International taxation: the Italian reform resulting in the light of the approval of the implementing decrees

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published on 3 January 2024 | reading time approx. 5 minutes


On 16 October 2023, the Council of Ministers approved the first two Legislative Decrees implementing the Tax Law No. 111/2023. The two preliminarily approved implementing decrees concern the reform of personal income tax (so-called IRPEF) and the reform a selected set of international taxation rules in national Law.




In particular, such reform, in the context of the principles inherent in international and EU law, is aimed at bringing the Italian tax system more in line with international practice and double taxation conventions, as well as making the income tax system more competitive on the international scene.

The pillars of the reform include the revision of the residence rules for natural and legal persons, the limitation of the scope of the Regime for so-called “Impatriated” workers returning to Italy, the encouragement of the reshoring of economic activities within the territory of the State and, finally, the transposition into domestic law of EU Directive No. 2022/2523, which will mark the introduction of the domestic minimum tax. Each of these prerequisites of the reform will be analysed below.

Following the preliminary go-ahead of the Council of Ministers on 16 October, the draft od Legislative Decree shall continue the institutional process and be approved within 31 December 2023.

Tax residence of natural persons: a new definition

Significant changes have been made to criteria for the assessment of natural persons’ tax residence in Italy. First and foremost, the assumption of tax residence resulting from the registration with the population register of residents for most of the tax period is officially superseded. This presumption, which in turn derives from a consolidated orientation in most Court rulings, is downgraded from absolute to relative: this concretely means that such a case the taxpayer will be granted the right to provide contrary evidence as to the place of his actual domicile or habitual abode, regardless of the place where his registry residence is formally located.

Moreover, the reference in Art. 2 of Presidential Decree No. 817/1986 (the so-called Consolidated Income Tax Law) to the civil law notion of domicile is eliminated in favour of an interpretation that affirms the prevalence of personal and family relationships over the economic sphere and business interests, contrary to the more recent development and decision of Court cases, which instead favoured business affairs. 

Regime for Impatriated Workers: Towards a Significant Downsizing

Particularly relevant is also the restriction of the scope of the facilitation regime for so-called “Impatriate” workers. The amendments mainly concern the following aspects:
  • Eligible income and taxable base: a quantitative limitation is introduced in relation to the income produced that can benefit from the relief, equal to €600,000. Moreover, the reduction of the taxable base for personal income tax will be equal to 50 per cent of the subject's total income within the aforementioned limit, instead of the previous 70 per cent. Only income from employment and from self-employment may henceforth be the subject of the benefit, while business income is excluded, unlike the previous regime;
  • Subjective requirements: workers must not have been tax resident in Italy for the three consecutive years preceding the transfer of their tax residence in Italy pursuant to the above-mentioned Article 2 Presidential Decree No. 817/1986, which is a conditio sine qua non to access the scheme. In addition, the benefits are to be repaid, with interest, if the person does not remain in Italy for at least five years, which corresponds to the duration of the facilitating regime. Eventually, only those who meet the requirements of high qualification or specialisation pursuant to Legislative Decrees No. 108 of 28 June 2012 and No. 206 of 9 November 2007 may qualify for the benefit.

For further discussion of the Impatriate Workers tax treatment, read “Limitations the applicability of the preferential tax regime for so-called “Impatriated” workers: an analysis of the recently introduced amendments and issues stemming therefrom”.

Tax residence of legal persons

Consistently with the international law of Conventions against double taxation, the reference to the main purpose of the business activity, which in the past has generated quite a few critical issues, as it was liable to generate double taxation, is eliminated. It is rather stated that the tax residence of companies and legal entities is to be ascertained exclusively on the basis of the following criteria, which are mutually alternative:
  1. The seat of effective management, understood as the place where the continuous and coordinated taking of strategic decisions concerning the company as a whole takes place;
  2. The seat of ordinary management in the main, to be understood as the place where the continuous and coordinated performance of the acts of ordinary management is actually carried out;
  3. The registered office, to be understood as the place where, according to the memorandum of association, the company or entity has the administrative centre of its ordinary business.

Reshoring Incentive 

The limitation of the scope of the “Impatriate” regime seems to be partially balanced by the introduction of an advantageous tax regime for the relocation of economic activities to Italy: the facilitation provides for the non-taxability to the extent of 50 per cent of income deriving from business activities and from the exercise of arts or professions.

The imposition of specific forfeiture rules, as well as the repayment of the tax incentive previously received, in the event the taxpayer does not maintain his residence for five years following his return to Italy, also remains firm for this regime, in parallel with the provisions for Impatriates beneficial tax treatment.

Global minimum tax

Pillar 2, elaborated within the OECD under the impetus of the G20 countries, aims to ensure a level playing field between large multinational corporations and to reduce incentives to shift profits to low-tax jurisdictions through the introduction of common rules aimed at ensuring a minimum taxation of 15 per cent in each of the jurisdictions in which they operate (so-called GloBE rules).

The domestic implementation of the global minimum taxation rules is provided for in Article 3(1)(e) of Delegated Act No. 111/2023. The draft delegated legislative decree, in turn, was drafted in compliance with EU Directive No. 2022/2523, which aims to ensure the implementation of Pillar II in the single market, with entry into force set for 1 January 2024. The transposition into national law of further provisions deriving from international developments may take place through ministerial decrees and, in any case, the interpretation and application of the Italian transposing legislation will be oriented towards compliance with what has been agreed at international level.

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