# Tax question S Corp sole owner - living 1 year in Italy



## mariath

Hi,

I am currently living in the US, planning to move to Italy (Taormina, then Rome) in January. I would like to live in Italy for about a year. I have my own home based consulting business, which is set up as an S Corp. I know I have to register and pay taxes in Italy since I will be a resident. The question is complicated by the fact that I am an S Corp. I am the sole owner of the S Corp, and the only employee. Should I set up business in Italy as a subsidiary of my US-based S Corp? Or should I register as a self employed individual? What are the tax liabilities in either case? If I pay corporate taxes in Italy, do I still have to pay personal income tax in Italy? How does that affect the Foreign Earned Income Exclusion on my US taxes?

Does the fact that I have no Italian clients make a difference? My clients are US and UK based companies.

If I don't want to be liable for Italian income tax, will that be averted simply by living there less than 183 days? I could, potentially, live 4-5 months in Italy, then 4 months in France or Spain, then 3 months or so in another EU country. That's all up to me. I would prefer to spend the entire year in Italy.

Any and all advice very appreciated! 

Maria


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## Bevdeforges

I'm not familiar with the ins and outs of Italian taxes, but I can tell you that, as a US citizen you still have to file US taxes while living overseas and you have to declare your worldwide income.

In the case of the S Corporation, you can probably claim the overseas earned income exclusion on your "salary" as employee of the company for the period that you are considered "resident" in Italy (or as long as you are physically overseas for a 12 month period). It depends a bit on the nature of your business and you can only exclude the part of your profits that represent "the value of your personal services" to the business. There is also the issue of US social security ("self-employment tax" as it's affectionately known). Unless you are paying into the Italian social security (i.e. social benefits) system, either as a sole proprietor or the employee of an Italian business entity, you'll have to fork over the 15% for US social security.

The 183 day rule isn't the only criteria used to determine when/if you become subject to Italian income taxes. If your business is set up in Italy, they may decide you're "resident" even if you move around during the year. It really doesn't matter where your clients are located - it's where you maintain your "primary center of interest." 
Cheers,
Bev


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## mariath

Bevdeforges said:


> I'm not familiar with the ins and outs of Italian taxes, but I can tell you that, as a US citizen you still have to file US taxes while living overseas and you have to declare your worldwide income.
> 
> In the case of the S Corporation, you can probably claim the overseas earned income exclusion on your "salary" as employee of the company for the period that you are considered "resident" in Italy (or as long as you are physically overseas for a 12 month period). It depends a bit on the nature of your business and you can only exclude the part of your profits that represent "the value of your personal services" to the business. There is also the issue of US social security ("self-employment tax" as it's affectionately known). Unless you are paying into the Italian social security (i.e. social benefits) system, either as a sole proprietor or the employee of an Italian business entity, you'll have to fork over the 15% for US social security.
> 
> The 183 day rule isn't the only criteria used to determine when/if you become subject to Italian income taxes. If your business is set up in Italy, they may decide you're "resident" even if you move around during the year. It really doesn't matter where your clients are located - it's where you maintain your "primary center of interest."
> Cheers,
> Bev


Hi Bev,

Thanks for your reply. I will keep digging into this so that I am well informed and prepared when I get there.


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