The general principle governing taxation of individuals in Italy is ‘tax residency’.
According to Article 2 of the Italian Tax Code, an individual is considered an Italian resident for tax purposes if, for the greater part of the fiscal year (i.e. for more than 183 days):
- the individual is registered in the Records of the Italian Resident Population (Anagrafe)
- the individual has a ‘residence’ in Italy (habitual abode), or
- the individual has a ‘domicile’ in Italy (principal centre of business, economic and social interests, e.g. the family).
If one of the above conditions is met the individual qualifies as tax resident for Italian tax purposes.
Therefore, in general, in order to recognise an individual’s tax residence, the basic criteria is the registration in the records of the Italian resident population. Failing said registration, the alternative principles of the presence of the principal centre of economic and social interests (i.e. family), or the permanent abode in Italian country are applicable.
An individual who moves to Italy must apply for registration with the Record of the Italian Resident Population in the municipality (so-called 'comune') where they intend to reside. At the end of the stay in Italy, the individual is required to apply for the cancellation of their name from the Record of the Resident Population.
An individual who is registered with the Registry of the Resident Population for less than 183 days in a calendar year is generally considered a non-resident for tax purposes (although other factors have to be taken into consideration) and is thus subject to taxation only on Italian source income.
An Italian citizen who transfers to a foreign country has to cancel oneself with the Records of the Italian Resident Population and has to register with the Records of the Italian resident abroad, the Anagrafe Italiani Residenti Estero (AIRE).
An anti-abuse rule provides that Italian citizens who transfer residence to countries considered as ‘tax havens’ (these are determined through a Decree of the Ministry of Finance), are deemed to be resident in Italy even if they are no longer registered in the Records of the Italian Resident Population, unless otherwise proven by the individuals.
Italian tax residents will be subject to taxation for the whole fiscal year (January through December).
Any provision covered by double tax treaties (DTTs) between Italy and other countries shall apply.
The Italian tax authority recently is focused on the assessment of the tax residence status for Italian citizens who moved their tax residence abroad.
Potential assessment of the tax residence status for Italian citizens who moved their tax residence abroad
The tax residence status for Italian citizens who moved their tax residence abroad is carried on by the Italian tax authority and registered into the record of Italian residents abroad (so-called ‘AIRE’).
The increased role of the Italian tax authorities in this matter takes origin from:
- a higher available information background due to the data exchange at the European level and, at an international level, in accordance with the Common Reporting Standards (CRS) of the Organisation for Economic Co-operation and Development (OECD) source with more than 100 countries, and
- the implementation of a new and more precise database (e.g. the so-called SO.NO.RE, acronym that stands for 'non-resident subjects'); this database collects all the relevant information that allows identification of the actual risk for an individual to be re-qualified as an Italian tax resident because of one's centre of vital interest effectively localised in Italy.