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Suppose you are a scholar that has a contract at a university in state S for less than 2 years, and you are resident in your home country, say Italy. Then you successfully apply for tax treaty benefits, and your income in state S is not taxed.

If S is the US the controlling section is found in Article 20. If If S is New Zealand the controlling section is found in Article 20.

Are you supposed to pay taxes in Italy on your US income?

Are you supposed to pay taxes in Italy on your New Zealand income?

I am asking this as the two articles are worded a bit differently, and in particular the former does not explicitly require the US income to be taxed in Italy.

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Based on your being a resident of Italy and you meeting the requirements of the respective Article 20s.

You are exempt from USA tax on income earned in the USA irrespective of if you are taxed on it in Italy or not. Domestic Italian tax law will determine if you have to pay tax in Italy.

You are exempt from NZ tax on income earned in NZ provided you are taxed on that income in Italy. Again, domestic Italian tax law will determine if you have to pay tax in Italy.

Without knowing the Italian tax code I would hazard a guess that you will need to pay tax in Italy in botth cases.

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The Italy/New Zealand treaty says:

...shall be exempt from tax in the first mentioned Contracting State on any remuneration for such teaching, advanced study or research in respect of which he is subject to tax in the other Contracting State.

While the Italy/US treaty says:

shall, for a period not exceeding two years, be exempt from tax in the first-mentioned Contracting State in respect of remuneration from such teaching or research.

The difference is that in the NZ treaty the exemption is explicitly conditioned on the teacher being taxed in the other country, but in the US treaty it is not so conditioned. But the US treaty does not grant an exemption in the "second" state (country), that is the country of residence of the teacher. It looks to me that in any normal case the teacher would owe the normal tax to his or her resident country (ital in this case). If for some other reason part of this income was exempt from tax in the teacher's home country, NZ would them tax it, while apparently the US would not. But it is hard to see what other reason would be likely to apply.

I do not see anything in these treaty provisions which would say that the teacher should not pay the normal tax in the teacher's home county.

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  • Do you know what is the procedure and documentation to provide the New Zealand governement the home country taxation information/proof?
    – mark789
    Apr 12, 2019 at 3:56
  • @mark789 No I don't. I suspect a copy of the Italian tax forms would be involved. The NZ tax authorities could be asked about the procedure.
    – David Siegel
    Apr 12, 2019 at 3:58

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