# Residency and taxes



## ianthy (Apr 15, 2012)

Hi

I am growing more and more confused about residency and how this affects taxation.

We are UK residents with a home in Italy, we would like to spend significant time in Italy maybe 6-8 months of the year. We would not be working in Italy but would receive investment income from the UK, we would pay tax on this income in the UK.

What would be the impact/benefits of residency in Italy and would we also become liable for paying tax on our UK generated income in Italy?

Thks for reading.


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## NickZ (Jun 26, 2009)

Italian tax act (TUIR) defines tax residency in three ways. If you pass any of the three tests for the majority of the year you're considered Italian tax resident and liable for tax on worldwide income.

1) test one is being registered resident.

2) centre of life test.

3) Normal domicile

The last two are normal international tests and should be covered by the UK/Italy tax treaty. I'm too lazy to look but it would be highly unusual if they weren't in the tax treaty.

I don't remember what UK investment income is taxed at. If you're non UK the UK would take the treaty rate (The UK government has this info on one of it's websites. Inland revenue?). At WORST the treaty rates are 10% interest,15% dividend . But the UK tends to take less then the treaty rate. 

Italy is currently taxing at a flat 20%. So you might be paying 15% to the UK and 5% to Italy. This ignores any deductions etc.


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