After reviewing the domestic law and the relevant Tax Treaty , the Tax Authorities concluded that, in a nutshell, it is necessary to take account of “the place where the employee is physically present when he carries out the activities for which he is remunerated“, irrespective of whether the results of the activities are used in a place other than that of the employer’s residence.
The document is interesting from various perspectives and touches on areas where we have previously commented.
Firstly, the practical aspects connected to the mode of working are reviewed, and both fiscal and employment law must be considered. Moreover, the “Covid effect” cannot be used as a justification for any delays that might affect either the employer or the employees tax compliance. On this point, as has already been mentioned, Italy, unlike other States, has not put into place ad hoc initiatives and guidelines put forward in the form of the parliamentary response of autumn 2020 remain in force.
Secondly, the response opens the way to foreign employers wishing to take advantage of the advantageous taxation introduced by the Italian authorities to attract talent to the country.
For example, as we have detailed in previous articles that can be found on our website, under certain conditions the personal income tax burden can be significantly reduced thanks to a reduction in the tax base of 70% or 90%, depending on geographical location.
Last but not least, the de facto activity carried out by the employee in Italy should be taken into consideration, in order to verify and/or avert the risk that the foreign employer might establish a permanent base in Italy. It would therefore be advisable to verify the prerequisites and relevant provisions provided for in both internal regulations and by Tax Treaty concerning not only the taxation of the employee’s income (usually in Italy), but also the requirements aimed at establishing (or relocating) secondary offices or permanent offices in Italy.
Our Firm has a dedicated department where our professionals deal with private clients in all areas of immigration and relocation for talents, foreign pensioners and those clients with high capital potential (UHNWI) who opt for their non-Italian sourced income to be taxed in Italy through the application of a flat substitutive tax, at a fixed amount of 100,000 euros.
We remain available for any further information you may require.
