With Ruling No. 81/2025, the Italian Tax Authorities have addressed a case of international taxation regarding the payment of a Long-Term Cash Bonus to an employee who had returned to Italy. The Authorities clarified that taxation must occur in the country where the work activity was effectively carried out during the vesting period, regardless of the beneficiary’s tax residence at the time of payment.
In the case examined, the bonus – although received in 2024 by an individual who was a tax resident in Italy – had accrued in relation to work performed in the United Kingdom between 2021 and 2023, when the employee was also a resident in the UK. The Authorities, citing Article 15 of the Italy-United Kingdom tax treaty as well as Article 23, paragraph 1, letter c) of the Italian Income Tax Code (TUIR), reaffirmed the primacy of the principle of actual territoriality: only the portion attributable to services performed in Italy is taxable in Italy.
This clarification confirms the OECD’s approach regarding workdays and deferred compensation, helping to reshape application practices dealing with bonuses and incentive plans in cross-border contexts.
