Smartworking: the income must be taxed based on the tax resident and Country where the worker is

Special Tax Regime

Table of Contents

Clarifications of the Italian Revenue Agency with regard the correct tax treatment that an Italian Company must pay to its employee, resident abroad.

With the reply No. 296 of 27th April 2021, the Italian Revenue Agency provided clarifications on the correct tax treatment of remuneration that the company, which is tax resident in Italy, is required to pay to its employee, who is tax resident in the United Kingdom and who is working in smart working.

Territoriality of Smartworking Activities

Following the reply to Question No. 296, the Italian Revenue Agency has established that, for the purposes of assessing the territoriality of smart working activities, reference should be made to the place where the activity is actually provided, irrespective of whether the company headquarters is situated in another State.

Article 15, paragraph 1 of the Double Taxation Convention between Italy and the United Kingdom states that, in order to identify the exact place of work during the smart working modality, the place where the employee is physically present when performing the working activities becomes of utmost importance. In addition, the income received by the employee may not be subjected to taxation in the other contracting State, even if the results of the working activity are used in that State.


In conclusion, according to the case submitted to the Italian Revenue Agency, the salary is not fiscally relevant in Italy. As a withholding agents, the company can apply directly and under its own responsibility the exemption scheme provided for in the Italy-United Kingdom Convention, if the worker proves that he fulfils the conditions to benefit from this exemption.

Regulatory Framework

Reply n. 296/2021

Reference (Italian only)

Get a Free Quote

Book a call

For a preliminary advisory about the topic, you can also book a call with our Experts: choose the date and time that best suit you!

Related Services

Studio A&P supports both companies and individuals with tax services in Italy and abroad

Get professional tax assistance

Italian Tax Advisory

Get professional advisory from our Italian Tax Specialists on tax obligations and benefits.

How to avoid double taxation, access favorable tax regime and more.