US-Italy Tax Treaty

PERSONAL SCOPE

ARTICLE 1

Personal Scope
1. Except as otherwise provided in this Convention, this Convention shall apply to persons who are residents of one or both of the Contracting States {the United States and Italy}.

RESIDENCY DEFINITION

ARTICLE 4

Resident
1. For purposes of this Convention, the term ''resident of a Contracting State'' means any person who, under the laws of that State {the United States or Italy}, is liable to tax therein by reason of domicile, residence, place of management, place of incorporation, or any other criterion of a similar nature, provided, however, that:
a) this term does not include any person who is liable to tax in that State {the United States or Italy} in respect only of income from sources in that State {the United States or Italy};

RESIDENCY TIE-BREAKER RULE

ARTICLE 4

Resident
2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States {the United States and Italy}, then his status shall be determined as follows:
a) he shall be deemed to be a resident of the State {the United States or Italy} in which he has a permanent home available to him; if he has a permanent home available to him in both States {the United States and Italy}, he shall be deemed to be a resident of the State {the United States or Italy} with which his personal and economic relations are closer (center of vital interests);
b) if the State {the United States or Italy} in which he has his center of vital interests cannot be determined, or if he has not a permanent home available to him in either State {the United States or Italy}, he shall be deemed to be a resident of the State {the United States or Italy} in which he has an habitual abode;
c) if he has an habitual abode in both States {the United States and Italy} or in neither of them, he shall be deemed to be a resident of the State {the United States or Italy} of which he is a national;
d) if he is a national of both States {the United States and Italy} or of neither of them, the competent authorities of the Contracting States {the United States and Italy} shall settle the question by mutual agreement.

SAVING CLAUSE
ARTICLE 1

Personal Scope
2. Notwithstanding any provision of this Convention except paragraph 3 of this Article, a Contracting State {the United States} may tax:
a) its residents (as determined under Article 4 (Resident)); and
b) its citizens by reason of citizenship
as if there were no convention between the Government of the United States of America and the Government of Italy for the avoidance of double taxation with respect to taxes on income and the prevention of fraud or fiscal evasion.
From PROTOCOL: ARTICLE 1(1)
1. For purposes of paragraph 2(b) of Article 1 (Personal Scope) of the Convention, the term ''citizen'' as applied to the United States shall include a former citizen whose loss of citizenship had as one of its principal purposes the avoidance of tax, but only for a period of 10 years following such loss.

SAVING CLAUSE EXCEPTIONS

ARTICLE 1

Personal Scope
3. The provisions of paragraph 2 shall not affect:
b) the benefits conferred by a Contracting State {the United States} under Articles 19 (Government Service), 20 (Professors and Teachers), 21 (Students and Trainees), and 27 (Diplomatic Agents and Consular Officials), upon individuals who are neither citizens of, nor have immigrant status in, that State {the United States}.
{The tax treaty with Italy does not include an exception to the saving clause for private pensions and annuities.}

TAXES COVERED

ARTICLE 2

Taxes Covered
1. This Convention shall apply to taxes on income imposed on behalf of a Contracting State {the United States or Italy}.
2. The existing taxes to which this Convention shall apply are:
a) in the case of the United States: the Federal income taxes imposed by the Internal Revenue Code and the excise taxes imposed on insurance premiums paid to foreign insurers and with respect to private foundations, but excluding (notwithstanding paragraph 5 of Article 10 (Dividends)) the accumulated earnings tax and the personal holding company tax, (hereinafter referred to as ''United States tax'');
3. The Convention shall apply also to any identical or substantially similar taxes which are imposed by a Contracting State {the United States or Italy} after the date of signature of this Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States {the United States and Italy} shall notify each other of any significant changes which have been made in their respective taxation laws and shall transmit to each other any significant official published material concerning the application of this Convention, including explanations, regulations, rulings, or judicial decisions.

