With recent Ruling Requests in early 2023, the Italian Tax Authorities go back to investigate a rather relevant topic: the transfer of individuals residence during the year.

From a domestic perspective, tax residency of the taxpayer should be assessed based on specific requirements. 

In more detail, pursuant to article 2 of Presidential Decree No. 917/1986 (“TUIR”), a person is considered to be resident in Italy for income tax purposes, if for the majority of the year (at least 183 days a year, 184 for leap year):

  • is registered with the National Registry of the Resident Population in Italy, or
  • has his/her place of residence (i.e., habitual abode) or habitual residence (i.e., principal center of business, economic and social interests) in Italy.

If one of the above conditions is met for a given tax year (which for the individual taxpayers coincides with the calendar year) the individual qualifies as a tax resident for Italian tax purposes with respect to such tax year.

It should be pointed out that the absence of domestic tax law regulating the “starting point” of the acquisition or loss of residence during the year shall entail per se that the taxpayer moving abroad will continue to be taxed in Italy on income wherever produced from the time of the transfer until the end of the year (i.e. worldwide taxation principle) if it has fulfilled the residency requirements for most of the tax period (namely at least 183 days a year, 184 for leap year). 

In such a case the issue that may arise (including the double taxation of the same income upon the taxpayer in both the Country of his/her departure and in the Country of his/her arrival) may be solved by international double taxation conventions. 

In this respect, paragraph 1 of article 4 of the OECD Model refers to the domestic legislation of individual States for the definition of tax residency while paragraph 2 of the same article provides for a set of criteria called tie-breaker rules to be applied in hierarchical order for the purposes of solving possible residency conflicts.

More precisely, according to the above-mentioned paragraph 2: "Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:

  1. he shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests);
  2. if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode;
  3. if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;
  4. if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.”.

In this regard, it is also worth noting that the OECD Commentary to article 4 (see paragraph 10) suggests the splitting of the tax period as a solution to the problem of dual residence in the case of a transfer during the year. 

The option of splitting the tax period into two is only recognized in the International Double Taxation Agreements entered into by Italy with Switzerland (article 4, the Italy Switzerland Double Taxation Agreement, signed in Rome on 9 March 1976 and ratified by Law No. 943/1978) and with Germany (Section 3 of the Italy Germany Double Taxation Agreement, signed in Bonn on 18 October 1989 and ratified by Law No. 459/1992).

In recent months, a number of Ruling Requests dealing with the application of the split year rule have been issued by the Italian Tax Authorities.

On the Swiss side we highlight the following.

The case analyzed in Ruling Request No. 98 of 19 January 2023 concerns a taxpayer who transferred his residence to Switzerland as of mid-June 2020 (from April 2020 until his move to Switzerland, the subject had claimed to work for a Swiss University in remote working mode from Italy).

The taxpayer, once transferred to Switzerland had entered immediately into a rental agreement and had registered with the Swiss immigration office, which means that the taxpayer could certify that he had been resident in Switzerland since mid-June 2020 and had therefore been resident in the Swiss Confederation for more than 183 days in the same tax year.

Taxpayer had however started the procedure to change residence with registration with the Register of Italians living abroad (“AIRE”) at the end of July and, therefore, had been also resident in Italy for more than 183 days in the 2020 tax year. 

Considering the dual residence issue, the Italian Tax Authorities have stated that, according to the information provided, as a result of the application of the split year rule included in the Treaty stipulated between Italy and Switzerland, the individual had to be considered resident in Italy until the date of transfer of his domicile from Italy to Switzerland while he had to be considered resident in Switzerland from the day following his transfer of domicile from Italy to Switzerland[1].

Furthermore, in the context of the Ruling under consideration the Italian Tax Authorities have also addressed another significant issue related to the conventional wages regime (“retribuzioni convenzionali”) ruled by article 51, paragraph 8-bis of TUIR.

In this regard it has been clarified that the employment income cannot be taxed on the basis of the conventional wages regime if the type of activity carried out is not included in the detailed tables annexed to the Italian decree that determines these specific remunerations for employees working abroad[2].

At first glance, one might conclude that since the activity was carried out in Italy in remote working mode, the conventional wages regime could not apply (indeed the conventional wages regime is exclusively reserved to the work performed abroad).

