Participation exemption regime potential in breach of EU freedoms
Foreign tax credit to be granted in proportion to the Italian taxable base
Severance payments paid to former Italian tax residents are taxable in Italy
Non-compete payments are not taxable in Italy
The location of an intangible asset affects the taxation of the related royalties
Taxes on management fees levied abroad may be credited against Italian taxes
Rental fees for boxes and pallets fall under Art. 12 of the OECD Model
Pro-rata taxation on stock options if part of the vesting occurred while working in Italy
Research carried out by Czech researcher in Italy
Pension payments are taxable only in the residence State regardless to actual taxation
Prescription period to avail of tax credit for taxes paid abroad
Payment code to be used by frontiers workers in Switzerland has been issued
Administrative penalties waived with reference to FATCA obligations
Price adjustments are relevant for VAT purposes
Implementation of the DAC 9 Directive
Participation exemption regime potential in breach of EU freedoms
On the 10 April 2025, the Chartered Accountants Italian Association has issued its document no. 229 which analyses the new participation exemption regime introduced in Italy with respect to capital gains derived by companies resident in the EU or EEA on the sale of stakes into Italian companies. According to the association, such regime should also be extended to capital gains derived by persons resident in third Countries; if not, the Italian participation exemption regime rule might be considered as in breach of the free movement of capital principle enshrined in Art. 63 of the TFEU.
Foreign tax credit to be granted in proportion to the Italian taxable base
According to the ruling reply no. 101 of 15 April 2025, the principle contained in Art. 165(10) of the TUIR, according to which, if foreign income are subject to tax partially in Italy, the foreign tax that can be credited against taxes due in Italy shall also be proportionately reduced, is applicable to capital gains on participation taxable both abroad and in Italy (where they are taxed only with respect to 5% of their amount). The case analyzed by the Italian tax authorities addressed a capital gain realized by an Italian company following the sale of a stake in a French company, taxable (partially) in both States by virtue of the protocol to the tax treaty entered into between Italy and France.
Severance payments paid to former Italian tax residents are taxable in Italy
According to the Italian tax authorities’s ruling no. 98 of 14 April 2025, the amounts paid by an Italian company to a non-resident as a severance payment following a settlement for the termination of the employment relationship:
• are only taxable in Italy for the portion related to the employment period during which the person was a resident in Italy and the work was performed in Italy;
• they are equally taxable in Italy for the portion related to the work period during which the person was a resident in a State which has not entered into a tax treaty with Italy and the work was performed in such foreign State (in this case, Cuba). Indeed, in such a case, according to Art. 23(2)a) of the TUIR, these amounts are taxable in Italy for non-residents if paid by an entity resident in Italy.
In addition, these amounts fall within the scope of Art. 15 of the OECD Model Convention as they qualify as employment income; thus, in order to assess the correct allocation of taxing rights the person’s tax residence and the place where the work was carried out must be taken into consideration.
Non-compete payments are not taxable in Italy
With ruling no. 111 of 17 April 2025, the Italian Tax Authorities clarified the tax regime which is applicable to sums paid by Italian companies to non-resident individuals under non-compete agreements. These sums, if aimed at ensuring that the ex-manager does not take on managerial roles in other companies, are not taxable in Italy as they are only taxable in the State of residence of the recipient. This regime applies even if, according to Art. 23(2) a) of the TUIR such amounts are territorially relevant in Italy when paid by Italian companies as the relevant tax treaty prevents Italy from levying any tax.
The location of an intangible asset affects the taxation of the related royalties
In ruling no. 112 of 17 April 2025, the Italian tax authorities examined the taxation of royalties paid by a non-resident company to a non-resident taxpayer. According to the Italian Tax Authorities, the place where the relevant intangible asset is located is relevant in order to determine the territoriality and tax treatment of the royalties. This is because, for such income, the territoriality criteria are established by Art. 23(1) f) of the TUIR, which considers taxable in the hands of non-residents miscellaneous income deriving from activities carried out in Italy and from assets located in Italy.
Taxes on management fees levied abroad may be credited against Italian taxes
According to the ruling reply no. 116 of 18 April 2025, the services related to the development of a plant carried out by an Italian company for the benefit of an Egyptian company are to be considered as “management fees”. Therefore, the payments:
• do not fall under the scope of Art. 22 of the ItalyEgypt tax treaty, which provides for exclusive right to tax in the residence State of the recipient;
• do not fall under the scope of Art. 7 of the same tax treaty, which provides exclusive right to tax of the State of residence of the recipient in the absence of a permanent establishment in the other Contracting State;
• are taxable in both Contracting States
In the case analysed in the ruling:
• the services were carried out from Italy;
• the Italian company had a permanent establishment in Egypt, but such permanent establishment was not involved in the development of the plant.
As the taxation in Egypt occurs in accordance to the provision of the tax treaty, the Italian company can therefore offset taxes levied in Egypt from the Italian IRES, to the extent that such taxes are final (as defined by Article 165 of the TUIR).
Rental fees for boxes and pallets fall under Art. 12 of the OECD Model
In their ruling reply no. 117 of 18 April 2025, the Italian Tax Authorities clarified that boxes and pallets for fruit transport are classified among the “industrial, commercial or scientific equipment”. Accordingly, where the income is derived by a non-Italian resident, a 30% withholding tax comes due on the fees agreed upon. In this specific case, the territorial requirement was considered to be met, as the rented goods were located within the Italian territory (Art. 23(1)f) of the TUIR). However, as the requirements for Art. 12 of the tax treaty between Italy and the residence State of the recipient (being Spain) are met, the Italian domestic withholding is to be reduced to 8% of the gross fee.
