Companies having their legal or administrative headquarters or their principal business activity within the Italian territory are considered to be resident companies and are taxable in Italy on their worldwide income.
A foreign company holding one or more Italian subsidiaries is deemed to be resident in Italy for tax purposes if at least one of the following conditions exists:
- The foreign company is, either directly or indirectly, held by Italian tax resident persons.
- The board of directors of the foreign company is made up mainly of Italian resident individuals.
Non-resident companies are subject to IRES and IRAP only on their Italian-source income. Specifically, Italian non-resident companies having a PE in Italy are subject to IRES and IRAP with respect to the taxable income generated from the PE in Italy.
Permanent establishment (PE)
The domestic definition of PE is substantially aligned with the OECD model.
Corporate residence of a trust
Trusts are considered as persons subject to corporate taxation.
Residence is defined on the basis of the location of the place of management or of the main object of the trust. In the first instance, trusts that operate through an appropriate structure are deemed to be tax resident in Italy if the said structure is located in Italy. In the absence of any such structure, trusts managed by a trustee will be deemed as tax resident in Italy if the trustee is tax resident in Italy; in case of more than one trustee, a case-by-case analysis shall be conducted in accordance to specific guidelines.
In addition, trusts that have the largest part of their assets located in Italy (e.g. real properties or real rights) are deemed to be tax resident in Italy; nevertheless, in case the assets are composed of financial activities, an ad hoc analysis is required to define the place of effective course of business, being irrelevant the residency of the trustee(s).
Note that there are anti-avoidance rules for Italian non-resident trusts, setting out the specific conditions on which these trusts can become Italian tax resident.