Residence, the tie-breaker and the persons excluded

Who is a resident

The convention protects only residents of the two states, and its first question is therefore always whether a person is resident in Switzerland or in Italy within the meaning of Article 4. Paragraph 1 defines a "resident of a Contracting State" as any person who, under the law of that state, is liable to tax there by reason of his domicile, residence, place of management or any other criterion of a similar nature.¹ The definition refers to domestic law. For an individual in Switzerland this means unlimited tax liability under Article 3 of the Federal Act on Direct Federal Taxation (DBG) and the corresponding cantonal law, which arises from domicile or from a stay of at least thirty days with gainful activity, or ninety days without it.² For an individual in Italy it means residence within the meaning of the Civil Code, domicile or presence in Italy for the greater part of the tax period, counting fractions of days, under Article 2 TUIR, while registration in the population register (anagrafe) creates a presumption of residence that the taxpayer may rebut. Since the reform by Legislative Decree No. 209 of 27 December 2023, that provision defines domicile as the place where a person's personal and family relationships principally develop and adds physical presence as an independent criterion.³ Chapter H.II examines the reform and its consequences for Italians who move to Ticino.

For companies the Swiss criterion is the registered seat or the place of effective management under Article 50 DBG. The Italian criteria are the registered office, the place of effective management and, since the same reform of 2023, the principal ordinary management in Italy for the greater part of the tax period (Art. 73 para. 3 TUIR).⁴ Chapter F.II describes the Italian presumption of residence for foreign holding companies controlled by Italian residents (Art. 73 para. 5-bis TUIR) and the doctrine of esterovestizione (literally "foreign dressing"), under which the Italian tax authorities treat a foreign company as an Italian resident. A Lugano company that is managed in substance from Milan may therefore be resident in both states under their domestic laws.

The tie-breaker for individuals and companies

Where a person is resident in both states, Article 4 paragraph 2 resolves the conflict for individuals in the familiar sequence of the OECD Model. The individual is deemed resident in the state in which he has a permanent home available to him. If he has a permanent home in both, he is resident in the state with which his personal and economic relations are closer (centre of vital interests). If that cannot be determined, or if he has no permanent home in either state, the state of his habitual abode prevails, then the state of his nationality. If all criteria fail, the competent authorities settle the question by mutual agreement.⁵ For companies and other persons that are not individuals, paragraph 3 assigns residence to the state in which the place of effective management is situated.⁶ The convention thus contains the classical rule of the OECD Model of 1963, before the Model of 2017 replaced it with a case-by-case determination by the competent authorities.

The tie-breaker has two consequences that practitioners in Lugano meet regularly. The first concerns Italian citizens who have moved to Ticino but keep a flat in Milan and a family there. Italy may consider them resident under its domestic law, whatever their Swiss permit and Swiss tax assessment say. The convention then decides on the basis of permanent home and centre of vital interests, which are questions of fact. An entrepreneur whose spouse and children have stayed in Milan, whose doctor and clubs are there and who spends his weekends in Italy will find it difficult to establish that his centre of vital interests lies in Lugano. The second consequence concerns companies. Since the tie-breaker for companies looks only at the place of effective management, a Lugano company whose strategic decisions are taken in Italy is an Italian resident for treaty purposes. It loses the protection of the convention against Italian taxation of its worldwide profits.⁷

Notes

1. Convention, Art. 4 para. 1, text (above): "l'espressione «residente di uno Stato contraente» designa ogni persona che, in virtù della legislazione di detto Stato, è assoggettata ad imposta nello stesso Stato, a motivo del suo domicilio, della sua residenza, della sede della sua direzione o di ogni altro criterio di natura analoga". ↩
2. Federal Act on Direct Federal Taxation of 14 December 1990 (DBG), SR 642.11, Art. 3 paras. 1 to 3, https://www.droit-bilingue.ch/de-it/6/64/642.11-3-6.html (stay of at least 30 days with gainful activity or at least 90 days without it). ↩
3. TUIR, Art. 2 paras. 1 and 2, as amended by Legislative Decree No. 209 of 27 December 2023, Art. 1 para. 1, applicable from 1 January 2024, Brocardi.it, https://brocardi.it/testo-unico-imposte-redditi/titolo-i/capo-i/art2.html ("hanno la residenza ai sensi del codice civile o il domicilio nel territorio dello Stato ovvero sono ivi presenti"; domicile as "il luogo in cui si sviluppano, in via principale, le relazioni personali e familiari della persona"). ↩
4. TUIR, Art. 73 para. 3, as amended by Legislative Decree No. 209 of 2023, text at Brocardi.it, https://brocardi.it/testo-unico-imposte-redditi/titolo-ii/capo-i/art73.html; see Chapter F.II. ↩
5. Convention, Art. 4 para. 2, text (above). ↩
6. Convention, Art. 4 para. 3, text (above) (residence of persons other than individuals determined by the seat of effective management). ↩
7. Convention, Art. 4 para. 3 and Art. 7 para. 1, text (above). On the Italian domestic criteria see Chapter F.II. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.