The Italian tax authority, The Revenue Agency, recently issued advice concerning remote or teleworking where an employee is carrying out their work in a country other than where the employer is based. In this situation, it is essential to note where the employee’s activity is carried out and not the territory in which the work is used. The country where the employee resides serves as the state in which the employee’s income is taxed, taking into account these conditions:
- The recipient is present in the other state for a period or periods not exceeding 183 days in any fiscal year.
- The remuneration is paid by, or on behalf of, an employer who is not a resident of the other state.
- The remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other state.
To accurately identify the location where the service is to be performed, the Revenue Agency refers to the OECD recommendations regarding double taxation. According to the OECD, identifying the state in which work is considered conducted means taking into account where the employee is physically present when they complete the activity for which they are paid. Therefore, the income received by the employee cannot be taxed in another state, even if the results of the work are used in that country.
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