# question: USA-Italy double tax treaty, remote work, and the southern Italy tax incentives



## jqhdw (8 mo ago)

apologies in advance if this belongs in the expat tax forum instead of here. i chose to post it here because it feels specific to Italy, but let me know if this is a miscat and i can delete and repost over there.

i recently learned about il contratto di espansione and the 10 years of 90% reduced tax for purchasing property in southern Italy is incredibly attractive.
if i do remote work for a US based company while in Italy, do i still have to pay US taxes? my understanding is that i'll have to pay both US and Italian taxes, and while filing my US tax return i'll get reimbursed for the amount i paid in taxes to Italy. if that's true, what conditions must be met for me to only be accountable for taxes in italy?


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## Bevdeforges (Nov 16, 2007)

jqhdw said:


> if i do remote work for a US based company while in Italy, do i still have to pay US taxes? my understanding is that i'll have to pay both US and Italian taxes, and while filing my US tax return


If you are a US citizen, you will always and forever be obligated to file a US tax return for any year that your worldwide income exceeds the filing threshold for your tax status. However, there is also the principle that you are considered to be working in whatever country you are physically located in while doing your work - so if you're in Italy, then you are liable for paying taxes (and social insurances) to Italy, regardless of where your employer is located.

Depending on your circumstances, you may be able to use the FEIE (Foreign Earned Income Exclusion) to avoid US taxes on your Italian salary amounts - but you do have to file a US return to claim that exclusion.


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## MrNiceGuy (12 mo ago)

jqhdw said:


> i recently learned about [...] and the 10 years of 90% reduced tax for purchasing property in southern Italy is incredibly attractive.


I have also heard of this program; as far as I know it requires you to move to _a small town_ in southern Italy, defined as a town with less than 20000 people. (Am I wrong about this? As a big city person I decided not to participate).

As far as US taxes, as Bevdeforges said, you will have to continue to pay those.


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## NickZ (Jun 26, 2009)

I think people worrying about taxes are getting lost in undergrowth and ignoring the forest. The taxes in Italy aren't that out of line and can be lower than many high tax states. The problem is social security equivalent contributions. 

All this assuming you can get a work visa of some sort.


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## modicasa (May 29, 2021)

The 90% deduction on tax for 4 years is for Italians returning to work in Italy. The contratto di espansione is an 'early retirement' option for dependents of large companies in Italy. If you are a pensioner you can get good incentives on tax (7%) if you go to live in a small comune in the south or an earthquake zone for a certain number of years - but obviously you would be a pensioner and not working, even remotely. What is the 90% you have read about?


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## jqhdw (8 mo ago)

modicasa said:


> The 90% deduction on tax for 4 years is for Italians returning to work in Italy. The contratto di espansione is an 'early retirement' option for dependents of large companies in Italy. If you are a pensioner you can get good incentives on tax (7%) if you go to live in a small comune in the south or an earthquake zone for a certain number of years - but obviously you would be a pensioner and not working, even remotely. What is the 90% you have read about?


i've read about the 90% from multiple sources, here's one of them:



> *Special tax regime for inbound workers and (individual) entrepreneurs*
> . . .
> Such exemption is increased to 90% - and, consequently, only the* 10% of income shall be subjected to income tax* - in case inbound workers move their residency in one of the Italian southern Regions (i.e. Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia, Sicily). In this case, the individual income tax can be reduced to approximately *4.3%* (10% of taxable income * 43% highest tax rate).
> The new incentives apply for *5 years* and can be *extended for another 5 years* (in total 10 years) - with a 50% income exemption in the extended period - subjected to some additional conditions (i.e. a residential property is purchased in Italy in the previous twelve months since the acquisition of the Italian residence or in the following 12 months, or there is an underage child; if there are three underage children, the exemption in the extended period is increased to 90%).


via https://www.ipsoa.it/documents/lavoro-e-previdenza/amministrazione-del-personale/quotidiano/2019/05/27/growth-decree-new-tax-incentives-for-attracting-human-capital-italy


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## modicasa (May 29, 2021)

This is the law you're looking for.


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