REFUNDS OF WITHHELD TAXES

PROTOCOL: ARTICLE 5

Taxes withheld at the source in a Contracting State {the United States} at the rates provided by domestic law will be refunded by request of the taxpayer if the right to collect the said taxes is limited by the provisions of the Convention. Claims for refund, which shall be made within the time limit fixed by the law of the Contracting State {the United States} which is obliged to make the refund, shall be accompanied by an official certificate of the Contracting State {Italy} of which the taxpayer is a resident certifying the existence of the conditions required for being entitled to the benefits provided for by the Convention. This provision shall not be construed to prevent the competent authority of each Contracting State {the United States or Italy} from establishing other modes of application of the benefits provided for by the Convention.

INCOME FROM SELF-EMPLOYMENT

ARTICLE 14

Independent Personal Services
1. Income derived by an individual who is a resident of a Contracting State {Italy} from the performance of personal services in an independent capacity shall be taxable only in that State {Italy} unless such services are performed in the other Contracting State {the United States} and:
a) the individual has a fixed base regularly available to him in that other State {the United States} for the purpose of performing his activities, but only so much of the income as is attributable to that fixed base may be taxed in that other State {the United States}; or
b) the individual is present in that other State {the United States} for a period or periods aggregating more than 183 days in the fiscal year concerned.
2. The term ''personal services in an independent capacity'' includes, but is not limited to, scientific, literary, artistic, educational, and teaching activities as well as independent activities of physicians, lawyers, engineers, architects, dentists, and accountants.

INCOME FROM EMPLOYMENT

ARTICLE 15

Dependent Personal Services
1. Subject to the provisions of Articles 16 (Directors' Fees), 18 (Pensions, etc.), and 19 (Government Service), salaries, wages, and other similar remuneration derived by a resident of a Contracting State {Italy} in respect of an employment shall be taxable only in that State {Italy} unless the employment is exercised in the other Contracting State {the United States}. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State {the United States}.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State {Italy} in respect of an employment exercised in the other Contracting State {the United States} shall be taxable only in the first-mentioned State {Italy} if:
a) the recipient is present in the other State {the United States} for a period or periods not exceeding in the aggregate 183 days in the fiscal year concerned;
b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State {the United States}; and
c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State {the United States}.

STUDENTS AND TRAINEES

ARTICLE 21

Students and Trainees
Payments which a student or business apprentice (trainee) who is, or immediately before visiting a Contracting State {the United States} was, a resident of the other Contracting State {Italy} and who is present in the first-mentioned State {the United States} exclusively for the purpose of his education or training receives for the purpose of his maintenance, education, or training shall not be taxed in that State {the United States} provided that such payments arise outside that State {the United States}.

PROFESSORS, TEACHERS AND RESEARCHERS

ARTICLE 20

Professors and Teachers
1. A professor or teacher who makes a temporary visit to a Contracting State {the United States} for the purpose of teaching or conducting research at a university, college, school, or other educational institution, or at a medical facility primarily funded from governmental sources, and who is, or immediately before such visit was, a resident of the other Contracting State {Italy} shall, for a period not exceeding two years, be exempt from tax in the first-mentioned Contracting State {the United States} in respect of remuneration from such teaching or research.
2. This Article shall not apply to income from research if such research is undertaken not in the general interest but primarily for the private benefit of a specific person or persons.
ARTISTS AND ATHLETES

ARTICLE 17

Artistes and Athletes
1. Notwithstanding the provisions of Articles 14 (Independent Personal Services) and 15 (Dependent Personal Services), income derived by a resident of a Contracting State {Italy} as an entertainer, such as a theatre, motion picture, radio, or television artiste, or a musician, or as an athlete, from his personal activities as such exercised in the other Contracting State {the United States}, may be taxed in that other State {the United States}, if:
a) the amount of the gross receipts derived by such entertainer or athlete, including expenses reimbursed to him or borne on his behalf, from such activities exceeds twelve thousand United States dollars ($12,000) or its equivalent in Italian lire for the fiscal year concerned; or
b) such entertainer or athlete is present in that other State for a period or periods aggregating more than 90 days in the fiscal year concerned.
2. Where income in respect of activities exercised by an entertainer or an athlete in his capacity as such accrues not to him but to another person, that income may, notwithstanding the provisions of Articles 7 (Business Profits), 14 (Independent Personal Services), and 15 (Dependent Personal Services), be taxed in the Contracting State {the United States} in which the activities of the entertainer or athlete are exercised. For purposes of the preceding sentence, income of an entertainer or athlete shall be deemed not to accrue to another person if it is proved by the entertainer or athlete that neither he nor persons related to him participate directly or indirectly in the profits of such other person in any manner, including the receipt of deferred remuneration, bonuses, fees, dividends, partnership distributions, or other distributions.

