Hello. U.S. citizen here interested in applying for an Italian Digital Nomad Visa. Short context: I have been a full-time exempt employee fully remote for an employer resident only in the United States. I understand all the particular DNV application steps and potential clarifications directly from the Italian Consulates have not been published (the DNV webpage from my Consulate shows to be under construction). But in preparation for a discussion with my employer/corporate HR to encourage them to support my move with the Italian DNV, I am searching for leads and resources on Italian tax obligations for both myself and, more importantly, my employer. I’m reading that the DNV may be revoked/denied if all tax obligations are not met during the stay in Italy, so an important topic in any case. I’d like to inform myself as best I can before considering the services of an Italian expat tax/business mobility consultant.
So, questions: Does anyone have experience or resources to clarify Italian tax/legal consequences for foreign employers (particularly U.S. employers) with an employee (U.S. citizen employee) resident in Italy? I have begun research and arrived at some conclusions (see specifics below), but there are gaps in my understanding of compulsory employer/employee taxes and applicable labor laws in Italy. And I don’t know how big these gaps are in my knowledge. I don’t know what Italian payroll taxes consist of beyond general social security paid to the INPS (National Institute for Social Security). It seems some Italians in “risky” job roles and their employers also pay tax to the INAIL (National Institute for Insurance against Accidents at Work), but I understand my remote job does not fall into any of the job categories labeled as “risky.” Are there any other compulsory taxes like this that I may be overlooking and obligated to pay? Any insight would be greatly appreciated.
Here is my research so far:
Social Security Tax (U.S. SSA/Italy INPS): Per the U.S.-Italy Social Security Agreement (Totalization Agreement), my employer and I would be exempt from paying Italian Social Security taxes. To be exempt, my employer would need to request a Certificate of Coverage from the U.S. SSA and present it to the relevant authority in Italy). With this exemption, my employer and I would continue to pay U.S. social security taxes (and medicare taxes as part of FICA, I think) as usual. My employer would would not need to register with Italy’s INPS and withhold taxes on behalf of INPS. As for the specific social security taxes we are exempt from: Italian “compulsory general insurance for old-age, disability and survivors, as well as legislation providing benefits which are substitutes for benefits provided by said compulsory general insurance.” I don’t know what Italian paystubs look like and I cannot read Italian, but the INPS website suggests the translation/exempted taxes are “assicurazione generale obbligatoria per l'invalidità, la vecchiaia e i superstiti, nonché ai trattamenti di previdenza sostitutivi dell'assicurazione generale, come i fondi speciali di previdenza gestiti dall'INPS e altri regimi speciali di assicurazione di alcune categorie di lavoratori ex ENPALS, INPGI ed ex INPDAI.” Are there any other Italian social security taxes outside of these listed that employees and their employers regularly pay in Italy?
Medicare Tax: This may be grouped with Social Security and not relevant—I cannot fully discern. Per the U.S.-Italy Totalization Agreement (and the general U.S. webpage about Totalization Agreements indicating they cover Medicare under Title II of the Social Security Act), I interpret my employer and I will not be reliable for medicare-related taxes in Italy. We would continue to pay U.S. medicare taxes and withhold accordingly on my paystubs. The U.S.-Italy Totalization Agreement excludes some medicare-related benefits like Section 226, 226A, 228 of SSA Article II, but I assume this has no affect on the tax obligation.
Personal Income Tax (Italy IRPEF): Per the U.S.-Italy Tax Treaty, I will be liable for both Italian and U.S. personal income taxes. However, I interpret that nothing would change for my employer. They would continue to process U.S. federal withholding on my monthly paystubs; they would not withhold Italian income taxes on my paystubs. I interpret that Italian income tax is for me to handle independent of my employer. During tax return season, I would file both an Italian Tax Return and a U.S. Tax Return, including FEIE Form 2555 with my U.S. return (for the first U.S. return on the Italy DNV, I would be applying for an FEIE return extension or simply filing an amended return with the FEIE included once I satisfy the bona fide residence test or physical presence tests).
