1.Allowances for internships programs do not benefit from the in-bound workers regime
According to ruling no. 152 issued by the Italian Tax Authorities on 15 July 2024, the benefits of the in-bound workers regime provided for by Art. 16 of Legislative Decree 147/2015 cannot be enjoyed by those who attend a master’s degree in business administration (MBA) in Italy and who, in this context, carry out a training internship receiving a participation allowance.
Indeed, the above mentioned regime only applies to income derived from employment activities and it does not cover allowances received for participating into internship programs (as the latter do not qualify as employment income under Italian law).
2.The in-bound workers regime does not apply to income subject to the separate taxation regime
With its statement of practice no. 40 of 23 July 2024, the Italian Tax Authorities have clarified that the in-bound workers regime may also apply with respect to income derived by consensual termination agreements of an employment relationship (severance payments or settlement amounts).
Pursuant to Italian domestic law, taxes on these sums (up to 1,000,000.00 Euros) might be calculated pursuant to a beneficial regime provided for by Art. 17 and 19 of the TUIR, the so called separate taxation regime. If such regime applies, as these amounts would not be subject to an ordinary taxation and they do not concur to determine the overall income of the relevant taxpayer they do not fall within the scope of the in-bound workers regime.
However, if more favourable, the taxpayer may decide not to apply the separate taxation regime and have the amount received concurring to the determination of its overall tax base. In such cases, the amounts may benefit from the in-bound workers regime.
In any case, the in-bound workers regime applies for income higher than 1,000,000 Euros, as the separate taxation regimes shall not apply to those.
3.After renouncing the res non-dom regime a taxpayer may apply the in-bound workers one
With its ruling no. 159 of 22 July 2024, the Italian Tax Authorities clarified that an Italian citizen, who returned to Italy from the United States in 2019 and initially benefitted from the so-called Italian res non-dom regime (Art. 24-bis of the TUIR) may renounce to such regime and, for the following fiscal years, benefit from the in-bound-workers regime.
This, also with the possibility of further extending (if and where the relevant conditions are met) the in-bound workers regime for additional five fiscal years (pursuant to Art. 5(2-bis) of Legislative Decree n. 34/2019).
Indeed, even if Italian domestic law actually establishes that the Italian res non-dom regime and the in-bound workers regime are alternative, a taxpayer may still apply one of the other in different fiscal years (as also highlighted by the Circular Letter no. 17/2017).
4.The new criteria to establish Italian tax residence apply as of 2024
With its decision no. 19843 dated 18 July 2024, the Italian Supreme Court established that the new Article 2 of the TUIR (which modifies the criteria for establishing the residence of individuals under Italian domestic tax law) applies as of 1 January 2024 and not also to the years prior to that date.
In the case which was analyzed by the Italian Supreme Court (which was related to an individual claiming he was tax resident in the Principality of Monaco for the 2006-2010 fiscal years), on the contrary, the provisions of Art. 2 of the TUIR as it reads until 2023 have to be applied.
As a consequence of that, the provisions and definition of domicile provided for by Art. 43 of the Italian Civil Code (leading to the prevalence of economic ties over personal ones, and not the newly introduced one, which provides for the prevalence of personal ties) should be applied.
5.The new Italian tax rules to establish residence are in line with the Italian treaty network
According to the Italian Supreme Court (decision no. 20002 of 19 July 2024), the tax residence of a company can be established in the place where it is managed, coinciding with the place of effective management, i.e. the place where the management activities of the entity are actually carried out.
The criterion for establishing the Italian tax residence of entities, now expressly introduced in the new Article 73(3) of the TUIR, is therefore in continuity with international best practice and with the Tax Treaties entered into by Italy.
6.Assonime compares the new and the old criteria to establish Italian tax residence for entities
In its Circular letter no. 15 of 30 July 2024, Assonime analyzes the new criteria for establishing tax residence for companies and entities which were introduced by Art. 2 of Legislative Decree 209/2023, which apply for fiscal years from 2024 on.
In particular, Assonime examines the definition of place of effective management and main ordinary management of the entity, in comparison with the previous existing criteria.
