Tax residence between Italy and the United Arab Emirates: the relevance of temporary presence in Italy

The temporary presence in Italy of an individual who is permanently established in the United Arab Emirates raises a particularly sensitive issue of tax characterisation where that individual’s presence in Italy extends over a significant portion of the tax year.

From a personal perspective, the circumstances may appear relatively straightforward: the individual’s home, professional activities, investments and long-term plans remain based in the Emirates, while the stay in Italy is driven by contingent circumstances and does not reflect an intention to relocate there on a permanent basis.

From a tax perspective, however, a broader range of factors must be taken into consideration.

The Italian rules governing the tax residence of individuals, including following the amendments to Article 2 of the Italian Income Tax Code (TUIR) introduced by Legislative Decree No. 209 of 27 December 2023, attach relevance to residence under civil law, domicile and physical presence within the territory of the State. The revised definition of domicile also refers to the place where an individual’s personal and family relationships are primarily centred.

This raises the question of how to assess circumstances that may point in different directions: the duration of the individual’s presence in Italy, the location of the family, the availability of homes in both States, the place where professional activities and investments are carried out or held, and the continuity of economic and personal ties with the Emirates.

Even the frequent reference to the “183-day” threshold does not, in reality, resolve all relevant issues. It is also necessary to consider the role played by the temporal criterion in relation to the other connecting factors, as well as the relevance that may be attributed to the distribution of periods of presence and to fractions of a day over the course of the tax year.

The autonomous significance attributed to physical presence raises, from a different perspective, the issue of a possible vis attractiva arising from an individual’s presence within the territory of the State. This question becomes particularly significant where the factual element of physical presence in Italy must be assessed against personal, professional and financial circumstances that continue to demonstrate substantial links with the United Arab Emirates. It therefore remains necessary to determine how such potential attractive force may be reconciled with the other criteria laid down under domestic law and, on a separate level, with those provided for under the applicable tax treaty.

A further layer of analysis arises where the circumstances disclose significant connecting factors with both States. The Convention for the avoidance of double taxation between Italy and the United Arab Emirates provides, inter alia, for the criteria of a permanent home, the centre of vital interests and habitual abode.

The interaction between domestic law and treaty law therefore gives rise to additional issues of interpretation. The Italian concept of domicile refers to personal and family relationships, whereas the treaty criterion of the centre of vital interests takes into account both personal and economic relations. The manner in which these different parameters interact in situations characterised by a high degree of international mobility is one of the most delicate aspects of the subject.

Accordingly, the characterisation of a stay as temporary from a personal perspective does not exhaust the issues that may arise for tax purposes. The question is rather one of identifying and assessing the various connecting factors with Italy and the United Arab Emirates and determining their legal significance within regulatory frameworks operating at different levels.

It is precisely in circumstances where an individual’s personal, family and economic life is divided between the two countries that the boundary between temporary presence and tax residence may become less clear-cut than it initially appears.