The Abruzzo Regional Tax Commission further clarifies avoidance conditions for cases of Double Taxation.
Following the Ruling no. 190 of the Abruzzo Regional Tax Commission of 17/03/2021, it has been made clear that in the presence of a Treaty for the Avoidance of Double Taxation it is irrelevant that in the country where the tax is abstractly due the tax is not paid.
The exclusive State power of taxation
The Double Taxation Conventions identify precisely which contracting State has the exclusive power of taxation. On the basis of this statement, the Abruzzo Regional Tax Commission considered the denied reimbursement of the sums taxed in Italy to be illegal, having the taxpayer its tax residence abroad and having worked in the current country of residence.
Bilateral double taxation treaties to prevent higher tax burden
The fact that the taxpayer does not appear to have fulfilled the obligation to pay taxes in the State of residence is not a valid argument for non-applying the conventional rules on the allocation of tax power. The existence of the main power of taxation of the other State is consistent with the aims of the bilateral double taxation treaties, which have the function of avoiding the double taxation, in order to prevent taxpayers from incurring a higher tax burden on income earned abroad and to facilitate international economic and investment activity.
In conclusion, it is not considered necessary an effective payment of taxes in the country of residence, but it is sufficient the abstract subjection to that tax system taking into account the total of liabilities subordinated to a foreign tax system.