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Ruling No. 15/2025 of the Italian Revenue Agency addresses a request for legal guidance submitted by an association concerning the identification of income produced in Italy by pilots operating international air routes.
The case
The applicant association requested legal guidance from the tax authorities on two issues relating to the calculation of income produced in Italy by pilots during international routes that cross, even only partially, Italian territory:
- the interpretation of the expression “employment activity carried out in the territory of the State” (Article 23(1)(c) of the TUIR) and of the expression “income produced in Italy” (Article 16 of Legislative Decree No. 147/2015);
- the information duties of the withholding agent with regard to the correct completion of the Single Certification (Certificazione Unica – CU) and the obligations to be fulfilled to ensure the correct taxation of income received by non-resident individuals.
Position put forward by the taxpayer
The applicant takes the view that income generated during international flights merely overflying Italian airspace is not taxable in Italy. According to this position, tax territoriality would arise exclusively with respect to income derived from domestic flights, i.e. flights departing from and arriving in Italy.
As regards information duties, the applicant argues that no provision requires the withholding agent to provide the employee with data or explanations on how to complete the CU.
Furthermore, according to the association, where the employee formally notifies the withholding agent of his or her residence abroad or of meeting the requirements to benefit from the impatriate workers regime (Legislative Decree No. 147/2015), the employer would not be entitled to tax the entire amount paid.
Reply of the Italian Revenue Agency
The tax authorities provide a detailed response, addressing both questions raised by the applicant association.
Question 1: interpretative issues
The Revenue Agency first addresses the interpretative doubts raised.
Under the principle of territoriality—set out in Article 3(1) of the TUIR—personal income tax applies, for non-resident individuals, exclusively to income produced in the territory of the State.
In the present case, the relevant category is employment income. Article 23(1)(c) of the TUIR provides that income deriving from employment carried out in the territory of the State is taxable in Italy.
As also argued by the applicant, the Revenue Agency confirms that:
- income produced by pilots on domestic flights is taxable in Italy;
- with regard to international flights, it is necessary to identify the portion of the employment activity carried out within Italian territory, including its airspace.
Accordingly, Italy exercises its taxing power over income attributable to flight hours performed within Italian airspace, while it may not tax income relating to activities carried out beyond its borders.
Application of the impatriate workers regime
With reference to the special regime for impatriate workers under Article 16 of Legislative Decree No. 147/2015, the tax relief applies only to income produced in the territory of the State, excluding from the benefit income derived from activities carried out outside Italy.
The Revenue Agency further reiterates that, in order to access the impatriate regime, employees must submit a formal request to their employer. The benefit applies from the pay period following the request and, at year-end adjustment, may be recognised retroactively from the date of hiring. The employer therefore applies withholding tax on the reduced taxable base in accordance with the percentage of taxable income provided for by the regime, with tax deductions recalculated on the reduced taxable amount.
Where the employer has been unable to apply the benefit directly, the taxpayer—provided that the statutory requirements are met—may still claim it in the annual tax return by reporting the income already reduced.
Question 2: obligations of the withholding agent
The withholding agent (in this case, the airline company) is required to comply with the obligations set out in Article 23(1) of Presidential Decree No. 600/1973, namely:
- applying withholding tax at source for IRPEF on amounts paid as employment income;
- exercising the right of recourse (rivalsa).
Where the withholding tax cannot be offset against amounts paid in cash, the substituted taxpayer must pay the withholding agent an amount equal to the tax due.
Pursuant to Article 14 of Legislative Decree No. 471/1997, where the withholding agent fails, in whole or in part, to apply the required withholding tax, an administrative penalty equal to 20% of the tax not withheld applies.
Finally, the withholding agent must:
- perform the year-end adjustment by 28 February of the following year or upon termination of the employment relationship (Article 23(3) of Presidential Decree No. 600/1973);
- issue the Single Certification to the employee and transmit it electronically to the Revenue Agency.
Conclusions
With this ruling, the Revenue Agency provides important clarifications, both interpretative and operational, on the taxation of income earned by pilots engaged in transnational flights. In particular, it is clarified that:
- for non-resident pilots, the income taxable in Italy is only that attributable to flight hours within Italian airspace;
- withholding agents must correctly apply withholding tax, carry out year-end adjustments and comply with reporting obligations;
- there are no legal grounds to disapply penalties relating to any past irregularities, as the alleged regulatory uncertainty is not considered to exist.
