In its ruling No. 274 of 28 October 2025, the Italian Revenue Agency (Agenzia delle Entrate) clarified that repatriated workers, once they have moved abroad again and the preferential regime has expired, must be subject to ordinary taxation on any bonuses or incentives received thereafter. This applies even if such payments derive from work performed in Italy during the period in which they benefited from the tax relief.
The Case at Issue
In 2021, an Italian company hired three employees from abroad who transferred their tax residence to Italy and accessed the preferential repatriated workers’ regime for the tax years 2021–2024.
During that period, the company set up two deferred incentive schemes:
- Long Term Incentive Plan (LTIP), granted in 2022 and maturing in 2025;
- Deferred Bonus Plan, granted in 2023 and also maturing in 2025.
In 2024, however, the employees terminated their employment and transferred their tax residence to Greece. The company, acting as withholding agent, asked whether the remuneration arising from the two plans—although received after moving abroad—could still benefit from the repatriated workers’ regime, as these payments related to work performed in Italy while the employees were tax resident there.
According to the company’s view, the territorial nature of employment income, as established by Articles 3 and 23(1)(c) of the Italian Income Tax Code (TUIR), would allow the continued application of the tax relief, since such income should be considered as “produced” in Italy, regardless of when or where it is actually received.
The company also referred to the Italy–Greece Double Taxation Convention (Law No. 445/1989) and to Circular No. 17/E of 2017 to argue that the preferential regime should apply to income connected with work carried out in Italy, even if paid after the loss of Italian tax residence.
The Revenue Agency’s Response
In its response, the Italian Revenue Agency first recalled that the special repatriated workers’ regime (please refer to our dedicated article), regulated by Article 16 of Legislative Decree No. 147 of 14 September 2015, applies exclusively to individuals who transfer their tax residence to Italy and derive employment (or equivalent), self-employment, or sole proprietorship business income there.
With regard to the deferred incentive schemes (LTIP and Deferred Bonus Plan), the Agency clarified that such payments qualify as employment income under Article 49 of the TUIR. They are therefore deemed to be received when the right to payment becomes certain and determinable, i.e. in 2025, when the employees were tax resident in Greece.
In this case, the Agency based its reasoning on the Double Taxation Convention between Italy and Greece (Athens, 3 September 1987, ratified by Law No. 445/1989). This treaty provides, as a general rule, that employment income is taxable in the employee’s State of residence (Greece), with an exception allowing taxation also in the State where the employment is actually carried out (Italy).
To support this interpretation, the Agency referred to the OECD Commentary on Article 15 of the Model Convention, according to which “remuneration” includes benefits in kind, such as stock options or cash bonuses. Such payments, if linked to work performed in a given State, are taxable in that State (the source State) even if paid at a later time—regardless of the date of actual receipt.
On this basis, Ruling No. 81 of 25 March 2025, subsequently amended by Ruling No. 199 of 4 August 2025, represented a change in practice. The Agency clarified that bonuses or incentives accrued in connection with work performed in one Contracting State must also be subject to taxation in that State, even if paid in a later tax period when the employee is resident in the other Contracting State.
Specifically, while the March ruling had confirmed exclusive taxation in the source State, the August response clarified that such bonuses or incentives are taxable both in the source State and in the State of residence—providing for concurrent taxation, with a foreign tax credit to be claimed in the State of residence to avoid double taxation.
Subsequently, in considering whether the preferential repatriated workers’ regime under Article 16 of Legislative Decree No. 147/2015 could apply to such income, the Agency referred to Circular No. 33/E of 28 December 2020, which clarified that, for employment income, the cash principle applies—meaning income is taxable at the time of receipt, whether in cash or in kind.
As a result, a bonus received after the expiry of the preferential regime cannot benefit from the tax relief but is fully subject to ordinary taxation rules.
Applying these principles to the case at hand, the Agency concluded that, since the recipients were no longer tax resident in Italy when the payments were received, the amounts cannot fall under the repatriated workers’ regime. These sums must therefore be taxed according to the ordinary rules applicable to non-residents, based on the territoriality principle set out in Article 23 of the TUIR.
Conclusions
Ruling No. 274/2025 confirms that the tax benefit does not extend to income received after the loss of Italian tax residence, even if the income relates to employment carried out during the preferential period.
