In its response 199 of 4th August 2025 to a request for an advance ruling, the Italian Revenue Agency explains when to tax the bonus derived by a manager during a period in which he had worked and been resident in the United Kingdom but paid after he had become tax resident in Italy.
With reference to the commentary on Article 15 of the OECD Model (the convention for the avoidance of double taxation signed between Italy and the United Kingdom are compliant with the OECD Model), the so-called working state, i.e. the source state, has the right to tax income derived by work performed in that contracting state regardless of when the sums are paid and taxed.
The state in which the worker is resident for tax purposes, however, may tax the income when the taxable event occurs under that state’s internal rules, without prejudice to the obligation to eliminate double taxation through exemption or tax credit, depending on the double taxation agreement signed.
The case had already been addressed by the Italian Revenue Agency in March (response 81), and on that occasion the Agency had erroneously stated that tax residency should be verified at the time the income has been “earned”, not at the time of payment.
With its August response (response 199), however, the Agency correctly recognized Italy’s right to tax the bonus received by the manager based on his residence in Italy at the time of payment, with application of the tax credit (Article 165 of DPR 917/86).
Response 199, which argues that income earned in England when the worker was also tax resident there but paid when he or she was tax resident in Italy should also be taxed in Italy, net of the tax credit for taxes paid in the UK, is based on the cash principle that governs this type of income in Italy.
Casale Monferrato, 1st September 2025
English 
Italian