The Italian Tax Authorities issues clarifications on the new tax residency rules
New Italy-China tax treaty ratified in Italy
New clarifications on the investment management exemption legislation
Foreign fund proceeds are subject to the separate taxation regime
New penalties for intra-community supply of goods
italy implements the VAT threshold exemption regime
Ecofin reaches an agreement on VAT measures on digital economy
Directive proposal on the Pillar Two GIR
The ECJ rules on the right to deduct VAT when its value is not reported in the invoice
EU Commission closes the State aid cases
Dutch laws on dividends distributions and reserves deduction found to be against EU Law
The Italian Tax Authorities issues clarifications on the new tax residency rules
With the Circular Letter no. 20/2024 the Italian Tax Authorities examined the amendments made by Legislative Decree no. 209/2023 to the Italian rules aimed at establishing the tax residence residence of individuals and legal entities, which are effective as of fiscal year 2024. On the residence of individuals, it is confirmed that the four connecting criteria (civil residence, domicile, physical presence and civil registration) are alternative to each other. It was also clarified that, in order to ascertain whether or not an individual has met one of the above-mentioned criteria for the most part of the relevant fiscal year also nonconsecutive periods are to be considered relevant. In addition, the new notion of domicile (which gives precedence to personal and family relationships over economic ones) also includes formalised relationships (e.g. marital or civil union) and personal relationships with a stable character that reflect a deep link with the territory of the State (e.g. cohabiting couples). The Circular Letter also provides clarifications on the new criteria for defining the residence of companies, linked to the location in Italy of the registered office, the place of effective management or the main ordinary management, the latter associated with the place where the normal functioning of the company and the obligations relating to the ordinary administration of the same are carried out.
New Italy-China tax treaty ratified in Italy
The law ratifying the new tax treaty entered into between the People’s Republic of China and Italy was definitively approved on 5 November 2024 by the Italian Parliament. With respect to the previous existing treaty, the main differences affect the following income:
•dividends, for which, in addition to the generic reduced 10% rate withholding, a preferential 5% withholding rate has been provided for by companies that hold interest, for which, in addition to the generic reduced 10% rate withholding, a preferential 8% reduced withholding rate has been introduced for those paid to financial institutions in relation to loans related to investment projects and with a maturity of at least 3 years;
•royalties, for which a differentiation of the rate between royalties for copyrights and fees for the use or concession of use of industrial, commercial or scientific equipment has been provided;
• cases of dual resident companies are to be resolved by a mutual agreement procedure between the competent authorities.
New clarifications on the investment management exemption legislation
The Circular Letter no. 23 of 19 November 2024 has provided clarifications on the investment management exemption regime referred to in Art. 162(7-ter) and (9-bis) of the TUIR (containing a presumption that exclude the existence of a permanent establishment of foreign entities that manage investments in Italy on behalf of nonresident vehicles, so-called asset managers). The circular examines the independence requirements of the asset manager and the investment vehicle and provides operational guidance for the application of the method chosen for determining the remuneration of intragroup services.
Foreign fund proceeds are subject to the separate taxation regime
According to ruling no. 229 of 27 November 2024, the amount received by a heir (residing in Italy) from an USA resident deceased as a consequence of the liquidation of a foreign pension fund qualifies as “pensions of all kinds and equivalent allowances” referred to in Art. 49 (2)a) of the TUIR and subject to the separate taxation regime pursuant to Art. 17(3) of the TUIR.
New penalties for intra-community supply of goods
Ruling no. 236 of 29 November 2024 analyses the effective date of the new provisions on the deadline for the transport or shipment of goods to another Member State by the buyer in the context of intra-community supplies. Art. 7(1) of Legislative Decree 471/97, as amended by Legislative Decree no. 87/2024, provides for a penalty equal to 50% of the VAT due to be comminated to those who carry out intra-community supplies without charging any VAT, if the goods transported or shipped have not arrived in the EU Member State of destination within 90 days of delivery. This penalty is not applied if, within the following 30 days, the invoice is regularized and the relevant VAT is paid. The new provision applies to violations committed as of 1 September 2024.
Italy implements the VAT threshold exemption regime
Legislative Decree no. 180 of 13 November 2024 (published in the Official Gazette no. 281 of 30 November 2024) introduces the cross-border VAT threshold exemption regime that will apply as of 1 January 2025. Legislative Decree no. 180/2024 implements the measures contained in the Directive 2020/285/EU, which introduces, among other things, simplification measures for small EU economic operators that intend to extend their activities to other Member States. The internal rule, however, provides for more strict requirement being applicable in Italy only to individuals qualifying as VAT persons.
Ecofin reaches an agreement on VAT measures on digital economy
At the Ecofin meeting of 5 November 2024, the Member States reach an agreement on the “ViDA” (VAT in the Digital Age) package, with a compromise solution on the new VAT rules for the platform economy. The measures follow the so-called three “pillars”:
• the introduction of new “real-time” digital reporting obligations for cross-border VAT transactions, from 1 July 2030;
• the involvement of platforms in the collection of VAT on short-term accommodation and road passenger transport services;
• the provision of a unified VAT registration system at an European level through the extension of the one-stop shop mechanism.
Directive proposal on the Pillar Two GIR
The EU Commission has recently presented a proposal to amend the Directive on Administrative
Cooperation (2011/16/EU, the so-called “DAC”) to improve the exchange of tax information on multinational groups. The proposal for a directive, the so-called “DAC 9”, provides that the declarations on supplementary taxes relating to Pillar Two are collected and shared with an uniform model.
The ECJ rules on the right to deduct VAT when its value is not reported in the invoice
In its decision relating to Case C-624/23 of 21 November 2024, the European Court of Justice affirmed that legislation of a Member State according to which, even in the context of a tax audit:
• the recipient of a VATable supply cannot deduct the tax in the event that the supplier has not registered for the purposes of the tax and has issued invoices that do not have VAT expressly reported;
• the correction of an invoice is precluded if the document concerning a VATable supply does expressly report the relevant VAT tax;
• is compliant with EU law.
EU Commission closes the State aid cases
The European Commission has closed the three investigations based on State aid regulation in connection with the tax rulings on transfer pricing granted by Luxembourg to Fiat and Amazon and by the Netherlands to Starbucks. After the decisions on these cases have been published by the European Court of Justice, the Commission concluded that the tax rulings did not grant any selective advantages to the above-mentioned companies.
Dutch laws on dividends distributions and reserves deduction found to be against EU Law
According to the decision on the case no. C-782/22 of 7 November 2024 issued by the European Court of Justice, the Dutch legislation in force ratione temporis that provided for:
• a withholding tax to be applied on dividends paid only if the recipient was a non-resident insurance companies;
• a deduction linked to the change in reserves for future payment commitments to policyholders, with a consequent reduction in corporation tax, for resident insurance companies;
• is contrary to EU law (and, specifically, contrasts with the free movement of capital principle referred to in Art. 63 of the TFEU). That restriction has been found to be unlawful because it is not justified by any overriding reason in the public interest.
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