PRIVATE PENSIONS AND ANNUITIES

ARTICLE 18

Pensions, etc.
1. Subject to the provisions of paragraph 2 of Article 19 (Government Service), pensions and other similar remuneration beneficially derived by a resident of a Contracting State {Italy} in consideration of past employment shall be taxable only in that State {Italy}.
2. Annuities beneficially derived by a resident of a Contracting State {Italy} shall be taxable only in that State {Italy}. The term ''annuities'' as used in this paragraph means a stated sum paid periodically at stated times during life or during a specified number of years, under an obligation to make the payments in return for adequate and full consideration (in money or money's worth).

ROYALTIES

ARTICLE 12

Royalties
1. Royalties arising in a Contracting State {the United States} and paid to a resident of the other Contracting State {Italy} may be taxed in that other State {Italy}.
2. However, such royalties may also be taxed in the Contracting State {the United States} in which they arise and according to the laws of that State {the United States}, but if the beneficial owner of the royalties is a resident of the other Contracting State {Italy}, the tax so charged shall not exceed:
a) 5 percent of the gross amount of the royalties in respect of payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic, or scientific work;
b) 8 percent of the gross amount of the royalties in respect of payments of any kind received as a consideration for the use of, or the right to use, motion pictures and films, tapes or other means of reproduction used for radio or television broadcasting;
c) 10 percent of the gross amount of the royalties in all other cases.
3. The term ''royalties'' as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic, or scientific work including motion pictures, films, tapes or other means of reproduction used for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or other like right or property, or for the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial, or scientific experience.
4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State {Italy}, carries on business in the other Contracting State {the United States} in which the royalties arise, through a permanent establishment situated therein, or performs in that other State {the United States} independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base. In such case, the royalties are taxable in that other Contracting State {the United States} according to its own laws.
5. Royalties shall be deemed to arise in a Contracting State {the United States} when the payer is that State {the United States} itself, a political or administrative subdivision, a local authority, or a resident of that State {the United States}. Where, however, the person paying the royalties, whether he is a resident of a Contracting State {Italy} or not, has in a Contracting State {the United States} a permanent establishment or a fixed base in connection with which the obligation to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. Notwithstanding the preceding provisions of this paragraph, royalties with respect to the use of, or the right to use, rights or property within a Contracting State {the United States} may be deemed to arise within that State {the United States}.
6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right, or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments is taxable according to the laws of each Contracting State {the United States}, due regard being had to the other provisions of this Convention.
From PROTOCOL: ARTICLE 1(10)
10. Notwithstanding paragraph 2 of Article 12 (Royalties) of the Convention, in the case of royalties derived with respect to tangible personal (movable) property, the tax imposed by the Contracting State {the United States} in which such royalties arise may not exceed 7 percent of the gross amount of such royalties.

OTHER INCOME - PRIZES AND AWARDS

ARTICLE 22

Other Income
(1) Items of income of a resident of a Contracting States {Italy}, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that Contracting State {Italy}.
(2) The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6 (Income from Immovable Property), if the person deriving the income, being a resident of a Contracting State {Italy}, carries on business in the other Contracting State {the United States} through a permanent establishment situated therein, or performs in that other State {the United States} independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case the items of income are taxable in the other Contracting State {the United States} according to its own law.
{The Treasury Explanation of Article 22 states that this article applies to income mainly of an occasional nature such as prizes.}

Tommaso_Dorigo

Last modified: Wed Apr 12 10:21:47 CDT 2000