China Expat Life: Double Fiscal Residency

In our previous articles we have often discussed about taxation issues, and about the fact that sometimes income is taxable in more than one Country.

In this article we will go through another topic concerning international taxation: what to do if you have fiscal residency in two Countries (Italy and China). It may occur when foreigners working in China obtain fiscal residency, as per the conditions we specified in our article on August 19, 2019, but also maintain fiscal residency in their own Country (in our article we shall consider the country in question to be Italy).

In our previous article we saw the conditions to obtain fiscal residency in China, so we shall also briefly list the conditions to obtain fiscal residency in Italy. These are specified in art. 2 of D.P.R. n. 917/1986, that states a fiscal resident is considered to be a person who for the majority of the fiscal year:

-       Has been registered in the list of the resident population (they have not registered to A.I.R.E.);

-       Has residence in Italy;

-       Has a domicile in Italy as specified in the “Codice Civile”.

It is enough that one of the three conditions above is met in order for the person to be considered a fiscal resident in Italy.

In case of double fiscal residency, in order to avoid double taxation, art. 4, second paragraph of the Convention on Double Taxation between Italy and China specifies several criteria that make it possible. According to the article, a person that has double fiscal residency in the two Countries is considered to be resident in the Country where the person:

-       Has a permanent living space. If this is present in both countries, the person is considered a fiscal resident in the Country in which the economic and personal relations are more important;

-       If it cannot be determined, or if the person has no permanent living space in either Country, the person is considered a fiscal resident in the Country in which he/she normally lives;

-       If the person lives equally in both Countries, or if they do not live in any of the two, then they will be considered a fiscal resident in the Country of which he/she holds the nationality;

-       If the person has the nationality of both Countries, or of none of them, the two Countries will resolve the matter via mutual agreement.

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