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An overview by Maisto e Associati, Taxand Italy
The Italian Revenue Agency has recently issued Circular Letter no. 20/E, providing guidance on the new definition of tax residence for companies and other entities, which came into effect in January 2024. The revised rules aim to align Italy’s criteria with international standards by replacing two key tests: The administrative seat and main business purpose tests, with the place of effective management (where strategic decisions are made) and the place of day-to-day management (where routine operations occur).
The new criteria emphasise substance over form, aiming to align with international standards and reduce interpretative uncertainty. For foreign-controlled companies tied to Italy, the rules now reflect these updated tests. The Circular also confirms consistency with Italy’s double tax treaties, which use the place of effective management as a tiebreaker in residence conflicts.
Tax experts from our Italian member firm Maisto e Associati have published a tax alert on the new guidance in more detail here.
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