for which you are being paid while in Italy, then you are working in Italy and you will owe taxes to Italy. (And the fact of her being American just adds that little layer of complication, since the US considers all its citizens to be "tax resident" no matter where they are living - though there are treaties to avoid double taxation.)

Not sure there is really much to "discuss" here, and I'm pretty sure that Covid isn't going to change much in the short to medium term.
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Old 14th August 2020, 08:36 PM
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Excellent clarification @Bevdeforges thank you.

In 2014, I tried to find remote work with American employers in a field which traditionally has a lot of remote work. I was living in Italy. I was surprised to see that I had to reside in the US and in some cases in certain states, again for tax and likely labor law reasons.

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Old 14th August 2020, 09:06 PM
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Quote:
Originally Posted by Anna_Magnani View Post
Excellent clarification @Bevdeforges thank you.

In 2014, I tried to find remote work with American employers in a field which traditionally has a lot of remote work. I was living in Italy. I was surprised to see that I had to reside in the US and in some cases in certain states, again for tax and likely labor law reasons.
If you want to work remotely for an American company from outside the US you either have to be paid through the employer's local affiliate (branch, subsidiary, etc.) so that you are on the local payroll and enrolled in the local payroll and social insurances system or you have to work as a "contractor" or "vendor" - which means you simply bill the American company for your work and you then are responsible for registration with the appropriate tax and social insurance agencies in your country of residence. What many US "employers" object to is that in most European countries, VAT is charged for services based on where the services are performed rather than where they are being billed. American companies really object to being hit with an addition 20% or more for VAT (which they can't deduct in any way).

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Old 14th August 2020, 09:14 PM
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Originally Posted by Bevdeforges View Post
If you want to work remotely for an American company from outside the US you either have to be paid through the employer's local affiliate (branch, subsidiary, etc.) so that you are on the local payroll and enrolled in the local payroll and social insurances system or you have to work as a "contractor" or "vendor" - which means you simply bill the American company for your work and you then are responsible for registration with the appropriate tax and social insurance agencies in your country of residence. What many US "employers" object to is that in most European countries, VAT is charged for services based on where the services are performed rather than where they are being billed. American companies really object to being hit with an addition 20% or more for VAT (which they can't deduct in any way).
Exactly. And how useful contractors are for shareholders I'd add. Ooops off topic a bit, but that's all I'll say on that. Thank you!

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Old 20th August 2020, 01:45 AM
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My understanding is that income taxes paid in Italy are tax deductible and reduce any US taxes owed.

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Old 20th August 2020, 06:54 AM
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My understanding is that income taxes paid in Italy are tax deductible and reduce any US taxes owed.
Basically, yes - however, the process is a little tricky and you have to split both your income and your taxes paid into "types" and then you can only credit income taxes paid on the same type of income. It doesn't always work out the way you would expect.
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