Business Income Tax - Not Applicable. I am reading that the Italian Law Decree for the DNV specifically requires the digital nomad be employed by a company that is not resident in the EU. Per the U.S.-Italy Tax Treaty, my employer does not (and will not) have a permanent establishment in Italy/the EU and so will not be subject to Italian business income taxes. My employer will be unaffected.
I appreciate any insights/leads. Or if this may be best for an expat tax advisor, names of reputable folks would be helpful. Thanks!
So, questions: Does anyone have experience or resources to clarify Italian tax/legal consequences for foreign employers (particularly U.S. employers) with an employee (U.S. citizen employee) resident in Italy? I have begun research and arrived at some conclusions (see specifics below), but there are gaps in my understanding of compulsory employer/employee taxes and applicable labor laws in Italy. And I don’t know how big these gaps are in my knowledge. I don’t know what Italian payroll taxes consist of beyond general social security paid to the INPS (National Institute for Social Security). It seems some Italians in “risky” job roles and their employers also pay tax to the INAIL (National Institute for Insurance against Accidents at Work), but I understand my remote job does not fall into any of the job categories labeled as “risky.” Are there any other compulsory taxes like this that I may be overlooking and obligated to pay? Any insight would be greatly appreciated.
Here is my research so far:
Social Security Tax (U.S. SSA/Italy INPS): Per the U.S.-Italy Social Security Agreement (Totalization Agreement), my employer and I would be exempt from paying Italian Social Security taxes. To be exempt, my employer would need to request a Certificate of Coverage from the U.S. SSA and present it to the relevant authority in Italy). With this exemption, my employer and I would continue to pay U.S. social security taxes (and medicare taxes as part of FICA, I think) as usual. My employer would would not need to register with Italy’s INPS and withhold taxes on behalf of INPS. As for the specific social security taxes we are exempt from: Italian “compulsory general insurance for old-age, disability and survivors, as well as legislation providing benefits which are substitutes for benefits provided by said compulsory general insurance.” I don’t know what Italian paystubs look like and I cannot read Italian, but the INPS website suggests the translation/exempted taxes are “assicurazione generale obbligatoria per l'invalidità, la vecchiaia e i superstiti, nonché ai trattamenti di previdenza sostitutivi dell'assicurazione generale, come i fondi speciali di previdenza gestiti dall'INPS e altri regimi speciali di assicurazione di alcune categorie di lavoratori ex ENPALS, INPGI ed ex INPDAI.” Are there any other Italian social security taxes outside of these listed that employees and their employers regularly pay in Italy?
Medicare Tax: This may be grouped with Social Security and not relevant—I cannot fully discern. Per the U.S.-Italy Totalization Agreement (and the general U.S. webpage about Totalization Agreements indicating they cover Medicare under Title II of the Social Security Act), I interpret my employer and I will not be reliable for medicare-related taxes in Italy. We would continue to pay U.S. medicare taxes and withhold accordingly on my paystubs. The U.S.-Italy Totalization Agreement excludes some medicare-related benefits like Section 226, 226A, 228 of SSA Article II, but I assume this has no affect on the tax obligation.
Personal Income Tax (Italy IRPEF): Per the U.S.-Italy Tax Treaty, I will be liable for both Italian and U.S. personal income taxes. However, I interpret that nothing would change for my employer. They would continue to process U.S. federal withholding on my monthly paystubs; they would not withhold Italian income taxes on my paystubs. I interpret that Italian income tax is for me to handle independent of my employer. During tax return season, I would file both an Italian Tax Return and a U.S. Tax Return, including FEIE Form 2555 with my U.S. return (for the first U.S. return on the Italy DNV, I would be applying for an FEIE return extension or simply filing an amended return with the FEIE included once I satisfy the bona fide residence test or physical presence tests).
Business Income Tax - Not Applicable. I am reading that the Italian Law Decree for the DNV specifically requires the digital nomad be employed by a company that is not resident in the EU. Per the U.S.-Italy Tax Treaty, my employer does not (and will not) have a permanent establishment in Italy/the EU and so will not be subject to Italian business income taxes. My employer will be unaffected.
I appreciate any insights/leads. Or if this may be best for an expat tax advisor, names of reputable folks would be helpful. Thanks!