Confusion often arises about how the Italian rules on tax residence 
interact with the civil law rules about what it means to be Italian tax resident and how tax residence interacts with the Civil Code concepts of “residenza“, domiclio and “dimorra abituale” (residence, domicile and habitual abode) and registration with the Anagrafe at your local municipality – the Comune.
The Italian domestic rules might need to be interfaced with the tax residence provisions of a double tax treaty (DTA) or another of Italy’s international treaties.
This article aims to explain how the rules work.
The Italian Statutory Test of Tax Residence
Article 2 of the Italian Tax Code provides that an individual is considered to be tax resident in Italy for any particular Italian tax year “if, for the majority of the tax year (including fractions of a day), they have their residence under the Civil Code or their domicile within the territory of the State, or are physically present there” For these purposes “domicile” means the place where a person’s personal and family relationships are primarily centered. Unless proven otherwise, individuals who are registered with the Anagrafe – the resident population registry for the majority of a tax year are also presumed to be tax resident.
Under the test of tax residence an individual is either tax resident or not tax resident for any tax period. A tax period, as it concerns individuals, is a calendar year. It is not possible except in rare circumstances to be Italian tax resident for a part of tax of an Italian tax year. The Italian test of statutory residence is thus an “all in-all out” concept for any particular tax year.
This means that if, for more than 183 days (184 in a leap year) in any Italian tax (calendar) year, you will be considered tax resident in Italy if you;
- are physically present on Italian territory; OR
- have your “domicilio”, centre of vital interests – defined, for purposes of the tax residence test, as the centre of your affections – spouse, close family – in Italy, OR
- have your ” dimora abituale”, habitual abode in Italy; OR
- are registered as resident in the list of resident population (the Anagrafe) maintained by the local authority (Comune) – this is a presumption of tax residence under the rules, and not an absolute test. It can be overcome, if the facts and circumstances allow, e.g. by the terms of an applicable tax treaty.
The 183 days do not need to be continuous and can be split into different parts in any year.
Each Italian tax year – the calendar year – must be taken on its own. Thus an individual who meets one or more of the above four tests, only from 1 August of one year up to 31 May of the following year, will not be considered as tax resident in Italy for either of the two tax years.
By the same token a person who registers as resident with the Anagrafe on 1 July of any year will generally, subject to an applicable double tax treaty, other treaty or specific legislation, be presumed to be Italian tax resident for the whole of that year and hence potentially liable to income tax on worldwide income received in the period from 1 January of that year to 31 December of the same year, and to wealth tax on foreign assets owned during the course of the year.
Tax residence does not depend on age, gender, civil status, citizenship, ownership/rental of real estate or indeed physical presence on Italian soil (in the sense that is perfectly possible to be considered Italian Tax Resident, without spending a day in Italy). These may be factors in determining tax residence, but on their own, none of these elements automatically determine whether an individual is Italian tax resident or not. Reference must be made to the specific test of tax residence in the Italian Tax Code.
Registration as Resident
The concept of tax residence, is, although linked, through the statutory test of tax residence, is not the same as civil law residence. By civil law residence we mean the simple fact of being registered with the register of the resident population (Anagrafe).
Being registered for more than 183 days in any tax year will mean that you are presumed to be Italian tax resident for that year.
Obligation to Register As Resident with the Anagrafe
Italian law requires an individual to request registration for themselves, and for any minor child of which they are the parent or guardian, with the “Anagrafe” maintained by the Comune (here they have their habitual place of abode). In most cases there may be a legal obligation to register as resident (either as a temporary or permanent resident after 3 months or 90 days of physical presence on Italian soil. See this post for more information
Apart from a strict legal obligation to register with the Anagrafe, registration as resident in the necessary consequence of an application for a long term visa and stay permit (permesso di soggiorno) is that you will register with the Anagrafe, sooner or later. Application for immigration permits for purposes of elective residence or family reunion presupposes registration as resident sooner or later. An exception applies under the Investor Visa programme.
There may be some advantages to getting registered as resident such as cheaper cost of residential utility services and reduced purchase tax on acquisition of real estate. It is also necessary to be resident in order to become the registered owner of a motor vehicle in Italy.
Of the four conditions in the Statutory Residence, two are simple simple black and white tests – i,e. you are physically present or registered as resident for more than 183 days. The other two will depend on facts and circumstances. The black and white test of being registered as resident with the Anagrafe or not, means that you will be presumed to be a tax resident of Italy for any year in which you are registered as resident for more than 183 days, even if you do not actually spend any time on Italian soil during the year.
Rebuttal of the Presumption of Tax Residence
If you meet Test 4 of the Italian test of Statutory Residence (registration with the Anagrafe), you are presumed to be Italian tax resident. The presumption can be rebutted in certain circumstances. Rebuttal of a legal presumption in the Italian Tax Code requires taxpayers to produce specific legal support for overriding the terms of Italian law. This can be for example pursuant to an international DTA applicable to certain individuals in certain circumstances – e g diplomats, senior UN or EU functionaries where a relevant treaty operates to define the consequences of Italian residence or exemption from income tax) and in rarer occasions, wealth tax), based on the application of a double tax treaty (DTA).
