The Tax Residence of IndividualsinItaly

Regulatory Framework - Acquisition Methods

F.D.T.Consulting

Tax residence is the main connecting factor between the taxpayer and the State for the purposes of income taxation.

The identification of tax residence is particularly important since the taxpayer resident in Italy is subject to the principle of worldwide taxation, i.e. the obligation to declare in Italy all

income wherever it is produced, while the non-resident person is taxed exclusively on income produced in the territory of the State.

The discipline was profoundly amended by Legislative Decree No. 209 of 27 December 2023, which came into force on 1 January 2024, with subsequent clarifications provided by the Revenue Agency with Circular No. 20/E of 4 November 2024.

• Regulatory references Primary regulations
• Article 2, paragraph 2, of the Consolidated Income Tax Act (TUIR);
• Legislative Decree no. 209/2023 (Reform of international taxation);
• Art. 43 of the Civil Code;
• Double taxation treaties stipulated by Italy;
• OECD double taxation model.

Administrative practice

• Revenue Agency Circular no. 20/E of 4 November 2024.

• Definition of Tax Residence

Art. Article 2, paragraph 2, of the TUIR provides that persons are tax resident in Italy who, for most of the tax period (at least 183 days, or 184 in leap years), also considering fractions of a day:

• they have residence pursuant to the Civil Code;
• they are domiciled in the territory of the State;
• are physically present in the territory of the State;
• are registered in the registers of the resident population (unless proven otherwise).

The presence of only one of the above requirements is sufficient for the person to be considered a tax resident in Italy.

• How to Get Tax Residency in Italy

Tax residency can be acquired in a number of ways.

• Registered residence

A person who registers with the Resident Population Registry (APR) of an Italian municipality and maintains this registration for more than 183 days in the year is presumed to be a tax resident in Italy.

From 2024, this registration constitutes a rebuttable and no longer absolute presumption, as the taxpayer can provide evidence to the contrary.

Required documentation

• Identity document;
• Tax code;
• Title of availability of the property (ownership, lease or loan);
• Declaration of residence to the competent municipality.

• Domicile in Italy

As of 1 January 2024, the tax concept of domicile has been redefined.

By domicile we mean the place where the personal and family relationships of the person mainly develop. Economic interests are no longer primarily relevant, as was the case in the past.

Relevant elements:

• presence of the spouse;
• presence of children;
• stable family life;
• prevailing personal relationships.

• Civil Residence

Pursuant to art. 43 of the Civil Code, residence coincides with habitual residence.

Therefore, those who live permanently in Italy for most of the year can be considered tax resident even in the absence of particular administrative formalities.

• Physical presence in Italy

The 2024 reform introduced a completely new criterion.

A tax resident is someone who physically stays in Italy for more than 183 days in the year, even if not consecutive and considering fractions of a day.

Example

A subject:

• resident anagraphically to Dubai;
• with family abroad;
• present in Italy for 190 days a year;

may be considered a tax resident in Italy exclusively on the basis of physical presence.

• Transfer of Tax Residence to Italy

For a person coming from abroad, the transfer of tax residence to Italy normally requires:

Step 1

Actual transfer of the home to Italy.

Step 2

Registration with the Resident Population Registry.

Step 3

Stay in Italy for more than 183 days in the tax period.

Step 4

Shift of the center of personal and family relationships to the Italian territory.

Step 5

Verification of any applicable double taxation agreements.

• Dual Tax Residency

It may happen that two States consider the same person to be resident at the same time.

In such cases, the so-called "Tie Break Rules" provided for by the Double Taxation Treaties apply, which identify residence on the basis of the following criteria:

• permanent residence;
• center of vital interests;
• habitual stay;
• nationality;
• agreement between the tax authorities of the two States.

• Consequences of Italian Tax Residency

The taxpayer resident in Italy:

• must submit the Italian tax return;
• must declare income produced in any country in the world;
• may be subject to tax monitoring obligations (Form RW);

• can benefit from tax credits for taxes paid abroad.

Conclusion

Following the reform introduced by Legislative Decree 209/2023, Italian tax residence is determined using criteria that are more in line with international standards and more based on the substantial reality of the taxpayer.

From 2024, the following are particularly relevant:

• the physical presence in the Italian territory;
• the home understood as the center of personal and family relationships;
• civil residence;
• registration as a relative presumption.

Therefore, those who intend to transfer their tax residence to Italy must carefully evaluate all the substantial and documentary elements that can demonstrate the actual roots in the

national territory.

F.D.T. Consulting

Email: info@fdtconsulting.euTel. 3200203274

Report updated to current legislation and clarifications from the Revenue Agency (Circular no. 20/E of 04.11.2024).