Linkedin
Facebook
Email
more
On NT + Fisco - Il Sole 24 Ore, Davide Greco and Maria Lucia Di Tanna discuss three significant rulings by the Supreme Court regarding employment income and international tax treaties. These rulings highlighted mistakes in the application and interpretation of the rules by the taxpayers, tax authorities or relevant cases law.
The common theme across the cases analyzed is the tax treatment of "cross-border" income from employment. Particular reference shall be made to the following:
- Judgment no. 22445 of August 8th, 2024, involving an Italian taxpayer who earned income from employment for a work performed for over 183 days in Kazakhstan;
- Judgment no. 24205 of September 9th, 2024, involving an Italian pilot working for a UK-based airline with actual headquarters in Portugal. In this case, the taxpayer’s defense argued for the exclusive taxing power of Portugal, as the country where the actual headquarters of the airline company were located, as per article 15, paragraph 3 of the Double Tax Treaty between Italy and Portugal;
- Judgment no. 22445 of December 2nd, 2024, which involved an Italian taxpayer who earned employment income for work performed in the United States. In this case, the taxpayer's defense argued that this income should be exclusively taxed in the United States, according to article 15, paragraph 1 of the Double Tax Treaty between the two countries.
In the first case, the Supreme Court ruled that the taxpayer’s stay abroad for more than half of the year was relevant only to exclude the exclusive taxing power of the country of residence, leading to the application of the double taxation “principle” between the State of residence and the State of source.
In the second case analyzed by Davide Greco and Ms. Maria Lucia Di Tanna, the “principle” of double taxation between the State where the headquarter of the employer is located and the State of residence of the international pilot finds its “legal ratio” in the English text of the Italy-Portugal Tax Treaty which, instead of the expression “shall be taxable” it uses the expression “may be taxed”. In particular, article 15, paragraph 3 of the treaty provides that: ‘(...) remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic may be taxed in the Contracting State in which the place of effective management of the enterprise is situated’.
Finally, in the third case under examination, we also see a wrong interpretation of article 15, paragraph 1 of the Italy-USA Tax Treaty. This mistake has been emphasised by the Supreme Court that reminded the general principle of international tax law according to which the State of residence never loses its taxing power, even in international cases.