Relying on a DTA
The Italian Tax Agency have stated that in determining the tax residence of any individual, they will require concrete documentary evidence showing the presence of the elements the taxpayer is putting forward to support a claim under a DTA that you are not tax resident in Italy by virtue of the Treaty . Documents should be collated on an Italian tax year by tax year basis. The documentation may need to be translated into the Italian language, possible by a professional translator who will need to authenticate the veracity of the translations.
- you must be tax resident in another country as defined under the tax residence rules of that country;
- there must be a DTA in force with that other country;
- you must be entitled to access the benefits of the DTA;
- the DTA must contain a clause covering the position where an individual is dual tax resident providing that they should be considered tax resident in only one of the two countries – most of Italy’s treaties contain a “tie-breaker” clause for tax purposes with a tie-breaker test designed to identify the country of residence;
- the tie breaker test must resolve in favour of your being resident in the other country;
The application of a DTA should never be simply assumed. The terms of the individual treaty need to be checked and individual entitlement needs to be verified. Most of Italy’s DTA’s provide that in order to be able benefit from the Treaty you need to meet the definition of “resident” of the relevant country. As a minimum this usually means that you liable to tax in that country by reason of your “domicile” , residence or analogous concept. Certification of tax residence issued by the foreign tax authority will be required as a minimum. Treaty access is usually not available for someone who is liable to in the relevant country tax purely on sources in that country and not on worldwide income.
Some Treaties contain specific limitation of benefit clauses designed to counter a practice known as “treaty shopping”. These insert additional conditions on accessing a treaty such a required period of residence or ties in that country. The Italy-US Treaty for example requires a “substantial presence” in the U.S. in order for a taxpayer to be able to access the Treaty.
Impact of a DTA
DTA’s usually provided that the tie-breaker clause only applies to determine a single jurisdiction of tax residence for the purposes of the Treaty. DTA’s contains a series of articles defining how different sources of income are to be taxed in order to avoid double taxation. These articles typically provide that income sources are to be taxed
- in one country, with credit given in the country of residence for tax paid in the other country:
- only in the country of residence
The tie-breaker clause therefore simply sets up the relevant tax treatment of income sources, by defining a single country of tax residence, which is a necessary precondition of applying the articles of a DTA relating to individual income sources.
The tie breaker does not apply so that you are not considered tax resident, tout cour, in one of the two countries. Your tax residence status under domestic law in one of the two countries remains, but if the tie breaker makes you tax resident in one country you may not be liable to Italian tax on foreign income sources in accordance with terms of the Treaty.
Wealth Taxes
Note that most of Italy’s DTA’s with some exceptions, apply only to income taxes. So being considered tax resident outside Italy, pursuant to the tie-breaker clause, does not necessary comport exemption from wealth tax due by Italian tax residents.
Special Tax Reliefs
Many of Italy’s specific Tax Reliefs to encourage individuals to move their residence to Italy, provide for a minimum period of non Italian tax residence prior to the move. There is no guarantee that the Italian Tax Agency must accept that a prior period in which an individual meets the terms of the STTR as contained in the legislation, but claims to be non resident by virtue of the terms of a DTA, is eligible for a special tax relief which requires a prior period of non residence. This is because the legislation governing the legislation makes specific reference simply and specifically to art 2 of the Italian Tax Code.
The Tie Breaker in the DTA
Most of Italy’s contain a tie-breaker clause based on the standard OECD Model Treaty (Convention). The text of the relevant clause in the the Italy-UK treaty is as follows:
“(1) For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that Contracting State only if he derives income from sources therein.
(2) Where by reason of the provisions of paragraph (1) of this Article an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules: (a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests);
(b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has no permanent home available to him in either Contracting State, he shall be deemed to be a resident of the State in which he has an habitual abode;
(c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national;
(d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.”
What The Tie-Breaker Means
This means that if an individual to whom the DTA applies is tax resident under both foreign law and Italian law then their tax residence status shall be determined as follows:
permanent home – the individual will be tax resident in the country in which he has a permanent home. If they have a permanent home in both countries or in none, then the test moves to:
country in which personal and economic relations are closer (centre of vital interests) – this includes both family and economic interests. If that is inconclusive:
the test moves to at habitual abode – the country in which the individual has their home – the place that they intend to return after a period of absence for what ever length of time. If that is inclusive then the test moves to:
Nationality. In cases of dual nationality, or neither nationality, the test enters what may be a fairly lengthy mutual agreement procedure.
These rules obviously leave scope for interpretation, and indeed that interpretation may be different from each country’s tax authorities standpoint.
In terms of the Italian authorities standpoint, it should be realized that if you have made a solemn declaration requesting registration as resident with the Anagrafe, stating that you consider the address you give as your residential address in Italy is your habitual abode, the Italian authorities may be very resistant to an argument that, notwithstanding your declaration, your habitual abode is actually somewhere else.
