The 2024 Circular 20/E marks a pivotal change in the criteria for determining tax residency in Italy, focusing on personal and familial connections rather than economic interests.
Previously, the definition of 'domicile' was tied to the main place of business and interests, as per the Civil Code.
The new regulation, however, defines domicile as the primary location of personal and family life.
This change aims to address the inconsistencies and legal disputes that have arisen over the years, where courts have struggled to balance personal and economic factors in determining residency.
Recent court rulings have leaned towards recognizing the economic center of life as the primary factor, but the new law seeks to prioritize personal ties.
Despite this shift, the Italian Revenue Agency advises that each case should be assessed individually, considering both personal and economic elements.
This nuanced approach opens the door for further debate, as the agency emphasizes the need for concrete actions that demonstrate a genuine connection to Italy.
The law's wording suggests that economic relationships may now be less relevant, yet the agency's guidance indicates that economic factors still play a role, albeit secondary.
This change could impact how indicators like income from Italian sources or business roles are evaluated, requiring a case-by-case analysis.