The Italian Tax Revenue Agency, with the publication of ministerial memorandum no. 20/E of 4 November, reveals the effects of the changes introduced by Legislative Decree 209 of 2023 (Implementation of tax reform in international taxation) regarding the tax residence of individuals, companies and entities that have been operational starting from 2024.
Regarding individuals, the amendments concern article 2 of Italy’s Consolidated Law on Income Tax (TUIR): the ministerial memorandum in question confirms both the four connecting criteria (civil residence, domicile, physical presence and registry registration) and the fact that they function as alternatives of each other; it is furthermore specified that, for the purposes of calculating the major part of the tax period, non-consecutive periods during the year are also taken into consideration, as it is not necessary for the connecting criteria to recur continuously and without interruption.
A new concept of domicile is also introduced, giving precedence to personal and family relationships compared to those which are purely economic. In this regard, the memorandum specifies the necessity to evaluate “in-depth how a person manifests, through concrete actions, the will to maintain an effective link with the Italian territory” such as, for example, maintaining for any which reason a home in Italy, with utilities actively open, where a person goes on weekends and spends periods of absence from work.
As far as legal entities are concerned, the amendments apply to article 73 of Italy’s Consolidated Law on Income Tax (TUIR): replacing the criteria of administrative headquarters is that of actual management, meaning the place where continuous and coordinated strategic decision is assumed which deals with the company or entity as a whole. This also applies to the criterion of regular management, meaning the continuous and coordinated performance regarding acts carried out by the current management of said company or entity.
The new regulation shall be applied starting on 1 January 2024 for companies with a fiscal year coinciding with the calendar year. For companies which do not fall into this category, the regulation shall be applied from the fiscal year following the one in progress as of 29 December 2023.
