Tax residence of natural persons and transfer abroad


published on 11 July 2022 | reading time approx. 2 minutes

In its ruling No. 18009 of 6 June 2022, the Court of Cassation returned to the subject of tax residence, in particular on the importance of the center of vital interests as a criterion for identifying the State of residence.

The context is that of an Italian citizen who transferred his tax residence to Switzerland together with his wife and son; an in-depth analysis of the facts clearly shows that not only his permanent home, but the majority of personal and family ties is in the Swiss country.

Given that the OECD Model Convention (Article 4(2)) provides that, in the event of a conflict between States concerning the tax residence of an individual (in this case, Italy and Switzerland), the power of taxation lies firstly with the State where the individual has a permanent residence, secondly with the State where he has his centre of vital interests, and finally with the State where he has a habitual abode, the individual had grounds for considering his work as a director in an Italian company to be irrelevant for tax residence purposes. 

The opposite view was taken by the Italian tax authorities, who insisted on recovering taxable income from work paid to the citizen as the State of residence, on the assumption that as a director of a corporation resident in Italy, the subject actually had his tax domicile in our country, since his principal place of business was in Italy. 

The judges of the Supreme Court, in this very recent ruling, have effectively emphasized that the concept of the center of vital interests is to be understood not only as the place of core economic affairs, but also as the place where personal interests are concentrated. In this situation, it is established that the centre of vital interests in the most comprehensive sense has been in Switzerland for years; moreover, there is no evidence to the contrary other than the daily commute and the proximity between place of residence and place of work. 

However, this is in no way sufficient to identify the tax domicile in Italy, which is why the Supreme Court rejected the Revenue Agency's appeal.



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