The Italian Revenue Agency, in its Reply to Opinion No 12/2025, clarified the tax treatment applicable to severance indemnities paid to an agent who transferred his tax residence to Greece after terminating his agency contract with an Italian bank.
This opinion provides important guidance on how to classify the nature of income for the purposes of applying the convention.
National Legislation
As a first remark, the Italian Revenue Agency assumes that the taxpayer has become tax resident in Greece since 1 January of the relevant year.
Under Italian law, severance payments are qualified as self-employment income pursuant to Article 53(2)(e) of the Consolidated Income Tax Law (TUIR) and are subject to separate taxation pursuant to Article 17(1)(d) of the same decree.
In addition, Article 23(2)(a) of the TUIR provides that severance indemnities paid by an entity resident in Italy to a non-resident taxpayer are considered income generated in Italy. They are also subject to a 30% withholding tax at source, pursuant to Article 25(2) of Presidential Decree No. 600/1973.
The difference between the various types of income is significant, as it determines whether a taxpayer or a self-employed person can benefit from the provisions of a tax treaty. In this case, the qualification of severance payments as self-employment income, rather than as pension income as claimed by the taxpayer, has important tax implications.
Considerations on International Tax Law
Considering the applicability of the Italy-Greece Double Taxation Convention, the Agency determined that such indemnities qualify as self-employment income within the meaning of Article 14 of the Convention. This is in application of Article 3(2) of the Treaty, which provides that:
For the purposes of the application of the Convention by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that Contracting State concerning the taxes to which the Convention applies.
In application of this Article, self-employment income is taxed exclusively in the State of residence, unless there is a permanent establishment in the country of origin of the income.
Since the indemnities derive from an agency contract carried out in Italy, the Agency has established that they are referable to the period of work carried out in Italy. Therefore, according to the above-mentioned Article 14 of the Convention, they are subject to exclusive taxation in Italy and the 30% withholding tax must be applied, as established by the Italian tax legislation.
Importantly, the Italian Revenue Agency’s interpretation is in line with previous opinions and rulings. It therefore reinforces the principle that income generated by work performed in a specific jurisdiction remains taxable in that jurisdiction even if the taxpayer subsequently moves abroad.
Practical implications for companies
For companies, the opinion provides clarification on withholding tax obligations for payments to non-residents. Italian companies that terminate agency contracts and make indemnity payments must ensure that they comply with the 30% withholding obligation, unless the taxpayer can provide documentation demonstrating eligibility for treaty benefits or alternative tax treatment.