However, although not expressly mentioned in the Ruling Request, during COVID-19  Switzerland signed an agreement with Italy, under which, inter alia, the working activity carried out remotely in Italy by a frontier employee resident in Italy and normally working in Switzerland was considered to be carried out in Switzerland for the purposes of the application of article 1 of the Agreement of 3 October 1974 and article 15 (paragraphs 1 and 4) of the Double Tax Treaty stipulated between Italy and Switzerland[3].

Even in other recent cases the Italian Tax Authorities have followed a similar approach on the matter of split year.

The second case concerns a taxpayer which worked in Switzerland until 31 May 2022 and which, in the same day, moved his entire center of his interests to Italy in order to start an employee activity in June 2022 (see Ruling Request No. 54 of 17 January 2023).

In this instance, the Italian Tax Authorities have recognized the right to exclusively tax in Switzerland the income produced there until 31 May 2022 and the exclusive taxation in Italy of the income produced in our Country from 1 June 2022.

The split year rule has been also addressed in another recent interpretation of the Italian Tax Authorities (see Ruling Request No. 73 of 18 January 2023).

It is worth noting that the above interpretation provided by the Revenue Agency also confirms that the conventional provision prevails over the domestic legislation’s rule whereby Italian citizens who have been removed from the National Registry of the Resident Population and have emigrated to a Country or Territory with privileged tax status (as identified by Decree of the Ministry of Finance of 4 May 1999, as subsequently amended and supplemented[4]), are also deemed to be resident in Italy.

As for Germany, in Ruling Request No. 170 of 26 January 2023 the Italian Revenue Agency analyzes the territoriality criteria in relation to income received by an employee of a German Company who had transferred abroad during the year.

The latter had moved to Germany by registering with AIRE in August and had been employed by a German Company in September (of the same year).

The Italian Tax Authorities draw attention to the fact that the dual residence conflict should be solved according to the split year clause laid down by Protocol (Point. No. 3) of the Convention between the Federal Republic of Germany and the Republic of Italy[5] .

For these purposes, the date of the change of domicile has to be qualified as a “cut-off” date which entails, in principle, that:

  • Italy may exercise its right to tax until the date of the change of domicile;
  • Germany can claim its taxing rights from the following day.

Hence, the employment income carried out in Germany from September onwards is subject to taxation in Germany according to the provisions laid down by article 15 paragraph 1 of the Double Tax Treaty between Italy and Germany, which provides that salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State (which is not the case).

Employment income arising from working activities performed in Germany should not therefore be taxed in Italy. 

Edited by Giulia Sorci & Lodovico Bolis


[1] Therefore not being relevant for the purposes of the split year rule the registration with AIRE by the taxpayer. 

[2] The tables set out, for each businesses sector, and starting from the payable period from 1 January and until 31 December of each year, the conventional wages to be taken as the basis for the calculation.

[3] The application of the conventional wages regime is also addressed in another recent document (see Ruling Request No. 50 of 17 January 2023). The case concerned an individual resident in Italy in 2021  who, in June 2021, started working remotely for an Irish company. It is only in July 2021 that the taxpayer moved to Ireland, and only from August 2021 that the taxpayer's entire family registered with AIRE. The taxpayer stated that these timing 'slippages' in the final transfer of residence to Ireland (personal and family as a whole) were solely due to the pandemic restrictions. The Revenue Agency did not recognize these findings, so that the taxpayer had to be considered tax resident in Italy for the whole year. Consequently, income generated in Ireland had to be subject to taxation in both countries with a tax credit in Italy for taxes paid abroad. In this circumstance, moreover, the benefit of the conventional wages regime was not granted because the taxpayer, during the year of reference, did not exceed one of the requirements laid down by the rule for access to the relief. In fact, the latter did not exceed 182 days of stay abroad.

[4] Please note however that, with the political declaration signed on 20 April 2023 by Federal Councilor Karin Keller-Sutter and Finance Minister Giancarlo Giorgetti concerning the regularization of a number of pending tax issues between the two Countries, Italy undertook to remove the Swiss Confederation from the list of States or Territories with a privileged tax regime contained in the Ministerial Decree of 4 May 1999 (so-called ”black-list”).

[5] Point No. 3 of the Protocol provides that “If an individual is deemed a resident of a Contracting State in the sense of Article 4 for only part of the year and a resident of the Contracting State for the remainder of that year (change of residence), his tax liability in the first-mentioned State, as far as it is determined by his residence, shall cease at the end of the day on which the change of residence takes place. His tax liability in the other State as far as it is determined by his residence, shall begin on the day following that of the change of residence”.