Tax on income of non-residents
IRPEF applies to resident and non-resident individuals.
Resident individuals are taxed on a world-wide basis, while non-resident individuals are taxed on the income produced in Italy on a territorial basis.
The following incomes are deemed to be produced in Italy:
- income from land and buildings;
- income from capital paid by the State, by resident persons (entities or individuals) or by permanent establishment in Italy of foreign entities, except interest and other income derived from bank/post deposits and current accounts;
- income from employment produced in Italy;
- income from independent work derived from activities performed in Italy;
- business income derived from activities performed in Italy through a permanent establishment;
- other income derived from activities performed/assets located in Italy and capital gains derived from the sale of participation in resident entities (exceptions: e.g. non-substantial participations in listed companies);
- income from participation in transparent Italian entities (e.g. partnerships).
Tax is assessed on the aggregate amount of the incomes indicated above (deductions and tax reductions may apply).
Non-resident companies and other entities, including trusts, with or without legal personality are subject to corporation tax (IRES, Imposta sul Reddito delle Società).
Tax is assessed on the income produced in Italy, except for exempt incomes and incomes subject to final withholding tax or substitutive tax.
For corporation tax purposes (IRES), the incomes indicated above are deemed to be produced in Italy; for non-resident companies and other entities, the business income includes capital gains and capital losses relating to assets used in commercial activities performed in Italy (even if not realized through permanent establishments), dividends derived from resident entities, other income derived from activities performed/assets located in Italy and capital gains derived from the sale of participation in resident entities.
Tax treaties, where more favorable to the tax-payer, override statutory provisions.