The Italian Revenue Agency, with Circular No. 20/E of November 4, 2024, provided important clarifications on the tax residency of individuals. These clarifications consider the changes introduced by Legislative Decree No. 209 of 2023.
The new provisions, which came into effect on January 1, 2024, introduce updated criteria for determining tax residency. They align with the latest international standards, strengthening the connection to Italian territory.
Residency Criteria: Changes for Individuals
The Legislative Decree has revised Article 2 of the Consolidated Income Tax Act (TUIR), defining as tax residents in Italy those individuals who, for most of the tax period (183 days in a normal year and 184 in a leap year), meet one of the following requirements:
- They are registered in the register of the resident population (with a presumption of residency that is no longer absolute but relative);
- They have a domicile in Italy, understood as the main place of their personal and family relationships. This definition is no longer based solely on economic factors;
- They are physically present in Italy for most of the year, even if not continuously.
The New Physical Presence Criterion
The most significant novelty concerns the possibility of considering individuals who spend at least 183 days in Italy as tax residents, even if they do not have a stable domicile or registration in Italy.
It is sufficient for the individual to be present in the national territory for extended periods, even if non-consecutive.
This criterion may apply, for example, to individuals in Italy for reasons of:
- Study,
- Vacation, or
- Remote work,
if the total days spent in Italy exceed 183.
Domicile: Rooting Personal and Family Relationships
The concept of domicile takes on a new meaning. It no longer relies on its civil law definition but now focuses on the place where the individual develops their main personal and family relationships.
This criterion is designed to strengthen the connection with Italy for those who have their center of emotional and family relationships here, even if their economic activities are carried out elsewhere. This approach aligns with international practices. Additionally, it aims to make the domicile criterion an effective indicator of tax residency.
Registered Residency and Counterproof
Registration in the register of the resident population remains a valid criterion but no longer represents absolute proof of tax residency.
It has become a relative presumption, allowing the taxpayer to prove the absence of actual residency in Italy. Therefore, citizens registered in the register can provide counterproof showing their tax residency abroad. This provision is particularly useful for those who, while formally registered in Italy, live permanently in another country and do not meet any of the other residency criteria.
Italians in Countries with Privileged Tax Regimes
Another aspect confirmed by the Decree concerns Italian citizens who move to countries or territories with a privileged tax regime. For these individuals, the legal presumption of residency in Italy applies. However, it is still possible to provide counterproof, demonstrating actual residency in the new country.
Tax Residency of Companies and Entities
In addition to the changes for individuals, the Circular includes a section dedicated to the tax residency of companies and entities. For these subjects, the reform replaces the previous criteria with new concepts of “effective place of management” and “main ongoing management.”
The effective place of management identifies the location where strategic decisions are made. On the other hand, ongoing management refers to the location of day-to-day activities. The new rules, starting in 2024, also aim to strengthen the connection of companies with Italian territory based on substantial rather than merely formal criteria.