With the reply to the tax ruling n. 854 of December 22, 2021, the Italian Revenue Agency clarified that, with regards to the amount of deductions on employment income deriving from stock options and multiannual bonuses granted to employees benefiting from the inpatriates tax relief, taxation is applied on a cash basis to the special tax regime applicable to each tax period in which it is received.
The Italian Revenue Agency stated that the option to extend for a further 5 years the special regime for the “old” inpatriate workers (Article 16 Legislative Decree 147/2015) provided for in Article 5, paragraph 2-bis of DL 34/2019, cannot be exercised before the end of the first five-year period concerning the tax relief. Indeed, in the presence of the requirements provided for by Italian legislation, the option can be exercised from January 1st to June 30 of the year following that of the conclusion of the first five-year period facilitated. In fact, in presence of the requirements provided for by Italian legislation, the option can be exercised from January 1st to June 30 of the year following the one in which the prior period expires.
The Case subject of the Tax Ruling
The case analyzed in the tax ruling concerns the taxation of employment income which derives from share plans and bonuses, both related to the past years employment income and which expires during the five-year period of extension of the tax relief. As required by the legislation, the employee’s income taxation derived from the right of option takes place at the time of exercise of the same regardless of the date of issue and delivery of the bonds applying the so-called cash principle.
In conclusion, by applying the cash principle, employment income which derives from the exercise of stock options and multiannual bonuses is subject to taxation to the inpatriates tax releif applicable for each tax period in which they are received, meaning that taxation shall take place in accordance with the procedure laid down in the year in which income is taxed.