Pro-rata taxation on stock options if part of the vesting occurred while working in Italy
On 23 April 2025, the Italian Supreme Court issued its decision no. 10606, addressing the case of an individual residing in the Czech Republic who received stock options which partly vested while he was working in Italy. Both Italian domestic law (Art. 23(1)c) of TUIR) and Art. 15 of the tax treaty between Italy and Czechoslovakia does not give raise to any Italian tax liabilities with respect to the portion of income related to the period during which the individual resided abroad and did not carry out his employment activities in Italy. On the contrary, if stock options are allocated to a worker that is not residing in Italy who, however, performed part of its employment activity in Italy during the vesting period, then the income is taxable in Italy on a “pro-rata” basis, meaning only for the portion that represents compensation for work performed within the Italian territory. The taxable amount in Italy is determined using the proportional ratio between the number of days of employment that were rendered in Italy and the total number of working days within the vesting period.
Research carried out by Czech researcher in Italy
Ruling no. 97 issued by the Tax Authority on 15 April 2025 addresses the tax treatment of funding granted to a Czech citizen by the Ministry of the Czech Republic, through a Czech university, for a two-year research project conducted in Italy at an Italian university. According to Italian domestic law, such income is considered to be taxable in Italy as employment income. However, under Art. 20 of the tax treaty entered into between Italy and Czechoslovakia (which remains applicable to relations with the Czech Republic and the Slovak Republic), compensation received by professors and teachers who temporarily reside in a foreign state for the purpose of teaching or conducting scientific research for a period not exceeding two years is exempt from taxation in the host state. Therefore, in this case, the fees received by the Czech researcher might not be subject to taxation in Italy.
Pension payments are taxable only in the residence State regardless to actual taxation
The Italian Supreme Court, in its decision no. 11085 of 28
April 2025, confirmed that pension benefits paid by INPS to an Italian citizen being tax resident in Switzerland are not taxable in Italy, regardless to the circumstance that such amounts are taxed or not in Switzerland. Therefore, for the purpose of refunding withholdings made by INPS on pensions paid to a Swiss resident, the actual payment of Swiss taxes on these pensions is not relevant. Additionally, the Italian Supreme Court stated that the tax residence certificate mentioned in Article 29(2) of the ItalySwitzerland tax treaty is valid even if it is issued by the Cantonal Authority, taking into account the division of the Swiss Confederation into Cantons.
Prescription period to avail of tax credit for taxes paid abroad
As per the Italian Supreme Court’s decision no. 10642 of 23 April 2025, taxpayers retain the right to claim the tax credit for taxes paid even if this right is not claimed in the tax return for the fiscal year in which the foreign income was generated. In the absence of an explicit time limit under Art. 165 of the TUIR, this right can be asserted within a ten-year limitation period (being the general statute of limitation for credits in Italy).
Payment code to be used by frontiers workers in Switzerland has been issued
The Italian Tax Authorities’ statement of practice no. 27 of 10 April 2025 has introduced the payment code “1863” relating to the special regime of substitute taxation for frontier works in Switzerland. This regime applies to workers residing within certain municipalities identified in annexes 1 and 2 of the decree no. 113/2024, which are located entirely or partially within a 20 km zone from the Swiss border. The established code permits the payment of a substitute tax for IRPEF (and local surcharges) amounting to 25% of the taxes levied in Switzerland on income earned from employment therein. In order to benefit from this regime, effective as of 2024, an election must be made in the relevant income tax return, together with the payment of the substitute tax that need to occur by the deadline for paying the balance of income taxes. Once this option is exercised, taxes paid in Switzerland on income subject to substitute taxation may not be off-set against Italian taxes due.
Administrative penalties waived with reference to FATCA obligations
The Italian Ministry of Economy and Finance, in a FAQ dated 4 April 2025, confirmed the waiver of administrative penalties for Italian financial institutions that fail to fulfill the obligations to acquire and report the US TIN (tax identification number) concerning FATCA communications for the fiscal years 2025, 2026, and 2027. This waiver applies to institutions that comply with the conditions outlined by IRS practice in Notice 2024-78.
Price adjustments are relevant for VAT purposes
In case C-726/23, the Advocate General of the European Court of Justice analyzed the VAT implications of the amounts paid by a company to its parent company located in another Member State. These payments were made to adjust inter-company prices to arm’s length values in accordance with transfer pricing rules. The Advocate General concluded that such remuneration should be considered as compensation for services provided by the parent company for a fee, pursuant to Article 2 of Directive 2006/112/EC, and therefore subject to VAT.
Implementation of the DAC 9 Directive
The new directive 2025/872, referred to as “DAC 9”, regarding the automatic exchange of information on supplementary tax filing (known as GloBE Information Returns or GIR) has been published in the Official Gazette of the European Union. The Directive has been introduced by the Member States because of the relevant Pillar Two legislation.
The Directive provides for the introduction of a standardized and centralized system for reporting tax information called TTIR (Top-up Tax Information Return), which allows for the submission of a GloBE Information Returns filing by a single group entity, in lieu of separate filings in each State. By 31 December 2025, Member States must adopt (and publish) the necessary laws, regulations, and administrative provisions for its transposition. The first filing is scheduled for 30 June 2026.
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