🇫🇷 France — 🇮🇹 Italy

Tax Treaty / Double Tax Avoidance Agreement detail

The France-Italy double tax convention was signed on 5 October 1989 and entered into force on 1 May 1992, replacing the earlier 1958 treaty. It follows the OECD Model broadly and covers taxes on income and capital for residents of one or both contracting states. Dividends are taxed at 5% where the beneficial owner is a company holding at least 10% of the paying company's capital, and 15% in all other cases; however, EU Parent-Subsidiary Directive (2011/96/EU) and Interest & Royalties Directive (2003/49/EC) effectively reduce or eliminate withholding for qualifying intra-EU corporate distributions and interest/royalty flows, making the treaty rates secondary in many cross-border business contexts. Interest is taxed at 0% where the beneficial owner is a state, public body, or central bank, and 10% otherwise. Royalties are taxed at 0% for cultural royalties and 5% for industrial, commercial, and scientific royalties. Both countries signed the OECD Multilateral Instrument (MLI); France ratified in 2018 and Italy in 2019, with the MLI entering into force for the bilateral treaty thereafter. MLI provisions introduce a principal purpose test (PPT) as the anti-avoidance standard and enable mandatory binding arbitration for unresolved mutual agreement procedure (MAP) cases. For individuals, the treaty is particularly significant in two corridors. First, cross-border workers in the Mont Blanc/Aosta Valley and the French-Italian Riviera region benefit from special frontier-worker provisions governing which state has primary taxing rights over employment income. Second, Italy's flat-tax regime for new residents (Article 24-bis, introduced by Decreto Crescita 2017) offers an annual substitute tax of €100,000 on all foreign-sourced income (€25,000 per additional family member), making Italy attractive for high-net-worth French residents relocating to Italy. Additionally, Italy's impatriate regime (regime dei lavoratori impatriati) provides a 50% income exemption for qualifying workers who transfer their tax residence to Italy, offering significant relief for French professionals and executives moving south. France's exit tax rules (Article 167 bis CGI) apply when French tax residents transfer their domicile abroad, potentially triggering deemed disposal of unrealised gains; treaty MAP and the EU freedom-of-establishment case law provide some mitigation. Social security coordination is governed separately by EU Regulation 883/2004, not by the income tax treaty. Inheritance and gift taxes between the two countries continue to be governed by a separate bilateral convention signed in 1969.