International bilateral conventions for the avoidance of double taxation are international agreements aimed at governing tax relationships between persons who operate in the contracting states. They are necessary in order to avoid the phenomenon of double taxation.
Among the numerous conventions presently in force signed by the Italian State there is the Bilateral Convention signed in Abu Dhabi on 22 January 1995 between the Italian and UAE governments, applied, in general, to income taxes of persons residing in one or both countries.
In particular, as far as the UAE are concerned, the Convention shall apply to tax on income of natural and legal persons and on corporate tax (collected as withholding tax).
With regard to Italy, the scope of the Convention includes the tax on income of natural and legal persons, and the local tax on income collected as withholding tax. The Convention shall apply also “to any identical or substantially similar taxes which are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes” (Art. 2.4. Convention).
The competent authorities of the Contracting States shall notify each other of any significant changes which have been made in their respective taxation laws.
Pursuant to Article 15 of the Convention, subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
As for professionals, article 14 of the Convention, sets forth that the income derived by a resident of a Contracting State in respect of professional services or other independent activities of a similar character shall be taxable only in that State, unless he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities. If he has such fixed base, the income may be taxed in the other State but only in the amount in which it is attributable to that fixed base. In the Convention the term “professional services” includes especially “independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants”.
As for pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment, they shall be taxable only in that State.
(Bologna Office –Linda Tontodonati – 0039 (0)51 2750020)
