The declaration of income by the employees of the Embassies and Consulates

In recent months, many officials and employees of Embassies and Consulates in Italy and the Holy See have received one or more notices of assessment from the Inland Revenue, in which the state organization denounced the non-declaration, to purposes of the income tax payment of employment income earned.

The notification of these alerts is the final step of a thorough inspection carried out by the Inland Revenue, in an attempt to counter tax evasion and recover as much as possible by the workers at the service of the Embassies or Consulates, resident in Italy , who have received income , of Italian or foreign sources, subject to taxation in our country and never declared .

The latter, however, complain about the illegality of the claim by the Ente Tax Office, which does not take account of the ‘ tax exemption,  provided that international conventions, enjoyed by diplomatic representatives, officials and employees of Embassies and Consulates.

Who is right?

To answer this question we must first analyze the international and national rules and then focus on the pronunciations of the most significant Italian law.

The Vienna Convention of 1963

Article. 49 of the Vienna Convention on Consular Relations, signed on 24.04.1963 and has been ratified by Italy with Law No. 804/1967, prescribes that:

1. ” Consular officers, consular employees and members of their families forming part of their households shall s ono exempt from all dues and taxes, personal or real, national regional and municipal,  except:
   • taxes and taxes on private immovable property situated in the territory of the receiving State;
   • the inheritance rights and mutation levied by the State of residence,
   • taxes and taxes on private income , including capital gains, having its source in the receiving State;
   • etc
2. The members of the service staff shall be exempt from duties and taxes on the wages they receive for their services. “
3. The members of the consular post (ie officials, employees and members of the service staff) who employ persons whose salaries or whose wages are not exempt from income tax in the State of residence  must comply with the obligations placed on employers work by the laws and regulations of this State relating to the collection of income.

The provisions of paragraphs 1 and 2 , and subject to interpretation are clear and unambiguous: the officials and employees and their families are exempt from any tax or fee, both in Italy than in any other country signatory of the Convention, while members of the service staff are exempt only from those on the compensation.

The 3rd paragraph , however, is subject to two interpretations, apparently in contrast to the provisions of the first two paragraphs. With the word “person” it is not clear whether it is measured:

• to all the subjects in the first two paragraphs. In this case, the provision would run in stark contrast to the principle of ‘ tax exemption for officials, employees and members of the Embassy;
• to parties unrelated to the ones mentioned above, however, not specifying the identity of the same.

In this writer’s opinion, the second thesis seems to conform more closely to the overall interpretation of the above provisions, but reveals a clear regulatory conflict of which the signatory countries have had “taken advantage” by taxing labor income of all residents, without any distinction.

The Italian legislation

The Italian legislator, with Presidential Decree no. 601/1973, has complied in part with the provisions of the Vienna Convention, by providing in Article. 4, the IRPEF and local tax exemption only for incomes of ambassadors, diplomats and employees (the latter are subject to reciprocity) accredited by States in foreign and Italian are not Italian citizens, or non-Italians to the Republic. “

This rule is an exception to the general principle enshrined in Articles. 2 and 3 of the next DPR n. 917/1986 (Consolidated Income Tax Act), according to which all natural persons resident or domiciled in this country, regardless of nationality, are subject to taxation.

It follows, therefore, that the Italian Order are exempt from Income Tax and the only additional income, consular officers, officials and employees of Embassies and Consulates  without Italian citizenship , although resident in Italy.

The legal conflict

This conclusion, however, determines an obvious contrast with the legal principle established by art. 49 of the Vienna Convention, which provides for the complete tax exemption of incomes of members of Embassies and Consulates, regardless of nationality or country of residence.

Which rule prevails, then?

The Italian Constitution, in Articles 10 and 11 of the Constitution prescribes the supremacy of the rules laid down in international conventions on the national provisions conflicting with them and the consequent inapplicability of the latter.

It follows, therefore, that all exceptions and restrictions (citizenship, residence, etc.) Provided for in the national standards referred to above should be regarded as contrary to the principle of full tax exemption provisions of Art. 49 of the Convention and, therefore, inapplicable to the present case.

Conclusions

In this writer’s opinion, regardless of the different interpretations of the third paragraph of Article 49 of the Vienna Convention, any derogation provided for by national laws, the international principle of complete tax exemption for members of Embassies and Consulates, it should be regarded as unlawful or at least inapplicable.

The requests made by the Revenue in tax assessments, in most cases, be based on Italian standards referred to above and make no mention of the principle of the Vienna Convention.

Therefore, in this writer’s opinion, requests for payment IRPEF and additional towards the Embassies and Consulates members are, in most cases, no legal basis and justify recourse to the competent judicial offices.

The extra-judicial and judicial remedies

If the taxpayer deems unfair the request made by the Inland Revenue may notify Ente predicted, with the assistance of a lawyer, an appeal / complaint – if the disputed sums are below € 50,000.00 – or only an action (in case of higher amounts), asking for the cancellation or adjustment of the alert determination.

In case of failure / negative response from the Revenue Agency within the next ninety (90) days, the citizen will have to deposit the above-mentioned application at the Provincial Tax Commission in the next 30 days.

IN SUMMARY

The Inland Revenue is notifying assessment notices to residents in Italy and at the Embassies or Consulates of service, in which denounces the non-declaration and non-payment, the purposes of the Income Tax payment, incomes  of Italian source or foreign perceived.

Many of these alerts based the legal legitimacy of the demands set out therein on the general principle enshrined in Articles. 2 and 3 of the next DPR n. 917/1986 (Consolidated Income Tax Act): All incomes of natural persons resident or domiciled in Italy, regardless of their nationality, are subject to taxation.

This conclusion, however, determines an obvious contrast with the legal principle established by art. 49 of the Vienna Convention, which provides for the complete tax exemption of incomes of members of Embassies and Consulates, regardless of nationality or country of residence.

Therefore, in this writer’s opinion, all the exceptions and restrictions (citizenship, residence, etc.) Provided for in the national standards do not apply to the cases in question and, therefore, make illegitimate the demands made  by the Revenue  in tax assessments .

The Lawyer. Marco Coscia offers to all officials, diplomatic agents and employees of Embassies and Consulates that have received an assessment notice for non-payment of Income Tax and additional, comprehensive legal advice and the necessary legal assistance in all judicial offices competent.

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