INTRODUCTION

In recent years, the Italian legislature has adopted many legislative measures in the fiscal field aimed at making Italy more attractive and competitive for companies and individuals, Italian or foreign, intending to operate in Italy.

In particular, the tax regimes currently in force in Italy, implemented to attract foreign individuals or to attract back people who were previously Italian residents or citizens, are:

  • the "resident not domiciled" (res non-dom) regime, a favorable tax regime applicable on income earned abroad by Italian and non-Italian citizens who transfer their tax residence to Italy, according to Article 24bis of the Presidential Decree No. 917/1986 (TUIR);
  • the "inbound workers" regime, a favorable tax regime applicable to workers who transfer their tax residence to Italy, according to Article 16 of the Legislative Decree No. 147/2015;
  • the "foreign pensioners" regime, reserved for individuals with pension income from abroad who transfer their tax residence to specific municipalities in Italy, according to Article 24ter TUIR;
  • the regime applying to teachers and researchers who move their tax residence to Italy to work there, according to Article 44 of the Legislative Decree No. 78/2010.

I. ITALIAN RESIDENCY CRITERIA

Considering that the above-listed regimes are all aimed at and based on the transfer of residence to Italy, it is worth going through how the Italian legislation deals with the concept of residence.

The residence conditions are defined in Article  2 TUIR, which provides for two alternative criteria based on a mix of formal and substantial prerequisites. In particular, an individual is considered to be a resident for tax purposes in Italy alternatively:

  1. if he or she is recorded into the register of Italian residents of the municipality in which he or she resides (Anagrafe);
  2. if he or she is domiciled or has residence in Italy in accordance with the Italian Civil Code for most of the year.1

As far as the first criterion is concerned, we point out that it consists of a formal condition, as individuals have to file an application in order to be registered in the Anagrafe so as to be resident or domiciled in a specific Italian municipality. According to the Italian fiscal jurisprudence, as long as individuals do not delete their registration from the Anagrafe, they are considered to be residents in Italy for tax purposes even if they transfer their residence abroad. For such purposes, the individuals registered in the Anagrafe are considered, in application of the formal criterion under scope, in any case resident, and therefore taxable individuals in Italy; with the consequence that since the registration precludes any further assessment, the mere transfer of residence abroad is not relevant until the cancellation from the Anagrafe results.2

Regarding the second criterion, the domicile is based on a factual condition. It consists of where an individual has established the principal center of his or her business and interests. According to a minority interpretation, the words "business and interests" express an exclusively economic and patrimonial concept.3 The majority interpretation considers that a more extensive meaning should be attributed to this expression, including both patrimonial and moral interests.4 The Italian jurisprudence is oriented in this latter interpretation.5 In order to verify where the individual's domicile is located, a substantial analysis of the person's interests shall be carried out: priority shall be given to the place where the moral interests are located.6

Still regarding the second criterion, the residence consists in the place where an individual owns his or her habitual abode.7 This notion includes the objective element of permanence in a specific place and the subjective element of the intention to live there permanently, as revealed by the individuals' living habits and their conduct of daily social relations.8 Everyone who is a resident under this criterion is legally obliged to register together with those under his or her parental authority or guardianship in the Anagrafe.

Regardless of the applicable criteria and formal registration with the Anagrafe, it shall be noted that the individuals are considered to be a resident in Italy for tax purposes if their above-mentioned residence conditions occur for at least more than 183 days (although not consecutive) during a fiscal year.

It is worth pointing out that, during the first fiscal year, when a foreigner transfers his or her tax residence to Italy, there may be a potential double taxation risk with the country of origin. Notably, this depends on the fact that the Italian tax law does not provide any split-year rule concerning tax residence. The rule under scope aims at settling the potential double taxation controversy during the fiscal year when an individual moves from one country to another. Generally, the split-year rule provides that as soon as the conditions for being considered tax resident in the country of destination are met, the individual shall cease to be resident in the country of origin

For the sake of completeness, it is useful to underline that the OECD Model Convention9 has established particular criteria (the so-called tiebreaker rules) in order to determine the actual State of residence if, in application of the various national laws, the individual is considered to be resident in more States.

As far as the first criterion, it consists of holding a permanent habitation. If the individual owns one habitation in only one State, this is presumed to be the country of residence.

If the individual owns real estate in more States, the second criterion applies. The individual will be deemed to be resident in the State where his or her personal and economic relations are conducted (the so-called center of vital interests). This includes family and social relationships as well as business interests. If these kinds of relations are placed in different States (social relations in one country and economic interests in another country), the individual will be considered a resident in the country where the family relations are conducted.

Footnotes

1. Art. 43 Italian Civil Code.

2. Supreme Court, decision No. 16634, 25 June 2018; Supreme Court, decision No. 21970, 28 October 2015; Supreme Court, decision No. 677, 16 January 2015.

3. S. Pugliatti, Istituti di diritto civile, Milano, 1943, 272; S. Romano, Ordinamento sistematico del diritto civile, I, Napoli, 1968, 134.

4. V. Tedeschi, "Domicilio, residenza e Dimora", in NN.D.I., VI, Torino, 1960, 194; F. Carnelutti, "Note critiche intorno ai concetti di domicilio, residenza e Dimora", in Studi di diritto civile, Roma, 1916, 6.

5. Supreme Court, decision No. 5006, 8 March 2005; Supreme Court, decision No. 2936, 5 May 1980; Supreme Court, decision No. 435, 12 February 1973.

6. Supreme Court, decision No. 9723, 13 May 2015; Supreme Court, decision No. 20285, 4 September 2013.

7. Art. 43 Italian Civil Code.

8. Supreme Court, decision No. 3841, 15 February 2021; Supreme Court, decision No. 25726, 1 December 2011.

9. The OECD Model Convention was developed by the Organization for Eco

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