UK Company in Italy

UK Company in Italy

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I have a UK company looking to accept a contract working in Italy, for an Italian company supplying services. The intention is that he will spend 2 weeks in Italy and 2 weeks back in the UK.

Can anyone advise of the tax implications please? Will the company be taxed in Italy or will this purely be UK tax matter?

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By The Innkeeper
13th Sep 2011 12:50

Mix up

I assume that you mean the director in your second sentence

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By thisistibi
13th Sep 2011 13:27

Permanent establishment

Whether the company will be taxed in Italy is determined by the Double Tax Agreement signed between the United Kingdom and Italy.  The treaty (which is available here) sets out at Article 7 the conditions under which a UK company will become taxable in Italy.  Basically it says that If a Permanent Establishment ("PE") is created, then the company will need to register and pay corporate taxes in Italy.

The definition of a PE is set out in Article 5 of the treaty.  If you give more details as to what the services are, and what premises will be used to provide those services, then I might be able to give more helpful comments as to whether a PE is created or not.  Also, I'd need to know whether the contract was negotiated and agreed in the UK or in Italy.

Where employees of the company work in Italy, you may also find that their salary during the time they are working in Italy may become liable to Italian employment taxes.  The rules are set out in Article 15 of the treaty.  Broadly, if a PE isn't created, then it is unlikely that Italian employee taxes will apply.

You may also want to consider the VAT position of your services, which will depend on the type of services being provided.  In most cases you will be able to reverse charge VAT (i.e. UK VAT will not apply) provided the company's client is VAT registered in Italy, but that's not always the case.

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By PM2278
13th Sep 2011 13:37

Yes, the second sentence refers to the director.

The director is a project engineering and planning consultant and the services provided are on a Oil rig just off the Italian coastline. The contact was made through a UK recruitment agency.

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Replying to Mike Truman:
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By thisistibi
13th Sep 2011 15:51

Offshore activities

PM2278 wrote:

Yes, the second sentence refers to the director.

The director is a project engineering and planning consultant and the services provided are on a Oil rig just off the Italian coastline. The contact was made through a UK recruitment agency.

In that case your client needs to ensure that they carry out the activities for less than 30 days in Italy to avoid a PE being created.  Refer to Article 23 (offshore activities) para 4.

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