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Peculiarities of the double tax treaty between Italy and Germany

by Roberto M. Cagnazzo

The Convention for the Avoidance of Double Taxation between Italy and Germany has several peculiarities compared to the OECD Model.

The first is the split-year clause. Italian tax law states that a taxpayer is resident or non-resident for the entire tax period as it is not possible to consider them resident only for part of it. This approach can give rise to double taxation or double no taxation situations if the transfer of residence from Italy to Germany is made during a tax period. A specific provision of the Treaty resolves this situation of double residence by apportioning taxation between the states according to the day of the change of residence.

The second relates to the beneficial owner definition. The OECD Model does not contain a specific definition of this notion. The Commentary to Articles 10, 11 and 12 describes the key features of this notion and the Protocol highlights two requirements to qualify a person as a beneficial owner:

  1. The person must be the owner of the right to which the income relates; and

  2. The tax laws of both states must attribute the income to that person.

This clause raises some interpretive issues:

  • The first requirement appears to be formalistic and does not appear to be in line with the most recent guidelines of the OECD Commentary;

  • The second requirement points out a significant exception to the OECD Model which does not contain specific provisions regarding the allocation of income for the purposes of the domestic laws of the contracting states.

This is not in line with the consensus created at the OECD level by the Commentary to Articles 10, 11 and 12 whose principles have been taken up by both the Court of Justice (in the so-called Danish cases) and the Italian Supreme Court. So, it is appropriate to ask if this clause must be interpreted with a dynamic interpretation in accordance with the new guidelines in the Commentary, or if these principles should not be considered in the interpretation of the treaty. Although the interpretation should be to give primary relevance to the text of the treaty with the consequent irrelevance of the Commentary if it cannot be reconciled with the literal wording of the text, the Italian Supreme Court has adopted the OECD principles relating to the concept of beneficial owner in relation to the Italy-Japan Convention in which this locution was absent.

The third peculiarity relates to royalties. Although the Convention has a general definition of royalty, paragraph 3 grants exclusive taxing power to the state of the recipient of royalties for copyright and similar rights in connection with literary, dramatic, musical, or artistic works, including cinematographic films, and films or tapes for radio or television broadcasting activities. Interesting is the reference to rights analogous to copyright, which should make this definition an open definition which could also include income from the exploitation of the rights to images as pointed out by the Italian Supreme Court and the Italian tax administration.

Photo: fabio lamanna -

12 September 2023

Prof Roberto Maria Cagnazzo

THREE & PARTNERS Accounting Tax Legal, Founder & Partner

THREE & PARTNERS Accounting Tax Legal