Documentary Proof
At any rate if you do wish to advance the argument, the Italian authorities will require documentary proof that you are a tax resident in the other country and evidence that your home is actually there. This means, if you want to advance the view that your are tax resident for any year outside Italy you will need to produce, tax year by year, the following types of documents
Availability of Permanent home
- title deeds or rental contract:
- local property tax or services tax statements and proof of payment
- evidence that the property is not rented or sub-let to third parties
Centre of vital interests
- evidence of location of of members of family;
- employment contract
- evidence of self employment (VAT registration)
- evidence of where you are working
- bank statements especially those where salary/income is received;
- corporate offices (directorships) held and evidence of participation at business meetings;
- evidence of travel expenses and movements to and from Italy:
- hotel/accommodation,
- subsistence expenses
- membership of clubs or other organizations;
- childrens’ schools
- evidence of health services
Habitual Abode
- same documentation as for permanent home
- utilities bills in respect of your properties (ideally showing a higher usage abroad compared to similar bills on an Italian property)
- other evidence showing that your main home is outside Italy.
Leaving Italy after a Period of Registered Residence
If you do leave Italy to go and live abroad it is vital that you cancel your registration from the anagrafe. This is usually an easy procedure and can often be done simply by email (but check first with your local authority (comune). You will need to give an address abroad. Italian citizens should get themselves registered in the “AIRE” – the register of Italian citizens resident abroad by contacting the local Italian embassy or consulate abroad.
Note though that Circular No. 304/E/I/2/705 of 2 December 1997 provides that “the deletion from the register of the resident population and registration with the AIRE is not a decisive factor in excluding residence”. So simply cancelling your registration with the local authority will not mean, by itself, that you cease to be resident. The authorities will be entitled to ask for proof that your centre of vital interests and habitual abode have also changed in substance.
Special Rules for Italian citizens transferring residence to a listed Tax Haven
Article 2 (2bis) of .the Tax Code operates to impose an extra burden of proof on Italian citizens transferring residence to a black listed regime (tax haven)
The Split Year concept
By Resolution no. 471/2008 the Italy Tax Agency confirmed a fundamental principle that “…. for the purposes of Italian law – and therefore also for the purposes of the interpretation of international double tax treaties where they refer to domestic provisions – it is not possible to consider an individual resident limited to a fraction of the tax year … “. This means that an individual is either tax resident or not in any tax (i.e. calendar) year. This can raise issues where an individual is moving to or from a regime that does permit individual to be resident for part or all of a year.
For example, a resident individual moving abroad from Italy in the second half of any year (on or after 2 July will not be considered tax resident in Italy for the whole of that year. Thus income earned outside Italy in the second half of the year will be liable to tax in Italy (obviously with credit for the overseas tax). Each case will however need to be examined on an individual basis based on the facts and the terms of any Double Tax Treaties, as treaties (e.g the Italy’s DTA’s with Switzerland and Germany can in some case offer or impose a split year treatment.
Legislation
Codice Civile Libro Primo – Delle Persone e della Famiglia
Titolo III Del domicilio e della residenza
Art. 43. Domicilio e residenza
Il domicilio di una persona e nel luogo in cui essa ha stabilito la sede principale dei suoi affari e interessi.
La residenza e nel luogo in cui la persona ha la dimora abituale.
Italian Civil Code Book One – Individuals and the Family
Title III: Domicile and Residence
Art. 43. Domicile and Residence
The domicile of a person is in the place where they have established the principal seat of their affairs and interests.
The residence is in the place where the person has their habitual abode.
Testo Unico delle Imposte sui Redditi (TUIR) D.P.R. n. 917/86
Art 2.
Italian Consolidated Tax Code D.P.R. no. 917/86
Art 2.
1. Soggetti passivi dell’imposta sono le persone fisiche, residenti e non residenti nel territorio dello Stato.
1. Individuals, both resident and non-resident in the territory of the State are taxable persons.
2. Ai fini delle imposte sui redditi si considerano residenti le persone che per la maggior parte del periodo d’imposta, considerando anche le frazioni di giorno, hanno la residenza ai sensi del codice civile o il domicilio nel territorio dello Stato ovvero sono ivi presenti. Ai fini dell’applicazione della presente disposizione, per domicilio si intende il luogo in cui si sviluppano, in via principale, le relazioni personali e familiari della persona. Salvo prova contraria, si presumono altresi’ residenti le persone iscritte per la maggior parte del periodo di imposta nelle anagrafi della popolazione residente.
2. For income tax purposes, individuals are considered residents if, for the majority of the tax year (including fractions of a day), they have their residence under the Civil Code or their domicile within the territory of the State, or are physically present there. For the purposes of applying this provision, “domicile” means the place where a person’s personal and family relationships are primarily centered. Unless proven otherwise, persons who are registered in the resident population registry for the majority of the tax year are also presumed to be residents.
2-bis. Si considerano altresi’ residenti, salvo prova contraria, i cittadini italiani cancellati dalle anagrafi della popolazione residente e trasferiti in Stati o territori diversi da quelli individuati con decreto del Ministro dell’economia e delle finanze, da pubblicare nella Gazzetta Ufficiale.
2-bis. Unless proven otherwise, Italian citizens who have been removed from the registry of the resident population and transferred to States or territories with a privileged tax regime are also presumed to be resident.
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