The Italian Revenue Agency, in its reply to ruling No. 429 published on 16 August 2022, ruled that a person registered with AIRE (Register of Italian population resident abroad) who intends to carry out an activity as a freelance professional in Italy may open a VAT number indicating as tax domicile the place where such activity is carried out.
The definitions of taxable person and tax residency
To justify its ruling, the Italian Revenue Agency starts from two key definitions:
- Taxable person: any person who independently carries out, in any place, an economic activity, irrespective of the purpose and results of that activity;
- Economic activity: any activity of production, marketing or provision of services, including mining, agricultural activities, and activities of the liberal professions or the like.
According to the regulations in force in Italy, a person is considered to be a VAT taxable subject when performing relevant supplies of goods or services in the territory of the State in the exercise of trade, business or profession.
More specifically, the Revenue Agency points out that, in accordance with Article 7 c. 1, lett. d) of Presidential Decree 633/72, a person providing professional services is considered a taxable person in Italy if:
- is domiciled in Italy, even if resident abroad;
- is resident in Italy, without being domiciled abroad;
- has a permanent establishment in Italy, even if domiciled or resident abroad.
The Agency, recalling Circular No. 304 of 2 December 1997, underlines the difference between the concept of residence and domicile, beign the first “determined by the voluntary habitual abode of a person in a given place“, whereas domicile constitutes a legal situation, characterised by the intention to establish the centre of one’s affairs in a given place, regardless of the actual presence in that place.
The case analysed by the Revenue Agency with reply no. 429
The applicant is an Italian citizen resident in the United Kingdom and registered with the Registry of Italians Resident Abroad (AIRE) who wishes to proceed with the opening of a VAT number in Italy.
The taxpayer does not have a foreign VAT number and does not carry out any entrepreneurial or professional activity in the country where she resides. She would like to work as a self-employed person in Italy and turned to the Italian Revenue Agency for instructions on how to do this, particularly with regard to tax domicile.
The intention of the taxpayer at the centre of the case analysed with the reply to ruling no. 429, is to set up the centre of her interests in Italy and to carry out her business activity there.
The Italian Revenue Agency has recognized that having the residence in a third country does not preclude that person from being considered a tax resident. Consequently, since she does not carry out any activity in his country of residence, she may submit form AA9/12 to request the opening of a VAT number in Italy, and indicate her tax domicile, i.e. the place where she will carry out the work activity.
With regard to direct taxes, the Agency points out that, as a consequence of the establishment of a fixed base in Italy, self-employment incomes derived from it, are subject to concurrent taxation. The possibility of claiming a tax credit in the State of residence, on the basis of double taxation treaties, remains valid.