Taxpayer resident in the Principality of Monaco pays taxes in Italy: the centre of interest is decisive

In its judgment no. 19843/2024, the Court of Cassation has ruled on the conditions for the establishment of tax residence in Italy.

In this case, the Italian tax authority sent a tax assessment notice to a taxpayer resident in the Principality of Monaco, a country with a privileged tax status. The tax assessment notice stated that the taxpayer's income was higher because he had maintained the centre of his vital interests in Italy.

The taxpayer appealed to the Tax Court of First Instance, which granted the appeal.

The Office appealed against the judgment. It considered that the country in which the taxpayer had the centre of his financial interests (Italy), recognisable to third parties, as shown by the assumption and effective exercise of corporate offices in Italian companies, was decisive.

Consequently, the taxpayer lodged an appeal in cassation, claiming violation and misapplication of Article 2 of the Italian Presidential Decree No 600/1973.

The Supreme Court rejected the taxpayer's appeal on the following grounds.

As regards the legislation, the Court clarified that for the establishment of residence and domicile, the new provisions of Article 2 of the Italian Presidential Decree No 600/1973 (introduced by Legislative Decree 209/2023) are effective as of 1 January 2024.

Regarding the domicile test for Italian tax residence purposes, the Court confirmed the principle according to which the centre of vital interests must be considered as the point of reference instead of emotional and family ties, which are only relevant in conjunction with other univocal conditions. 

Provided, however, that the establishment of the Italian domicile must also concern ‘the greater part of the tax period’.