The UK-Italy Double Tax Treaty for Company Owners

Its full name is the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Italian Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income. It comes with an Exchange of Notes (scambio di note). In Italian it is a convenzione contro le doppie imposizioni (double tax convention).

The UK gives it effect by the Double Taxation Relief (Taxes on Income) (Italy) Order 1990, S.I. 1990/2590. Italy ratified it by L. 329/1990, its legge di ratifica ed esecuzione (ratification and execution law). This double taxation convention between Italy and the UK, the Italy-UK tax treaty, is called the Convention below.

This guide covers one of Italy's tax treaties, the double taxation agreement with the UK, and lists no other. It is written for a UK owner, lender or licensor of an Italian S.r.l., and for the S.r.l. that pays them. The payer's side runs through the company's books: we coordinate the bookkeeping an Italian S.r.l. has to keep with its accounting provider.

Art. 2(1) lists the taxes covered: for Italy IRPEF, IRPEG and ILOR (personal, corporate and local income tax); for the UK income tax, corporation tax, capital gains tax and petroleum revenue tax. Art. 2(2) adds identical or substantially similar later taxes. Whether today's IRES and IRAP count is not settled on this page. The Convention caps Italian tax on conditions; it does not remove it (Art. 10(2)).

The tax residence tie-breaker starts from Art. 4(1): a resident of a Contracting State (Stato contraente) is a person liable to tax there by reason of domicile, residence, place of management or a similar criterion, not one taxed there only on income from local sources.

A company resident in both countries

Under Art. 4(3), a company resident in both States is deemed resident where its place of effective management (sede di direzione effettiva) is situated. Italy has its own test. Under Art. 73(3) TUIR, as amended by D.Lgs. 209/2023 and in force to 31 December 2026, a company is resident if for the greater part of the tax period it has in Italy its registered office (sede legale), its place of effective management or its ordinary management on a principal basis (gestione ordinaria in via principale).

Effective management is the continuous and coordinated taking of strategic decisions concerning the company as a whole. Where the board takes them is fixed with the right structure for an Italian company.

A founder resident in both countries

For an individual, Art. 4(2) sets a ladder applied in order: the State of their permanent home; with a home in both, their centre of vital interests, where personal and economic relations are closer; if that cannot be determined, or if they have a permanent home in neither State, their habitual abode; with an abode in both or neither, their nationality. For a national of both or neither, the competent authorities (autorità competente) settle it by mutual agreement.

Italian tax on interest arising in Italy and paid to a UK beneficial owner shall not exceed 10% of the gross amount (Art. 11(2)). It is taxable only in the UK, so nil in Italy, when paid on a credit sale of industrial, commercial or scientific equipment or of goods between enterprises, or on a loan made, guaranteed or insured by the UK, its export credit body (ECGD) or a public establishment (Art. 11(3) and 11(4)).

The cap covers only the arm's-length amount (Art. 11(8)); it is denied for a debt-claim created or assigned mainly to take advantage of the article (Art. 11(9)) and for a holder exempt from tax that sells the holding within three months of acquiring it (Art. 11(10)). Domestically, Art. 26(5) D.P.R. 600/1973 makes the withholding a final tax, at 26% (D.L. 66/2014 Art. 3); the 12.50% still printed in Art. 26 is a drafting relic, not the rate.

Italian tax on royalties paid to a UK beneficial owner shall not exceed 8% of the gross, one band for every type (Art. 12(2)). Royalties cover copyright (films and broadcasting tapes included), patents, trade marks, designs or models, plans, secret formulas or processes, equipment and know-how (Art. 12(3)). The cap excludes a right effectively connected with a PE in Italy and covers only the arm's-length amount (Art. 12(4) and 12(6)).

Without the papers, Italy withholds 30% as a final tax on the taxable part (parte imponibile) of royalties paid abroad (Art. 25 D.P.R. 600/1973). The size of the taxable part is not covered here, so the comparison is 30% on the taxable part against 8% of the gross, and no effective domestic rate is given.

Art. 169(1) TUIR, in the text in force from 1 January 2004 to 31 December 2026, provides that the provisions of the TUIR apply, if more favourable to the taxpayer, also in derogation of the international agreements against double taxation. The more favourable rule is the one the taxpayer relies on.

Art. 162(1) TUIR, the domestic PE rule, opens by reserving what Art. 169 provides. The Convention's caps are ceilings on the tax Italy charges under its own law, so the domestic rate applies when the recipient does not claim the cap.

A resident who considers that taxation is not in accordance with the Convention may present the case to the competent authority of their State of residence, irrespective of the domestic remedies. This is the mutual agreement procedure (procedura amichevole) of Art. 26(1).

Domestic time limits keep running: a claim is not entertained where the taxpayer has not acted under domestic law to stop them expiring (Exchange of Notes, point 2), and for Italy the procedure does not relieve the taxpayer of starting the domestic dispute procedures (point 6). The Convention sets no term in days for a case, but an adjustment under it may be made only before the taxes are finally determined (Exchange of Notes, point 6), and this guide names no office as today's competent authority.

Gains on property other than immovable property, PE assets and ships or aircraft, shares in an Italian company included on a plain reading, are taxable only in the seller's State of residence (Art. 13(4)). A State may still tax an individual who was its own resident at any time in the five years before the sale and is not taxed on the gain in the other State (Art. 13(5)). The Italian side is set out in how a non-resident is taxed on selling an Italian company.

Fees a UK resident receives as a member of the board of directors of an Italian company may be taxed in Italy (Art. 16). This guide gives no rate for them.

Other taxes and routes. VAT is a separate regime from the income-tax Convention. Inheritance and gift tax on Italian company shares is covered in the inheritance tax on company shares guide, and a founder's own move to Italy in the residence route for a founder who moves with the company.

Open points, left open: whether IRES and IRAP are taxes covered by the Convention; whether the OECD multilateral instrument modifies it; what Art. 10(3) to 10(5) do today; and Italy's other treaties, which this guide neither counts nor compares. Each is outside this page and is not answered either way.

D.Lgs. 117/2026 approves a consolidated income-tax text, in force from 4 July 2026, whose numbering replaces the TUIR's from 1 January 2027. Arts. 73, 162 and 169 TUIR carry the end date 31 December 2026 on Normattiva. No successor article number is given here.

The D.P.R. 600/1973 articles (Arts. 25, 26, 27 and 27-bis) are cited for payments made in 2026. The Convention's own articles keep their numbers; this guide is re-read before any update dated 2027.