Separate taxation system in case of benefit provided by Maltese pension scheme to resident person

The Revenue Agencye rules taxation conditions in case of benefits received through Maltese pension scheme for Italian resident.

With reply no. 144 of 21 March 2022, the Revenue Agency clarified the tax treatment applicable to the amount paid to a tax resident in Italy by a Maltese pension scheme, to which the pension benefits of the company pension accrued during the period of work in the UK.

The Revenue Agency specified that a benefit provided by the Maltese pension scheme to a taxpayer who is fiscally resident in Italy, must be subject to exclusive taxation in Italy according to the separate taxation regime, if it qualifies as a pension. The Agency therefore specified that in order to establish which State involved has the taxing power on income, it is necessary to qualify what is received for conventional purposes.

How the separate taxation scheme works in the case in question

In the case in question, specific reference is made to the Convention against double taxation in force between Italy and the Republic of Malta, ratified by law no. 304/1983, which in art. 18, paragraph 1, provides that:

pensions and other similar remuneration, as well as annuities, paid to a resident of a Contracting State, are taxable only in that State.

If the taxpayer is resident in Italy for tax purposes, the benefit provided by the Maltese pension scheme, qualifying as a pension, must be subject to exclusive taxation in Italy, with the separate taxation regime being applied.

With regard to the tax qualification of the sum, it maintained its nature of a pension as deriving from a terminated employment relationship, even if this sum had been transferred to a Maltese pension scheme which managed it according to the typical rules of a supplementary pension scheme. In this context, art. 49, paragraph 2, letter a) of the TUIR applies, which equates pensions of all kinds to employees’ earnings.

In case of ordinary taxation regime

In place of the ordinary taxation regime, the separate taxation regime pursuant to art. 17, paragraph 1, letter a) of the TUIR applies. Furthermore, the rules on supplementary pension benefits pursuant to Legislative Decree no. 252/2005, the application of which is reserved, in addition to pension schemes established in Italy, also to those established in the Member States of the European Union that fall within the scope of application of EU directive no. 2016/2341 and which are authorized by the competent authority of the Member State of origin to carry out cross-border activities, in any case only for the accessions made in the territory of the Republic and for the resources accumulated and managed in relation to such accessions.

In this case, therefore, the provisions of Legislative Decree no. 252/2005, according to which these benefits constitute income similar to that of employee work do not apply.

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