A recent — and historic — decision by the Italian Court of Cassation marked an important step forward in the fight against double taxation for Italian citizens residing or working abroad, including in Brazil.
Sentence no. 24160/2024 reaffirmed that the tax credit for taxes paid in other countries is an inalienable right, even if the taxpayer has not declared such income to the Italian Revenue Service, provided that there is an international double taxation treaty between the countries involved.
The case in question involved a taxpayer with income generated in Brazil. Despite having already paid the corresponding taxes to the Brazilian Federal Revenue Service, he was fined by the Italian Revenue Service, which alleged failure to declare income in Italy.
However, the Court ruled that, based on the bilateral agreement signed between the two countries, taxes already paid in Brazil should be fully deducted from the amount due to the Italian Revenue Service.
This decision reinforces an essential principle, according to which “the failure to declare income in Italy (by taxpayers with tax residence in the country) does not automatically imply the loss of the right to credit for taxes paid abroad.”
Furthermore, it reaffirms that internal rules, such as article 165, paragraph 8, of the TUIR (Single Income Tax Text), which provide for penalties in cases of failure to file a declaration, cannot override international treaties.
Impact on workers abroad
The ruling also highlighted a recurring problem for Italians living abroad, especially those who do not register with the AIRE (Register of Italians Living Abroad). Without this registration, they remain tax resident in Italy and are exposed to double taxation.
For the Italian deputy Fabio Porta, which follows the issue, the decision is a significant step, but the Italian government needs to move forward with legislative reform to correct distortions in the tax system.
“For years, we have been denouncing, through questions, amendments and legislative proposals, the problem faced by tens of thousands of Italian workers who spend more than twelve months abroad and, for various reasons, do not register with the AIRE, thus maintaining their tax residence in Italy. This situation exposes them or subjects them to double taxation,” he said in a statement to the Italianism.
According to Porta, the Court of Cassation ruling makes it clear that the commitments undertaken by Italy in bilateral treaties must prevail. “It is important to emphasize, however, that the decisions of the Court of Cassation do not have the force of law, as they deal with specific cases brought before the court. However, they define the correct interpretation and application of a law,” he explains.
Now, the Italian legislature needs to act to ensure that taxpayers’ rights are fully respected, without relying on lengthy legal proceedings.
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