An Italian music producer, operating under a flat-rate VAT scheme, performed as a guest start a concert in Israel and received payment subject to a 9.4% withholding tax. Should this income also be declared in Italy?
The tax treaty between Italy and Israel (Law 371/1997) governs the taxation of artistic income between the two countries. According to Article 17, the income earned can be taxable in the country where the activity was performed (in this case, Israel), but this does not exempt the rapper from declaring it in Italy as well.
If the treaty provided for a complete tax exemption in Italy, it would explicitly state so using terms like “only” or “exclusively”. Since this is not the case, the income must still be reported in Italy.
However, to avoid double taxation, the rapper is entitled to a foreign tax credit equal to the taxes already paid abroad, offsetting the Italian tax liability with the 9.4% withholding tax applied in Israel.