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Bilateral Double Taxation Conventions: the appropriate classification of personal income for treaty application purposes

The Revenue Agency confirms the remuneration of a German citizen, who is not an Italian fiscal resident and carried out an internship at Italian administrations, must exclusively be taxed in Italy.

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The answer N.120 dated 20/01/2023 of the Italian Tax Revenue Agency specified that the remuneration received by an Italian citizen, tax-resident in Germany, for his internship with an Italian Government/Local Government body should be subject to taxation in Italy only.

The income received by a non-tax-resident working in Italy for an Italian Public entity falls in fact within the scope defined in Article 19, paragraph 1, A), of the bilateral Double Taxation Treaty between Italy and Germany; the amounts received should therefore be taxed only in Italy, being Italy the State of origin of such income and cannot be refunded.

Advice of the Revenue Agency

The advice of the Tax Revenue Agency provides a further opportunity to specify the most appropriate method to follow to apply correctly the relevant Double Taxation Treaties; this is most relevant when identifying the category of income and its tax treatment.

To this end, the Tax Revenue Agency refers to the guidelines provided in Art 3 of the above-mentioned Double Taxation Treaty between Italy and Germany, which in turn refers to the OECD Treaty Model most widely used in the international conventions entered in by Italy. Art 3, Paragraph 2 actually provides for the application of the following general principle:

“As regards the application of the Convention by a Contracting State any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that State concerning the taxes to which the Convention applies.”

The Tax Agency than defines the domestic rules and regulation applicable to the income under consideration and classifies the income from scholarship among those equalized to employment income, as per Art 50, Patragraph1, under C, TUIR (Presidential Decree 917/1986). Art.3, Paragraph1 of TUIR also confirms the taxability of the said income on the Italian territory, specifying that, as far as non-tax-resident citizens are concerned, only incomes originated on the Italian territory are taxable in the country. Furthermore, Art23, Paragraph2, under b) of TUIR establishes a strict presumption by which any salary/wage paid by the State or State Entities is considered as produced on the Italian territory and, therefore, taxable in the country.

Check of provisions foreseen by Double Taxation Treaties

Having established the correct nature of the income according to the Italian domestic law, we proceed checking and applying the provisions foreseen by the Double Taxation Treaties in respect of the income to be considered.

It follows that, being the scholarship income equalized to an employment income (i.e. salary), in principle it may fall within the scope of application of Art 15 of the Convention between Germany and Italy, which refers to salaries, wages and similar remunerations.

Again, Art. 19, Paragraph 1, sub a) of the same Convention also applies, with reference to “remuneration paid by a contracting State or a local authority to an individual in respect of services rendered to that State or local authority “.

In the case analyzed by the Tax Revenue Agency the special provision foreseen by Art 19 prevails over the general rule provided by Art 15, since the following conditions of Art 19 are jointly met:

  • Remuneration is paid by a Contracting State, a “Land” or a political subdivision or a local authority thereof
  • Remuneration is paid to an individual in respect of services rendered to that State, the “Land” or subdivision or authority.

Conventional rules prevail over national ones

Finally, the Tax Revenue Agency confirms that Conventional rules prevail over national ones. In this respect, according to Article 75, Presidential Decree N.600/1973, when applying the rules on income taxes,

Conventional rules prevail on national ones, in case of conflict between the two. We also recall the exception envisaged by Art.169, TUIR, which restricts the scope of international Conventions against Double Taxation entered in by Italy, whenever the application of the domestic law (TUIR) is more favourable to the taxpayer.

Final considerations

The Agency’s answer 120/2023, therefore, reaffirm the key importance of correctly defining the source of income within the provisions envisaged by the relevant international Convention, to apply the tax treatment envisaged by the prevailing rules.

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Regulatory Framework

Art. 50 of TUIR


Art. 3 of TUIR


Art. 23 of TUIR


Art.75 of D.P.R. n. 600/73


Convention between Italy and Germany on preventing double taxation (November 24, 1992, n.459)


Answer n.120 of 20/01/2023


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