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Question About US Residence Based Taxation

Robert asks…

I’m forming a US based LLC and doing business in Italy. What are my tax implications in Italy?

A tour company in Italy. I’m collecting payment in the US and will file as a US citizen working abroad. I understand that I may be exempt US taxes up to 84k. Can I reside in Italy? or should my residence remain US? What tax implications do I have in Italy?

Best Answer:

The US and Italy have a tax treaty which protects against double taxation for individuals who spend time and/or work in both countries. You will be liable for tax payments (with one exception I’ll outline later) only in the country in which you are resident, and residency is determined by a weighing of the following factors:

1) where you have a permanent house;
2) where you have your closest personal relationships and economic ties;
3) your normal location;
4) your nationality.

Therefore, you could potentially live in Italy but still be considered a US resident for tax purposes, depending on the other factors. If you are collecting payment in the US and you are (I’m assuming) a US citizen, this would probably be the case, particularly since the Italian tax authorities would have no practical way of checking your income in a foreign country.

The exception I referred to earlier is regarding the 84k you mentioned. If you are an Italian resident, you still must file annually with the IRS, but there is the exemption to claim up to 84k so long as you pay taxes at an equal or greater rate than you otherwise would in the US. In almost all cases Italian taxes are substantially higher, so this should always be met. However, anything above the 84k ceiling is considered taxable in the US regardless of you also having paid Italian taxes on the same income.

I hope this answers your questions. If not, feel free to shoot me an email.

Posted From Yahoo! Answers (for informational purposes only)

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