The ruling, Sentenza n. 83/2026, was handed down by the Corte di Giustizia Tributaria di secondo grado della Lombardia. The case, dating back to the 2017 tax year, has significant implications on the current debate surrounding the qualification of income, the interpretation of the concept of border worker, and the limits of the credit for taxes paid abroad.
The controversy stems from an Agenzia delle Entrate notice of assessment issued to an Italian resident, who was a shareholder and president of a Swiss company, qualifying as a border worker. The agency denied the nature of the employment relationship and taxed the income in Italy, arguing that the border worker regime did not apply. The taxpayer appealed, but the ruling confirmed the first instance decision, upholding the tax authority’s position.
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The court’s reasoning hinged on the distinction between dependent work and administrative or directive functions as outlined in the Italy-Switzerland Convention. The individual held multiple roles, was not deemed to be an employee, and this precluded the relationship from being classified as employment.
Moreover, the income received did not qualify as remuneration from dependent employment, but rather fell under the provisions of the Convention related to administrative or directive functions. This reclassification resulted in the loss of the border worker’s favorable tax treatment and the full application of Italy’s worldwide taxation principle, subject to the Convention’s coordination rules.
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The ruling also addressed the issue of the credit for foreign taxes paid. The court referenced Article 165 of the Italian Tax Code, which allows for the deduction of foreign taxes paid up to the limit of the Italian tax due on foreign income. However, the court noted that the deduction is not available if the taxpayer fails to file a tax return or include the foreign income in their tax return. In this case, the taxpayer had not declared the contested income in Italy, leading the court to deny the tax credit.
Sentenza n. 83/2026 has broader implications. It reinforces the importance of the actual nature of the employment relationship in qualifying as a border worker and clarifies that the tax treatment of income depends on its correct classification under the Convention. Following domestic tax filing obligations is essential for benefiting from tax treaty provisions aimed at preventing double taxation.
