Further clarifications on the inbound workers regime.
Tax Authorities issue clarifications on the extensions of the teachers and researchers regime.
Remunerations of self-employed artists are taxable in Italy.
CFC elective system implementing rules issued by the Italian Tax Authorities.
Swiss Capital Tax cannot be credited against CFC taxes in Italy.
The new dividend and participation exemption regimes already repealed.
EU principles infringement overrides tax treaty’s provisions.
The free movement of capital principle applies also to third Countries.
The new EU Inc. legal form has been introduced.
Italian Government delegated to implement ViDA reform package.
The Italy-Bulgaria tax treaty will be amended due to residence status issues.
Italy notifies Russia and Belarus of the tax treaty suspensions.
Further clarifications on the inbound workers regime
The Italian Tax Authorities has issued further clarifications on the in-bound workers regime.
In the answer to ruling no. 76 of 11 March 2026, referring to transfers to Italy that took place until 2023, it is highlighted that, if the person had originally moved to one of the Centre-South Regions (and therefore benefited from the 90% tax reduction) but then moved to a Northern Region (where the benefit is established at the ordinary rate of 70%), the benefit is not lost, but the difference must be paid ex post from the year of the original transfer.
In the subsequent answer to ruling no. 82 of 20 March 2026, referring instead to transfers to Italy as of 2024, it is confirmed that the benefit (being a tax relief to the extent of 50% the relevant income) is also available to people who work remotely in Italy on behalf of a foreign employer, and it is clarified that the “reinforced” benefit consisting of the tax relief to the extent of 60%, linked to the presence of a minor child, is also due in the event that the transfer of the minor is prior to that of the in-bound worker (the minor, in this specific case, had previously moved to Italy with the mother).
Tax Authorities issue clarifications on the extensions of the teachers and researchers regime
With the answer to ruling no. 80 of 18 March 2026, the Italian Tax Authorities confirmed that the benefits for teachers and researchers who moved to Italy until fiscal year 2019 (which consist of a 90% income tax exemption) could be extended from 4 to 8 years if, at the end of the first period in which the benefit applied (in this case, 2019-2022), the person had a minor child.
Furthermore, according to the Italian Tax Authorities, the birth of a second child by the eighth year of permanence in Italy allows the relevant worker to avail of the further extension of the benefits to 11 years. Similarly, the birth of a third child by the end of that additional period in which the regime applies would allow the benefits to be extended to 13 years. Both further extensions, however, would be subject to a fee payment, parameterized to the income of the teacher or researcher.
Remunerations of self-employed artists are taxable in Italy
According to ruling no. 66 of 6 March 2026, the services rendered in Italy by artists who are self-employed (in this case, an opera singer) are taxable in Italy. A withholding tax of 30% is levied on the fees paid by the Italian withholding agent (a theatrical entity).
The Italian taxation is confirmed if, as in the case at stake, Italy and the State of residence of the artist have entered into a tax treaty that contains provisions similar to the ones contained in Art. 17 OECD Model Convention, which grants the primary right to tax the performance State regardless of its duration and the existence in Italy of a permanent establishment or fixed base of the artist.
CFC elective system implementing rules issued by the Italian Tax Authorities
The ordinance no. 106520 of 31 March 2026 contains the implementing rules of the optional discipline contained in Art. 167(4-ter) of the TUIR, which, for controlled foreign companies regulation purposes, deems the ETR test to be met if the parent Italian parent resident company pays a 15% substitute tax on the subsidiary’s accounting profit. The ordinance regulates, in particular, aspects such as the identification of the financial statements from which this accounting profit results (even in the case of companies with permanent establishments), the methods of exercising the election, the subjects required to pay, as well as the tax regime of the profits subsequently distributed by the foreign subsidiary to the Italian parent company (which are subject to taxation up to a limit of 5% of their amount).
Swiss Capital Tax cannot be credited against CFC taxes in Italy
With its answer to ruling no. 70 of 6 March 2026 the Italian Tax Authorities have denied the possibility of crediting the Capital Tax paid in Switzerland against controlled foreign companies taxes due by a person resident in Italy.
Indeed, the Swiss Capital Tax is applied to the net assets of Swiss companies and would not, therefore, fall into the category of income taxes. Only the latter may be set-off against Italian controlled foreign companies taxe.
The actual benefits deriving from the CCA costs need to be proved in order for them to be deductible
With its decision no. 5753 of 13 March 2026 the Italian Supreme Court confirmed that, in the context of a Cost Contribution Agreement, in order for the consideration paid to the parent company to be deductible, the subsidiary must derive an actual benefit from the service and the latter must be objectively determinable and adequately documented.
