An Overview of Italy`s Double Taxation Agreement (DTA)
Italy, like many other countries, has entered into various Double Taxation Agreements (DTAs) with other countries in order to eliminate or reduce the incidence of double taxation on taxpayers who carry out business or earn income in multiple jurisdictions.
Double taxation generally occurs when a taxpayer is taxed on the same income in more than one jurisdiction. This can happen, for example, when a person or entity is a resident of one country but earns income from another country.
DTAs are bilateral agreements between two countries that aim to avoid double taxation by allocating taxing rights between the two countries. These agreements set out the rules for how these countries will tax the income of individuals and entities who are residents of either country or who earn income from both countries.
Italy has signed DTAs with more than 90 countries worldwide, including countries in Europe, Asia, Africa, and the Americas. These agreements are generally based on the Organisation for Economic Cooperation and Development (OECD) Model Tax Convention and contain similar provisions relating to the allocation of taxing rights between the contracting countries.
For example, Italy`s DTA with the United States provides that income from certain sources, such as interest, dividends, and royalties, may be taxed in the country in which the income arises, subject to certain conditions. The agreement also provides for a tax credit to be granted to residents of one country who have paid taxes in the other country on the same income.
In addition to providing relief from double taxation, DTAs can also promote economic cooperation and investment between the contracting countries. By reducing the risk of double taxation, these agreements can encourage businesses to expand into new markets and facilitate cross-border trade and investment.
In summary, Italy`s DTAs with other countries provide a framework for how taxes will be levied on income earned in multiple jurisdictions. These agreements aim to reduce or eliminate the incidence of double taxation and promote economic cooperation between the contracting countries. As such, they play an important role in facilitating cross-border commerce and investment.