Avoiding double taxation
International treaties are the conventions for the avoidance of double taxation according to which the contracting states regulate the exercise of the power to tax in order to eliminate double taxation on income.
Also such conventions are intended to prevent tax evasion and tax avoidance and include some of the provisions on administrative cooperation. In Italy such double taxation treaties become part of the legal framework and require a process of ratification by the Parliament. The contracting countries enter into administrative procedure designed to promote the exchange of information and making simultaneous checks.
Double tax treaties in Italy provide several different possibilities of taxation.
- Taxation exclusively by a state (in the country of residence).
- Exclusive taxation by a state when the income exceeds specific thresholds for exemption and/or when predetermined rates are applied.
- Taxation competitor (both states levy a tax on the same income).
Double Tax Treaties members
There are lots of states which have concluded Double Tax Treaties with Italy over the years. Nowadays there are more than 70 states participate in the Double Tax Treaties in Italy. For treaties which were concluded with states that no longer exist (like Yugoslavia, Czechoslovakia and USSR), the same regulations and provisions are applied with their predecessors.
Tax Information Exchange
Tax Information Exchange Agreements are signed along with Double Tax Treaties in order to regulate exchange of information between the partner countries and to maintain the good application of the treaties for foreign investors.
Each country applies different taxes on dividends, interests and royalties, but the amount withdraw is between 0% and 20%. The rate of the withholding tax may be influenced by the percent own from the company’s capital or by the nature of the receiver or payer. When it is a state body, beneficial or provider, there are usually no withholding taxes. The taxes applied through the Double Tax Treaties in Italy are usually low.