For these purposes, providing the contract concerning the provision of services rendered by the parent company to the subsidiaries and the invoice of the fees is not considered sufficient, as the paying company needs to produce the evidence to determine the actual or potential benefit achieved by it.
The new dividend and participation exemption regimes already repealed
Art. 11 of Law Decree no. 38 of 27 March 2026 repealed, with retroactive effect from 1 January 2026, the provisions introduced by the 2026 Budget Law which linked the Italian dividend exemption regime and the Italian participation exemption regime to the holding of a shareholding of at least 5%, or of a tax value of at least 500,000 euros. Both the relevant provisions of law (Arts. 87 and 89 of the TUIR) have, therefore, been re-written and they grants the relevant benefits regardless of the size of the shareholding held.
The provisions on intra-EU dividends have also been amended, again by reinstating the levy of the reduced with holding tax of 1.20% regardless of the size of the shareholding in the company distributing the profits.
EU principles infringement overrides tax treaty’s provisions
According to the decision of the Italian Supreme Court no. 4761 dated 3 March 2026:
• the elimination of the difference in treatment between resident and non-resident companies in relation to dividends received is a different matter than the relieving double taxation;
• consequently, if the relevant tax treaty, while reducing double taxation, leaves this discriminatory treatment unaffected, the latter must be removed from the national rule as it infringes the free movement of capital principle (Article 63 TFEU).
A German company was thus granted the refund of the withholding tax suffered (calculated at the 15% tax treaty rate) on the dividends distributed by some Italian banks, in the second instance limited to the difference between the 15% withholding tax levied and the 1.65% that should have been levied.
The free movement of capital principle applies also to third Countries
According to the decision of the 17 February 2026 no. 93/7/26 of the Court of second instance of Abruzzo, the US company that receives dividends from an Italian company is entitled to refund of the difference between the withholding tax suffered according to the relevant tax treaty provision and the one that should have been levied according to Art. 27 (3-ter) of the Presidential Decree no. 600/73 (currently 1.20% of the gross dividend).
Indeed, the free movement of capital principle also applies to third Country nationals and hence any unjustified restriction must be removed.
The new EU Inc. legal form has been introduced
The EU Regulation Proposal COM(2026) 321 final introduces the “EU Inc.”, a new European form of limited liability company. This kind of company, which is mainly designed for start-ups and innovative SMEs, will constitute an optional legal form which will be available alongside existing national company forms.
One of the advantages concerns the possibility of setting up EU Inc. online, using a faster procedure which, thanks to the use of standard forms, will allow to complete the registration within 48 hours at a maximum cost of 100.00 euros.
Tax breaks are also provided for warrants issued to employees and directors, who will not generate income in kind in the hands of the latter.
Italian Government delegated to implement ViDA reform package
With Law no. 36 of 17 March 2026 (European Delegation Law 2025) the Government has been delegated to implement Directive 2025/516/EU, which is part of the ViDA (VAT in the digital age) reform package. One of the main objectives of the reform is the introduction of a real-time digital reporting system for cross-border VAT transactions, based on electronic invoicing.
Therefore, as off 1 July 2030, the introduction of the e-invoice obligation for intra-community supplies is envisaged, in compliance with a European standard that will require interoperability between national systems. Other shorter-term innovations include:
• from 1 January 2027, certain amendments to the VAT rules on e-commerce;
• from 1 July 2028, the extension of the OSS regime to new types of transactions.
The Italy-Bulgaria tax treaty will be amended due to residence status issues
The answer to parliamentary question time no. 5-05144 of 11 March 2026 examined the specific features of the tax treaty between Italy and Bulgaria, by virtue of which an individual can be considered resident in Bulgaria only if he/she is a national of that State; in the absence of this requirement, the treaty does not apply.
It follows that INPS pensioners of Italian nationality who cannot be considered resident in Italy pursuant to Art. 2 of TUIR (as they live in Bulgaria) but who, according to the tax treaty, cannot even be considered resident in Bulgaria, cannot benefit from the Italy – Bulgaria tax treaty.
Due to the critical issues highlighted, the Government specifies that it has agreed with the Bulgarian counterpart to proceed with the amendment of the relevant treaty provisions.
Italy notifies Russia and Belarus of the tax treaty suspensions
In two press releases, the Italian Ministry of Foreign Affairs and International Cooperation announced that, on 13 and 12 March 2026, the Russian Federation and Belarus were officially notified of the unilateral suspension of the double tax treaties signed by these States with Italy. This formality follows the promulgation of Art. 10 of Legislative Decree 192/2025, according to which, if a foreign jurisdiction unilaterally suspends one or more provisions of a treaty in force with Italy (as it has happened with the Russian Federation and Belarus), the application of the same provisions is suspended as a countermeasure in Italy.
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Fazzini Holzmiller & Partners