By Andrew Lawford
This article is published on: 5th March 2025
Changes and Complications
As many of you may be aware if you read these updates, 2024 brought in changes to the concept of tax residency in Italy. We’ll be looking at the changes from the point of view of an individual but do be aware that they apply also to corporates and other entities.
Towards the end of 2024 (yes, more than 10 months after the new rules came into effect!) the Italian Tax Office, the Agenzia delle Entrate, published a 30-page circular to clarify the evolution of various concepts, which in its turn prompted the publication of various articles and guides on the subject. Let’s dive in and try to make sense of the situation.
First, though, I must preface today’s article with the following disclaimer: this is a complicated area and I am not an expert on the subject, so please make sure that you get proper advice before making decisions that will potentially affect your status as tax resident. Taking advice is really the only way for anyone who finds themselves in a grey area to gain some comfort, because unfortunately the Agenzia will not provide an advance ruling on matters of tax residency: they’ll tell you what they think if and when they decide to check!
I think it is probably useful to have a quick look at how the letter of the law itself has been modified (please note that these are not official translations):
Original Text
For income tax purposes, residents are those persons who, for the majority of the tax period, are enrolled in the registers of the resident population or have their domicile or residence in the territory of the State pursuant to the Civil Code.
New Text
For income tax purposes, residents are those persons who, for the majority of the tax period, including fractions of a day, have their residence pursuant to the Civil Code or domicile in the territory of the State or are present there. For the purposes of applying this provision, domicile means the place where the person’s personal and family relationships primarily develop. Unless proven otherwise, persons enrolled for the majority of the tax period in the registers of the resident population are also presumed to be residents.
The new text may seem somewhat similar to the old text but it is, in fact, an example of my general rule about life in Italy: things will only change to the extent that they can be made more complicated!
Let’s start by looking at the distinction that has been made between the concept of domicile as per the Civil Code and domicile for the purposes of establishing tax residency. The Italian Civil Code defines “domicile” as the place where an individual has established the centre of their business and interests. This may or may not coincide with their place of residency, which is defined as the usual place of abode. So we have a first distinction: domicile, for tax residency, now means where your personal and family relationships primarily develop and not, as before, where your business and interests were based.
Taking a step back, we can say that up until 2024, you would be considered Italian tax resident if any one of the following was true for at least 183 days in any given tax year (which in Italy coincides with the calendar year):
• You were enrolled as a resident in your local comune;
• You had your domicile (civil code definition – i.e. your centre of business and interests) in Italy;
• You were resident (i.e. you had you usual place of abode) in Italy.
From 2024 on, the criteria are as follows, referring always to the minimum period of 183 days in any given tax year:
• You were resident (i.e. you had your usual place of abode) in Italy;
• You had your domicile (new tax code definition – i.e. where your personal and family relationships primarily develop) in Italy;
• You were present in Italy, counting fractions of days as well as whole days;
• You were enrolled as a resident in your local comune – this final criteria now being a rebuttable presumption unlike before.
A few words on what is generally considered to be your usual place of abode: this doesn’t necessarily mean the place where you spend most of your time, although obviously it is reasonable to expect that you would have to spend an appreciable amount of time there.
Subjective factors are particularly important and these relate to your lifestyle and the presence of family and other important social ties.
Another important change is the focus now put on your physical presence in Italy. Before 2024, you could own a property in Italy and spend more than 183 days a year there, yet potentially maintain that your usual place of abode was outside of Italy (think of the situation where you maintain a substantial property in another country where most of your social and financial connections are). This possibility has now been precluded, making counting the days an important task in order to avoid being considered Italian tax resident.
The rebuttable presumption of being enrolled as a resident will depend, according to the circular, on being able to prove that none of the other three criteria were applicable. As always, maintaining clear documentation to support any interpretation you are applying to your particular situation remains of prime importance.
There may of course be situations where an individual appears to be tax resident of two countries and in these cases it will be important to look at any double-tax agreements. These will contain “tie-breaker” rules which often come down to the concept of the individual’s primary place of abode. Again, these are complicated areas and careful planning is required in order to give you confidence in your position. Please don’t hesitate to get in touch if you would like to discuss your situation; I can provide contacts with professionals who can help you to make sense of all the above.
