Convention Immunities UN for Consultant

Technical-legal report

Application of Article VI, Section 18 of the Convention on the Privileges and Immunities of Specialized Institutions of the United Nations and Tax Consequences in the Italian Legal System

Written by:
F.D.T. ConsultingDott. Francesco Di TommasoChartered Accountant – Statutory Auditor

1. Introduction

The purpose of this report is to analyse the content of Article VI, Section 18 of the Convention on the Privileges and Immunities of the Specialised Institutions of the United Nations, with particular reference to the effects produced in the Italian legal system and the tax consequences deriving from the qualification of international civil servant.

Italy has adhered to the Convention on Specialised Institutions through its domestic implementing legislation, making the provisions of the Convention directly applicable in national law. Similarly, Italy acceded to the General Convention on the Privileges and Immunities of the United Nations with Law No. 1318 of 20 December 1957.

2. International regulatory framework

The Convention on the Privileges and Immunities of the Specialised Institutions of the United Nations is one of the fundamental instruments of public international law aimed at guaranteeing the independence of international organisations.

The rationale of the Convention is to ensure that international civil servants can carry out their duties without interference from the internal laws of the Member States.

Privileges and immunities shall not be granted in the personal interest of the official, but exclusively in the interest of the international organization.

3. Analysis of Article VI – Section 18

Section 18 provides that each Specialized Institution shall independently identify the categories of officials to whom the privileges provided for by the Convention apply.

In particular:

• each Organization determines the categories of personnel beneficiary;
• these categories must be communicated to the acceding States;
• the names of the officials are periodically transmitted to the Governments concerned.

The provision takes on an organisational and procedural nature.

It does not directly confer any tax advantage.

The function of Section 18 is solely to identify the persons who will subsequently benefit from the immunities provided for in subsequent Sections of the Convention.

4. Link to Section 19

The effective tax exemption derives from Section 19 of the same Convention.

The privileges granted to international civil servants include:

• exemption from national taxes on salaries and emoluments paid directly by the Specialized Institution;
• the additional functional immunities necessary for the performance of institutional activities.

Therefore:

Section 18 identifies who can benefit from immunities;

Section 19 establishes the privileges and immunities to which the subjects thus identified are entitled.

5. Transposition into Italian law

Article 10 of the Italian Constitution recognises the effectiveness of generally recognised international law.

International Conventions ratified and enforced by State law take effect in the domestic legal system.

As a result:

• the Italian Tax Administration;
• the Tax Offices;
• tax judges;

are required to apply the provisions of the agreement directly.

The conventional rules prevail over the ordinary provisions that are incompatible according to the consolidated principles of international law transposed into the Italian legal system.

6. Identification of beneficiaries

Simply working with an international organisation is not enough to benefit from the exemption.

A distinction must be made between:

International Officials

They are included in the categories identified by the Organization pursuant to Section 18.

They enjoy the privileges provided for by the Convention.

Consultants

They provide professional activity on the basis of consultancy contracts.

They do not normally assume the status of "official" of the Organization.

The related fees remain taxable according to Italian tax legislation.

Occasional collaborators

They do not benefit from conventional immunities.

7. Tax effects

When the person holds the status of an international official recognised under the Convention:

• salaries paid by the Organization are exempt from IRPEF;
• there is no obligation to impose ordinary taxation on international employment income;
• the obligation to declare any additional taxable income produced in Italy or abroad remains, where provided for by national legislation.

The exemption only concerns:

• salaries;
• wages;
• official emoluments paid by the Organization.

Does not automatically extend:

• real estate income;
• financial income;
• private professional activities;
• business income;
• capital gains;
• to fees deriving from external consultants.

8. Progressivity clause

In some international conventions, the exemption operates with the mechanism of progressivity.

In such cases:

• exempt income is not taxed directly;
• it can only be used to determine the average rate applicable to other taxable income.

This verification must be carried out on a case-by-case basis on the basis of the specific Convention applicable to the International Organization concerned.

9. Interpretative guidelines

Italian jurisprudence and administrative practice have consistently affirmed that the privileges and immunities recognized by international conventions are applied exclusively to subjects formally identified by the international organization.

The decisive element is not the mere performance of work, but the legal qualification attributed by the international body pursuant to Section 18 of the Convention.

10. Conclusions

The regulatory analysis shows that:

• Section 18 does not introduce a stand-alone tax exemption;
• it identifies the persons entitled to benefit from immunities;
• effective tax exemption derives from the subsequent provisions of the Convention, in particular from Section 19;
• Italy, having transposed the Convention into domestic law, is required to recognise these privileges with regard to international civil servants belonging to the categories officially communicated by the respective Organisations;
• the exemption does not automatically extend to consultants, external collaborators or professionals who work for the Organizations without acquiring the status of international official.

Professional opinion from F.D.T. Consulting

In the light of international law, the Italian transposing legislation and the consolidated principles of international law, it is considered that the correct application of the tax exemption always presupposes the preliminary verification of the qualification held by the person concerned pursuant to Section 18 of the Convention.

Only then can the actual entitlement to the exemption provided for by Section 19 and the correct tax declaration method in the Italian legal system be assessed, also with reference to the possible application of the progressivity clause.

F.D.T. CONSULTING

Dr. Francesco Di TommasoChartered Accountant – Statutory Auditor