In Italy, the legislation on the determination of tax residency for natural persons (individual taxpayers) changed in 2024. The most significant changes concern the new definition of “domicile”, which is one of the four alternative criteria used to determine personal tax residency for income tax purposes, and the enactment of the new physical presence rule.
Italian Taxation of Individuals
Italy plans to repeal special tax regime for new resident workers, professional and entrepreneurs from 2024
By Marco Rossi on
On October 16, the Council of Ministers approved a legislative proposal that will repeal the special tax regime for new resident workers, entrepreneurs, and professionals with effect from January 1, 2024.
The special regime, enacted in its final form in 2020, allows Italian and foreign nationals who establish their tax residence in Italy while not…
Is There a Change of Course On Split Tax Residence Year? Italian Tax Agency Rules That Italy-Switzerland Tax Treaty’s Part-Year Tax Resident Provision Prevails Over Domestic Law, Refers to OECD Commentary In Support
By Marco Rossi on
In its ruling n. 370 issued on July 4, 2023, the Italian Tax Agency concluded that in a case of a change of tax residency during the year, the treaty provision according to which the change of tax residence takes effect on the day of the transfer out of Italy to the foreign country is…
Italian Taxation of Trusts: U.S. Complex Trust Meets Italy’s Anti-Abuse Rule, Distributions of Trust Income to Italian Trust Beneficiaries Not Taxable In Italy
By Marco Rossi on
In its Ruling n. 309 of April 28, 2023 (Risposta-n.-309_2023-1.pdf) the Italian Tax Agency addresses the issue of taxation to Italian beneficiaries with respect to distributions from a U.S. Trust.
Background
Under Italy’s tax law, trusts are classified in one of three ways, with different tax consequences for the trust, the settlor, and…
Italian Taxation of Trusts: Tax Agency Rules that Settlor’s Unconditioned Power To Remove and Replace Guardian Makes the Trust Fiscally Interposed, Nonexistent For Tax Purposes
By Marco Rossi on
In its ruling no. 267, dated March 27, 2023 (Risposta-n.-267_2023.pdf), the Italian Tax Agency addressed a case involving a trust where the Settlor reserved the power to revoke and replace the Guardian and retained certain powers related to the shares of a company he transferred to the trust, including the power to appoint…
Italian Taxation of Trusts: Tax Agency Rules on Taxation of a Foreign Family Trust and Testamentary Trust in Italy
By Marco Rossi on
With its ruling n. 251, issued on March 16, 2023 (n. 251 of March 16, 2023), the Italian tax agency addressed the issue of the tax classification of a Family Trust and a Testamentary Trust that were funded and started operating following the death of the settlor.
Background
Under Italy’s tax law, trusts are classified…
Italian Taxation of Trusts: Tax Agency Rules on Taxation of Beneficiaries of Unitrust Distributions
By Marco Rossi on
The Italian Tax Agency recently issued Ruling n. 237 of March 2, 2023 (Risposta-n.-237_2023.pdf), which clarifies foreign trusts’ tax treatment concerning Italian tax resident beneficiaries.
Under the ruling, when the trustee of a foreign trust is required to make an annual distribution to beneficiaries based on a predetermined percentage of the fair market…
Italy’s New Guidance on International Tax Reporting for Trust Beneficiaries
By Marco Rossi on
The Italian tax administration, in its Circular n. 34 of October 20, 2022, provided some new guidance on the international tax reporting obligations for assets held in foreign trusts. Domestic trusts report foreign assets held under the name of the trust on their own income tax return. In the case of foreign trusts, the reporting…
Some further thoughts on the Italian Supreme Court’s dividend foreign tax credit ruling: very good news for taxpayers, or a potential misunderstanding?
By Marco Rossi on
On September 1, 2022, the Italian Supreme Court issued a ruling (n. 25698) in a case concerning a distribution from a U.S. partnership treated as a taxable dividend in Italy. The dividend was taxed by way of a substituted tax, and Italian tax law did not allow a credit for the income tax paid the…
Italy’s Tax Administration Issued Final Guidance on Taxation of Trusts, Singles Out UK “Offhore” Trusts Subject to New Anti Abuse Rule
By Marco Rossi on
On October 20, 2022, Italy’s Tax Administration issued Circular 34/E providing final guidance on the Italian taxation of trusts. One section of the guidance discusses the new anti-abuse rule on the taxation of income distributions from foreign trusts to Italian resident beneficiaries. Article 44, paragraph 1, letter g-sexies of the Italian Income Tax Code…