France-Italy tax treaty: residence, pensions and the tax credit

The rules that come up in our files

• Residence (Article 4). France first applies its domestic criteria, notably Article 4 B of the French tax code. The treaty then decides only if the person is regarded as resident of both France and Italy under domestic law and Article 4, paragraph 1, of the treaty; they are then attached, in order, to the State of their permanent home, then their centre of vital interests, habitual abode and nationality; failing that, the two administrations settle the question by mutual agreement. The Italian Article 24-bis option is a relevant factual element but does not, on its own, bind the French authority or court. The Conseil d'État held that being subject to tax in Italy solely on account of an Italian pension does not make a person an Italian resident (CE 24 May 2006, no. 280942).
• Taxes covered (Article 2). By an exchange of letters of 7 and 28 July 1998, France and Italy confirmed that the treaty covers, on the French side, CSG, CRDS and the surtaxes on corporate tax, and on the Italian side IRAP. The exceptional contribution on high incomes (CEHR) has been held to be analogous to income tax, and therefore covered. Coverage does not mean exemption: the Montreuil administrative court had relieved an Italian resident of the contribution on French dividends (19 September 2024, no. 2215513); the Paris administrative court of appeal set that judgment aside, holding that Article 10 does not restrict the method of collection and allows France to tax under its own law, including by assessment (8 July 2026, no. 24PA05224).
• Dividends (Article 10). The State of the paying company may withhold at most 15% of the gross amount, or 5% where the beneficial owner is a company subject to corporate tax that has held at least 10% of the capital for at least twelve months before the distribution decision.
• Interest and royalties (Articles 11 and 12). Withholding capped at 10% on interest, with exemptions (credit sales of equipment or goods, public-sector interest, interbank loans to the extent provided in the protocol). Royalties are capped at 5%, and copyright royalties on literary, artistic or scientific works are exempt at source, except software, films and recordings.
• Real-estate gains (Article 13 and protocol, point 8 a). Taxable in the State where the property is located. The same applies to gains on shares of companies owning real estate in that State, where its law treats them as real-estate gains; property used by the company for its own industrial, commercial, agricultural or professional activity is disregarded.
• Substantial shareholdings (protocol, point 8 b). A rare clause: gains on the sale of a holding giving, alone or with related persons, a right to at least 25% of the profits of a company resident in one State are taxable in that State, under its domestic law. The treaty therefore leaves France free to tax, under its domestic law, an Italian resident's sale of such a stake in a French company. Other gains on shares are taxable only in the seller's State of residence.
• Salaries (Article 15). Taxable where the employment is exercised, unless a short assignment meets three cumulative conditions: no more than 183 days in total in the tax year, an employer not resident in the State of work, and remuneration not borne by a permanent establishment there. Days are counted on a physical presence basis, including weekends and holidays spent there.
• Cross-border workers (Article 15, paragraph 4). Employees who live in the frontier zone of one State and work in the frontier zone of the other are taxable only in their State of residence. The zones are, in France, Haute-Savoie, Savoie, Hautes-Alpes, Alpes-de-Haute-Provence, Alpes-Maritimes and Corse-du-Sud; in Italy, Aosta Valley, Piedmont, Liguria and Sardinia. The French administration requires a normally daily return home, and the status is evidenced to the administration of the State of work, in particular by an employer certificate and a certificate from the tax office of the place of residence.
• Directors (Article 16). Directors' and board members' remuneration is taxable in the State of residence of the company, without exclusivity: the director's State of residence may also tax it and must then relieve double taxation. The pay of an Italian-resident manager of a French SARL is thus taxable in France, whatever their shareholding.

Three decisions on residence, pensions and dividends

Between France and Italy, the tax authority challenges the residence of the person who leaves, and how an Italian pension enters French tax. These decisions set the method. Estates, which fall under a separate treaty, have their own decision on the page France-Italy estates.

• An Italian retiree living in France remains a French resident. An Italian national whose main home is in France and who does not show that his centre of vital interests is in Italy is a French resident, even if the Italian State pays him a pension taxable in Italy. That pension, which Article 19, paragraph 2, reserves to Italy when it is public, still enters French taxable income, with a credit equal to the corresponding French tax: a court that left it out of the base commits an error of law (CE, 24 May 2006, no. 280942).
• An athlete's departure does not by itself make him resident in Italy. A professional footballer who receives fees from French sources, holds shares in French companies and in real estate investment companies and shows no assets in Italy, while owning many properties in France, kept his centre of vital interests, hence his tax residence, in France, despite much larger Italian income (CAA Lyon, 26 October 2006, no. 01LY02689).
• Dividends paid to an Italian resident remain taxable in France. Article 10 does not limit how the tax is collected: France may tax by assessment roll the dividends that a French company pays to an Italian resident, as it does for a French resident (CAA Paris, 8 July 2026, no. 24PA05224, which sets aside the Montreuil administrative court judgment of 19 September 2024).

What a French resident's return must show

• Two separate calculations. For dividends, interest, royalties, directors' fees, artistes' income and the gains in point 8 of the protocol, the credit equals the Italian tax actually paid under the treaty, capped at the corresponding French tax; any excess is neither carried forward nor refunded. For other income, the credit equals the corresponding French tax.
• Income that genuinely falls within Italian tax. The credit equal to French tax is due whatever the amount of Italian tax, but the income must be taxable in Italy under Italian law. The Paris administrative court refused the credit to a seconded employee who could not show that their salary had been subject to tax in Italy (TA Paris, 4 November 2009, no. 05-13465): keep evidence of the Italian treatment.
• No additional effective-rate rule. The Article 24 mechanism stands in for the effective-rate rule; the Douai administrative court of appeal held that it excludes Article 197 C of the French tax code (CAA Douai, 6 April 2004, no. 99DA01494).
• Italian losses do not count. Only positive income is taken into account for the French computation.
• No double exemption (protocol, point 15). An exemption provided by the treaty applies only if and to the extent that the income is taxable in the other State under its law.
• Mutual agreement procedure (Article 26). In case of double taxation, the request is made by simple letter to the administration of the State of residence, within six months of the notification or withholding of the second tax.