Italy Tax Treaties with China

Email: mxp4ww@evershinecpa.com
The Engaging Manager from Headquarter
Ms. Anna Wang, Speak Italian English, and Chinese.
skype: burlinna

CN-Q-10:
China Parent Company, can apply for zero tax rate without PE under DTA in Italy?

CN-A-10:

Yes.
China has DTA with Italy, and if China Legal Resident company is without PE (Permanent Establishment), it will be deemed as “non-Italy Domestic Sourced Income”.
That means Italy will levy zero-tax.
However, China Legal Resident company still need to send zero-tax application to Italy Tax Bureau for being approved.

CN-Q-20:

When China Parent Company as an Investor, setup an Italy subsidiary, and provide services from China to Italy Subsidiary, can apply for zero tax rate without PE under DTA in Italy?

CN-A-20:

According DTA Article 5 item 7, an Italy subsidiary will not be treated as PE of China Parent company as an investor because it is a separate legal entity.

That means if an Italy Subsidiary pay service fee to China Parent Company through service contract signed between subsidiary and China Parent company
as an investor, China Parent Company can apply zero tax.

As for if paid amount being reasonable, it will get involved TP (Transfer Pricing) judgement by Italy Tax Bureau.

CN-Q-30:           

What is the procedure for Italy to apply for zero tax rate under DTA without PE?

CN-A-30:

In order to claim refunds, exemption or application of the reduced tax rate on income paid to non-residents, the Italian Revenue Agency published 4 forms.

Forms A, B, C or D can be used by non-residents

1. To obtain the direct application of the Convention for the avoidance of double taxation (DTC) in force;
2. To request for the refund of Italian taxes applied on Italian source income.

The forms must be filled in in all their parts and completed with the statement issued by the Tax authority of the State in which the recipient of the income is resident.

Said forms are submitted to the Italian withholding agent that may apply directly, under its own responsibility, the reduced rate or exemption provided for by the DTC.

The forms are organized in 2 copies.

1. One for the Italian withholding agent or, in the case of refund requests, for the Centro Operativo di Pescara (competent Italian Office for refunds requested by non-residents);
2. One for the beneficiary of the income.

Forms can be retrieved from the below web portal.

https://www.agenziaentrate.gov.it/portale/web/english/nse/business/double-taxation-relief/conventions-for-the-avoidance-of-double-taxation

In case of refund claims, taxpayers have to submit the request within 48 months from the date on which the tax was paid or withheld at source and send it to:

Agenzia delle Entrate – Centro Operativo di Pescara – via Rio Sparto, 21 65129 Pescara, Italia.

Email: cop.pescara.rimborsinonresidenti@agenziaentrate.it

CN-Q-40:           

When China Resident company having Italy domestic sourced income, what are the withholding tax rates for various incomes in Italy?

CN-A-40:

China has DTA with Italy, and if you are with PE (Permanent Establishment) in Italy, your income will be considered as Italy domestic sourced income.
As for levying Tax Rate, please be aware:
if Italy Tax rate > DTA Rate, adopt DTA Rate; if Italy Tax rate < DTA Rate, adopt Italy Rate.

If DTA applied, the DTA rates between China and Italy are as below:

*The withholding tax rate under domestic law may apply rather than the treaty rate where the domestic law rate is lower than the treaty rate.

CN-Q-50

When China Tax Resident having Italy domestic sourced income, what is Italy’s application procedure based on the DTA preferential tax rate?

CN-A-50:

In order to claim refunds, exemption or application of the reduced tax rate on income paid to non-residents, the Italian Revenue Agency published 4 forms.

Forms A, B, C or D can be used by non-residents

1. To obtain the direct application of the Convention for the avoidance of double taxation (DTC) in force;
2. To request for the refund of Italian taxes applied on Italian source income.

The forms must be filled in in all their parts and completed with the statement issued by the Tax authority of the State in which the recipient of the income is resident.

Said forms are submitted to the Italian withholding agent that may apply directly, under its own responsibility, the reduced rate or exemption provided for by the DTC.

The forms are organized in 2 copies.

1. One for the Italian withholding agent or, in the case of refund requests, for the Centro Operativo di Pescara (competent Italian Office for refunds requested by non-residents);
2. One for the beneficiary of the income.

Forms can be retrieved from the below web portal.

https://www.agenziaentrate.gov.it/portale/web/english/nse/business/double-taxation-relief/conventions-for-the-avoidance-of-double-taxation

In case of refund claims, taxpayers have to submit the request within 48 months from the date on which the tax was paid or withheld at source and send it to:

Agenzia delle Entrate – Centro Operativo di Pescara – via Rio Sparto, 21 65129 Pescara, Italia.

Email: cop.pescara.rimborsinonresidenti@agenziaentrate.it

Summary of TAX TREATY between Italy and CHINA

The Government of The People’s Republic of China and The Government of the Republic of Italy concluded and signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Double Taxation Agreements, DTA), on 31 October 1986 and takes effects from 1 January 1991.

Permanent Establishment

Article 5 states the term permanent establishment (PE) means a fixed place of business which generally includes the followings:

*A place of management

*A branch

*An office

*A factory

*A workshop

*A building site, a construction, assembly or installation project, or supervisory activities last more than 6 months.

*The furnishing of consultancy services through employees or other personnel for periods aggregating more than 6 months within any twelve-month period.

Withholding Tax

*Article 7 of DTA between Italy and China explained, Italy may not tax payments on general business services rendered by China corporation unless it is attributable to the permanent establishment situated in the relevant territory.

*In Article 10, dividends paid by Italy company to a resident of China shall be charged at 10%.

*Article 11 states that interest arising in Italy may be taxed in Italy according to the laws applicable in Italy, the tax so charged shall not exceed 10% of the gross amount of the interest.

*Article 12 explained royalties means payment for (a) the use of, or the right to use, any copyright of literary, artistic, or scientific work including cinematograph films and films or tapes for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula, or process; (b) the use of, or the right to use, industrial, commercial, or scientific equipment; or (c) information concerning industrial, commercial or scientific experience; or (d) know-how.

*Technical services are covered by the business profits in Article 7. Italy corporations may not tax payments for technical services rendered by a China enterprise unless it is attributable to PE. Technical services rendered in an independent capacity should be covered in Article 14 (see professional services) instead.

*A professional service or other activities provided by individuals of an independent character was explained in Article 14. Italy corporations may not tax payments for professional service rendered by a China resident unless the China resident has a fixed place or stay in Italy for 183 days or more. An independent activity includes physicians, lawyers, engineers, architects, dentists, and accountants.

Elimination of Double Taxation

Article 23 of the DTA states that double taxation shall be eliminated by allowing tax credit to be made available to the home resident territory. It shall be credited against the tax levied in the first-mentioned territory on that resident. However, the amount of credit shall not exceed the amount of the tax in the first-mentioned territory.

Exchange of Information

Article 26 states that the competent authorities of the territories shall exchange such information (including documents or certified copies of the documents) relevant to the provision of this Agreement.

Please be aware of the below Warning:
The above contents are digested by Evershine R&D and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

Contact Us

Milan Evershine BPO Service Limited Corp.
Email: mxp4ww@evershinecpa.com
The Engaging Manager from Headquarter
Ms. Anna Wang, Speak Italian, English and Chinese.
skype: burlinna

or
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LinkedIn address: Dale Chen

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(version: 2024/07)

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