1.Technical services under tax treaties concluded with Tanzania and Uganda
With its ruling reply no. 120 of 3 June 2024, the Italian Tax Authorities have clarified that the following activities have, respectively, the nature of technical services (under the tax treaty concluded between Italy and Uganda) or “managerial fees” (under the Italy-Tanzania tax treaty):
• payments for services that requires the exploitation of technical knowledge for consultancy activities, such as the preparation of projects in industrial plant engineering;
• remunerations of any kind paid for industrial or commercial consultations or activities of a managerial or technical nature.
If the activities performed meet the requirements above, the tax treaties mentioned above give shared taxing rights to the source State, being Uganda or Tanzania: where the withholdings suffered in these Countries are final they can be off-set against Italian taxes according to Art. 165 of the TUIR.
2.Tax treaty treatment of swiss AVS and LLP pensions
With the ruling reply no. 125 of 3 June 2024, the Italian Tax Authorities have analysed the tax treatment of sums paid to an Italian tax resident by the Swiss AVS and LPP pension funds.
According to the tax treaty between Italy and Switzerland, such remunerations fall within the scope of Articles 18 (for private sector pensions) and 21 (for pensions paid for con¬tri¬bu¬tions made during self-employment or a voluntary con¬tribution not linked to an employment activity) of such treaty.
Both provisions grant exclusive taxing rights to the taxpayer’s residence State.
Therefore, the remunerations derived from AVS and LPP pensions are taxable exclusively in Italy if the recipient resides therein, with the application of the 5% substitute tax.
3.Capital gain on shares sale is taxable only by the residence State under tax treaties
In their ruling reply no. 123 of 3 June 2023, the Italian Tax Authorities have maintained that a capital gain realized by a US resident through the transfer of shares in an Italian resident company is not taxable in Italy, if the Italy-USA treaty applies. In these cases, indeed, the treaty provides for the exclusive right to tax in favour of the residence State (in the case at stake, the United States).
4.Taxation of the income derived by airplanes pilot under tax treaty law
The ruling no. 121 of 3 June 2024 examines the tax treatment of the amounts received by the Special Fund for Air Transport from a pilot residing in the Netherlands, who works for a Dutch company with a permanent establishment in Italy.
According to Italian domestic law, these kinds of payments derived by non-Italian residents are taxable in Italy if the activities are performed within the territory of the Italian State.
According to Article 15(3) of the Italy-Netherlands tax treaty, remuneration received as a compensation for employment activities carried out on board aircrafts used in international traffic shall be taxed only in the residence State.
Therefore, the income received by the pilot residing in the Netherlands with respect to international traffic activities carried out for a company having its place of effective management in that State may only be taxed in the Netherlands.
On the other hand, the portion of income received for services performed on the ground in Italy or on Italian national routes is subject to the tax sharing clause contained in Article 15(1) of the Italy-Netherlands treaty.
5.The Italian Ministry of Finance has signed the Protocol to amend the Italy-Switzerland frontier workers agreement
With it press release of 6 June 2024, the Italian Ministry of Finance has announced the signing of the Amendment Protocol to the Agreement of 23.12.2020 with Switzerland related to frontier workers.
The Protocol confirms that a worker is considered to be a frontier worker even if he/she carries out his/her employment activities at his/her home in his/her state of residence, up to a maximum of 25% of the time worked during the calendar year.
This applies to both “new” frontier workers (to which a tax sharing clause applies) and frontier workers falling within the transitional regime referred to in Art. 9 of the Italy-Switzerland Agreement of 23.12.2020 (with exclusive taxation in the state where work is carried out).
In order to become finally binding, the Agreement must be ratified by both States.
6.Inerhitance taxes paid abroad increase the tax value of the assets
According to the ruling reply no. 132 of 12 June 2024, even the inheritance tax paid abroad increases the tax value of the shares received by inheritance.
In the case addressed by the tax authorities, the recipient of a legacy consisting of shares in a French listed company can add to the value of the shares, to be declared in Italy for inheritance purposes, inheritance taxes paid in France and take it into such higher value in case of sale of the shares pursuant to Art. 68(6) of the TUIR.
7.Social contributions paid abroad based on conventional wages are deductible in Italy
The Italian Supreme Court, with its decision no. 17747 of 27 July 2024, established that contributions paid to foreign pension systems based on the conventional wages determined based on the provisions of Art. 51(8-bis) of the TUIR are deductible in Italy.
Art. 51(8-bis) of the TUIR provides for a conventional determination of certain income from employment provided abroad on a continuous basis and as the exclusive object of the relationship by employees who are present in the foreign State for a period longer than 183 days over twelve months. The conventional remuneration is defined annually with a decree of the Minister of Labour and Social Security.
8.The inter-company provision of services does not necessary constitute a VAT permanent establishment
In its decision on case C-533/22 of 13 June 2024, the European Court of Justice stated that, for VAT purposes, the mere fact that a company in a Member State receives services from another company belonging to the same group or that the two entities are bound by a service contract does not constitute a permanent establishment in that State.
For a permanent establishment to exist, it is also necessary that the human and technical resources at the disposal of the company in the other Member State are distinct from those through which such services are provided.
9.The OECD published a new guidance on Pillar One
On 17 June 2024 the OECD/G20 Inclusive Framework on BEPS published a document containing additional elements to the report on Amount B of Pillar One.
In addition, the OECD has published an additional guidance on Pillar Two regarding, inter alia, allocation of cross-border current and deferred taxes and the treatment of securitization vehicles under GloBE Rules.
