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Smart working taxes in Italy


Smart working, which has spread like wildfire during the pandemic, has, on the one hand, overturned working methods, but on the other has created numerous doubts and perplexities in tax and legislative matters, particularly for all foreign residents who have returned to Italy and have continued to work remotely or smart working or Working From Home.

The basic principles dictated by the Revenue Agency on the subject of taxation of smart working had already been clarified in a previous article on the subject Where you are tax resident and pay taxes if you work remotely or in smart working

Smart working taxes in Italy

The Italian Revenue Agency had been clear on this point: if you have stayed for more than 184 days in Italy you are considered to be tax resident in Italy and required to pay taxes in Italy, in addition you are subject to worldwide taxation without any excuse of force majeure events, obviously taking into account any double taxation conventions in force.

We have already seen in a previous article how those who, instead, decide to return to Italy by transferring their residence, in order to continue to work in smart working mode for a foreign company can take advantage of some tax benefits introduced by Italian laws to facilitate the return of “brain drain”.


The Italian Revenue Agency is back again on the issue of those who, resident abroad and employed by an employer based abroad, during the pandemic returned to work in Italy in smart working.

The Italian Revenue Agency, with its answer 626/2021 of 27/9/2021 to the query of an Italian citizen registered in Aire, resident in Luxembourg and employee of a Luxembourg company, who during the pandemic in March 2020 returned to Italy continuing to work remotely or in smart working, provides clarification on the tax regime applicable on income received as an employee.

The Consolidated Income Tax Act states that ‘income from employment provided in the territory of the State’ is considered to be produced in Italy, but that this provision does not apply if there is a double taxation convention that provides for a taxing power to the State of residence for income from employment provided in another State.

The general principle is, therefore, that of taxation of the income in the State where the activity is actually carried out and with possible concurrent taxation in the State where the remuneration is paid.

The Italy/Luxembourg agreement provides for the exclusive taxation of income from employment in the beneficiary’s State of residence, unless the employment, in respect of which the income is paid, is carried out in the other Contracting State: in which case the said emoluments are subject to concurrent taxation in both countries.

The following paragraph, however, provides for ” the exclusive taxation in the State of residence also of income derived in respect of an employment exercised in the other State provided that the following three conditions are met

three conditions are met:

“(a) the recipient stays in the other State for a period or periods not exceeding a total of 183 days in any tax year;

and b) the remuneration is paid by or on behalf of an employer who is not a resident of the other State;

and c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.”

In order to establish the place of performance of the work, the Agency uses the OECD definition it is necessary to have regard to the place where the employee is physically present when carrying out the activities for which he is remunerated.

In the case examined the employee was in Italy to work and was there for more than 183 days.

Therefore, the second paragraph of Article 15 cannot be applied because the first of the three requirements, i.e. having stayed in Italy for less than 183 days in the reference period, is not met.

Under the first paragraph, therefore, the worker who has stayed for more than 183 days in Italy will be subject to double taxation, which ”will be resolved, in accordance with Article 24(1) of the Convention, by the granting of a tax credit by Luxembourg, the employee’s State of residence.

He will pay taxes in Italy and Luxembourg on the income from his employment and will get a tax credit in Luxembourg.

With the Interpello, the agency responds to the request submitted by the applicant without going into the merits of the assumptions provided by the applicant, i.e. the tax residence in Luxembourg.

But is the petitioner actually resident in Luxembourg in 2020?

The Agency itself has sent out various signals and alarm bells in its reply, where in the introductory part it expressly says ” As a preliminary point, it should be noted that the assessment of the conditions for establishing the actual tax residence of a person involves factual evaluations that cannot be carried out by this office when responding to requests for appeal” … … therefore, the following answer is based on the facts and data as presented in the petition, without prejudice to the ordinary power of verification and assessment of the petitioner by the competent tax office.

The Agenzia delle Entrate “provides the requested clarifications on the assumption (assumed uncritically) that the petitioner is resident for tax purposes in Luxembourg in 2020, since this is the case”.

In my opinion, there are no grounds to consider the petitioner as resident for tax purposes in Luxembourg since he stayed in Italy from March to December 2020, i.e. for most of the tax year 2020.


An Italian citizen who chooses to transfer his residence abroad in order not to be subject to taxation in Italy will have to comply with certain basic formal and substantive criteria, the main ones being:

  • living outside Italy for more than 183 days
  • habitual residence abroad
  • enrolling in the register of foreign residents AIRE
  • having the centre of one’s professional and personal interests abroad.


It is certain that the first criterion of residence for tax purposes abroad is not met in the case in question, as the worker resided in Italy for most of the year 2020, and there may also be doubts as to whether the other conditions concerning the centre of personal interests and residence in Italy rather than Luxembourg are met.

For all intents and purposes, the worker should be considered as resident in Italy in 2020 with all the consequences of taxation of all income produced, not only those from employment, and with all the taxation, contribution and declaration obligations in Italy.

Attention should also be paid to the problem that the worker could be considered as a permanent establishment in Italy of the foreign employer with the consequences of reporting obligations and tax payments borne by the latter.

adv.Dr. Rossella Gianazza Maltaway Partners