Italy Tax Agency Clarifies Tax Treatment of Bonuses Paid to Employees

The Italian Revenue Agency Aug. 4 issued Answer No. 199/2025, clarifying the tax treatment of long-term cash bonuses paid to employees working internationally. The taxpayer, a German company with an Italian permanent establishment (PE), sought clarification regarding whether bonus payments to an employee working in the U.K and Italy were subject to withholding taxes in Italy. The employee previously worked in the U.K. during the vesting period but became an Italian tax resident in 2024. Upon review, the Tax Agency clarified that: 1) the bonuses were taxable in Italy under the Italy-U.K. DTA if the employee was a tax resident ...