7.The Italian Chartered Accountants Association on outbound interest withholdings
According to the AIDC (Italian Chartered Accountants Association) rule of conduct no. 225/2024, the withholding tax on interest paid to companies resident in other Member States of the European Union must be applied on the amount calculated net of expenses directly related to the loan incurred by the person who provided it (e.g. expenses for legal advices, investigations on the reliability of the borrower, financial costs incurred etc.).
It is therefore possible to request a refund of the difference
between the withholdings applied to the gross amount of interest and the withholdings calculated on the net amount.
8.The Italian Tax Authorities provide clarifications on the pex regime for non-residents
With the Circular Letter no. 17 of 29 July 2024, the Italian Tax Authorities has provided some clarifications on the participation exemption regime for non-resident companies and commercial entities (Article 68(2-bis) of the TUIR).
The main clarifications concern:
• confirmation that the regime also applies where the foreign company or entity has an Italian permanent establishment, but the shareholding transferred is not effectively connected to that permanent establishment;
• the transferor tax status, i.e. it has to be liable to corporate income tax in its State of residence and must therefore not be considered as tax transparent;
• how to assess if the participation sold might be considered as registered in the financial accounts as a financial fixed asset (which varies de pending on the accounting standards applied by the transferor);
• the date after which the new rules applies, i.e for the sale carried out as of 1 January 2024.
9.Loss-making companies might be used as comparables for TP purposes
According to the Italian Supreme Court (decision no. 19512 of 16 July 2024), it is not in line with the OECD Guidelines to determine the transfer pricing to be applied to call centre services provided by an Italian subsidiary to a Dutch entity of the same group by excluding comparable companies just because they have recorded losses.
Indeed, the OECD Guidelines do not provide for the elimination of loss-making companies or companies with reduced or no book value; on the contrary, the OECD Guidelines allows for the exclusion of companies experiencing very peculiar situations (start-up phase, bankruptcy, etc.).
10.Italy has implemented its (Qualified) Domestic Top-up Tax for Pillar Two purposes
The Ministerial Decree of 1 July 2024 contains the implementing provisions of the domestic minimum top-up tax (Art. 18 of Legislative Decree 209/2023): such tax applies if the blended effective tax rate of companies part of a MNE group falling within the scope of the Pillar Two legislation is lower than 15%.
In particular, the Ministerial Decree provides:
• the way of calculating the top-up tax, which mostly resembles the OECD Model Rules;
• that the top-up tax is calculated regardless to the percentage of Ownership Interest that the group has in the companies located in Italy;
• that the Italian entities are free to allocate the tax burden among them as they prefer.
11.VAT paid in Italy by an EU VAT person migh be recovered within certain limits
Through its ruling no. 137 of 11 July 2024, the Italian Tax Authorities have examined the ways in which a person established in another Member State might recover VAT paid in Italy by, namely:
• by direct identification (or appointment of a tax representative), with an Italian VAT position;
• by means of a refund request (through the “electronic portal”) by the 30th September following the year in which the purchases were made.
In the case analyzed by the ruling, the non-resident person had made purchases of goods and services in Italy and reverse charge transactions without having an Italian VAT number: accordingly, as the deadline for the refund application had expired, the non-resident person could not recover VAT paid in Italy.
12.Transactions between persons party to the same VAT group are never taxable
In its decision on the case C-184/23 of 11 July 2024, the European Court of Justice have established that the supply of services carried out between two persons belonging to the same VAT Group are not VATable transactions, even when the recipient of the service is a person who cannot deduct input VAT paid.
The case examined concerned services provided by a company to a German foundation governed by public law which carried out both activities subject to VAT and activities not subject to VAT (in its capacity as a public body).
According to the Court, a service provided between two members of the same group do not constitute VAT taxable transactions; moreover, the right of deduction belongs to the Group itself and not to its members.
13.Professional secrecy in application of the DAC 6 Directive
The European Court of Justice, in its decision related to the case C-623/22 of 29 July 2024, has established that, among the professionals “intermediaries”, only lawyers can rely on professional secrecy to claim the application of the exemption from the reporting obligations referred to in Art. 8-bis ter(5) of Directive 2011/16/EU (introduced by the DAC 6 Directive).
Accordingly, no exemption from the obligation to disclose information relating to cross-border aggressive planning arrangements applies for other kind of intermediaries (e.g. tax advisors).
