Article 1 of Legislative Decree No. 209 of December 27, 2023, entitled “Implementation of the tax reform on international taxation”, published on December 28, 2023, in the Official Gazette, introduced significant changes to the connection criteria for determining the tax residency of individuals as provided and regulated by Article 2, paragraph 2, of Presidential Decree No. 917 of December 22, 1986.
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) taking into account even fraction of day:
- the individual is phisical present on the Italian territory, or
- the individual has a ‘residence’ in Italy (habitual abode), or
- the individual has a ‘domicile’ in Italy (principal centre of social interests, e.g. the family).
If one of the above conditions is met the individual qualifies as tax resident for Italian tax purposes.
Furthermore, unless proven otherwise, individuals who are registered in the record of the resident population for most of the tax period are also presumed to be residents.
The recent changes to the criteria for the determination of the tax residency result in the exclusive relevance of the “place where, primarily, personal and family relationships of the person develop”. Therefore the Legislature define a precise hierarchy between the connection criteria privileging the personal and family relationships over economic and work-related interests.
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.