ITALY Law and Practice Contributed by: Giuliano Foglia, Foglia & Partners
2. Territoriality, Residence and Permanent Establishment
nism of non-application of the conflicting domestic provisions by Italian public administration and national courts. 1.3 OECD Model/United Nations Influence on Treaty Practice DTCs concluded by Italy are largely drafted in accord - ance with the provisions of the OECD Model Tax Con - vention (“OECD Model”), although certain departures can be found across its treaty network. Among the main departures, it is worth mentioning the following: • with regard to the taxation of income from inde - pendent personal services and the related notions of “enterprise” and “business,” most of the Ital - ian DTCs continue to include a separate provision broadly reflecting Article 14 of the OECD Model (before its deletion in 2000); • in a relevant number of DTCs, Italy allows the source State to levy limited taxation on outbound royalties, in line with the reservation expressed in Article 12 (1) of the OECD Model, consistent with the approach adopted by the UN Model Double Taxation Convention (“UN Model”). At the same time, Italy often reserves a more favourable treat - ment to certain categories of royalties (eg, those relating to copyrights on literary, artistic or scientific works), granting full exemption from source-state taxation (eg, DTCs with Denmark, Germany and France); • some of the DTCs concluded by Italy with devel - oping countries (eg, Chile, Hong Kong, Mexico and Panama) and some of the most recent ones (ie, Colombia, Jamaica and Uruguay) are strongly influenced by the UN Model, retaining neverthe - less elements typical of the OECD Model (eg, rules governing the attribution of profits to permanent establishments). 1.4 Multilateral Instrument Italy is a signatory party to the OECD Multilateral Instrument (“MLI”) since 7 June 2017. As of today, Italy has not ratified the MLI yet and thus, the MLI is not in force and does not affect the Italian treaty network.
2.1 General Principle of Territorial Taxation Italian tax law applies throughout the territory of the Italian Republic, is binding on all persons to whom it is addressed and may be applied and enforced by the public administration and national courts. No territories outside Italy are subject to Italian tax law, with the sole exception of the municipality of Cam - pione d’Italia (geographically located in Switzerland). 2.2 Tax Residence of Individuals Article 2 of the ITC provides that individuals are deemed to be resident in the territory of Italy for tax purposes if, for more than 183 days in a calendar year, considering also fractions of a day, they meet (alter - natively) one of the following conditions: • they are registered with the Registry of the Italian Resident Population (so-called “Anagrafe”) of an Italian Municipality; • they have their “domicile” in Italy; • they have their “residence” (as defined in the Italian Civil Code) in Italy; • they are physically present in Italy. The registration with the Anagrafe of an Italian Munici - pality is a criterion of a merely formal nature, based solely on the circumstance that the habitual abode or the domicile of an individual is registered with the Anagrafe. It constitutes a rebuttable presumption for the Italian Tax Authorities. For tax residence purposes, domicile must be intend - ed as the place where the taxpayer’s personal and family relations are primarily developed. As clarified by the Italian Revenue Agency in Circular Letter No 20/2024, “personal and family relations” encompass - es not only legal relationships established by law (such as marriage or civil unions), but also stable personal relationships that demonstrate a connection to Italy (for example, cohabitation). It further includes ongo - ing documented social connections (such as annual membership in cultural or sports clubs) and behav - iours that clearly indicate an intention to maintain a meaningful link to Italy (such as maintaining a home
212 CHAMBERS.COM
Powered by FlippingBook