ITALY Law and Practice Contributed by: Giuliano Foglia, Foglia & Partners
In particular, pursuant to Article 23 of the ITC, the fol - lowing income is deemed to be produced or realised in Italy: • income from immovable property located in Italy; • income from capital paid by the Italian resident/ located entities, with the exclusion of interest on bank and postal accounts; • income from employment and self-employment, if the work activity is physically performed when present in Italy; • business income derived from activities carried on in Italy through a permanent establishment; • other income derived from activities carried on in Italy or related to assets located in Italy, as well as from the sale of participations in resident compa - nies; • income derived by a non-resident partner of a resi - dent partnership; • pensions, similar allowances and termination pay - ments, as well as income assimilated to employ - ment income, when paid by the Italian resident/ located entities; • income from the use of intellectual property, indus - trial patents, trademarks, processes, as well as formula and know-how acquired in the industrial, commercial or scientific field, when paid by Italian resident/located entities; and • compensation earned by enterprises, companies or non-resident entities for the performance of artistic or professional services on their behalf in Italy, if paid by Italian resident/located entities. 2.5 Tax Residence of Legal Entities Article 73 (3) of the ITC provides that a company or an entity is deemed to be tax resident in Italy for income tax purposes if it has, for more than 183 days in a tax period, any of the following alternative elements located in the Italian territory: • the registered office; • the place of effective management (“POEM”); • the principal place of ordinary management. The requirement of the registered office is a criterion of a merely formal nature, solely based on the place indicated in the legal entity’s bylaws.
The POEM refers to the location where the essential management and commercial decisions for a busi - ness are actually made. It is the place where the com - pany’s top management regularly makes strategic decisions that affect the company as a whole. This is true regardless of the governance model in place and requires that such decision-making be consistent and of a significant degree of permanence. The other substantial requirement concerns the identi - fication of the place where the company’s normal func - tioning and ordinary administration are carried out. As clarified in Circular Letter No 20/2024, the indicators for the location of day-to-day management may vary depending on the main activity carried out,, as well as the company’s business structure and organisation. The residence of undertakings for collective invest - ments is determined exclusively by their place of establishment. Therefore, undertakings for collective investments are considered Italian tax residents if established in Italy. Lastly, according to Article 73 (5-bis) of the ITC, the following rebuttable presumptions of tax residence apply: • companies and entities holding controlling share - holdings in Italian resident companies are pre - sumed to be resident in Italy, if they are, alterna - tively: (a) controlled, also indirectly, by Italian resident companies; or (b) managed by a board of directors (or other equivalent management body) composed mainly of directors who are tax residents in Italy; and • trusts and similar arrangements established in jurisdictions that do not allow an exchange of information with Italy are presumed to be resident in Italy, if, alternatively: (a) at least one of the settlors and at least one of the beneficiaries are both Italian tax residents; or (b) an Italian tax resident person contributes to the trust’s real estate assets or rights.
214 CHAMBERS.COM
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