Corporate Residency: the burden of proof lies with the Tax Authorities

With ruling no. 32155 of December 10, 2025, the Italian Supreme Court consolidates a fundamental principle of international tax law, stating that the burden of proof regarding the fictitious nature of a foreign residence rests entirely with the tax administration.

The core of the decision clarifies that taxpayers have the right to opt for the most tax-efficient corporate structure, provided it is not a construction lacking economic substance; indeed, choosing a jurisdiction with a favorable tax regime does not, in itself, constitute an abuse of law or fraudulent conduct.

For the purposes of Art. 73 of the Italian Income Tax Consolidation Act (Tuir), tax residency must be anchored to the concrete verification of the "place of management", meaning the location where the actual decision-making power resides and the effective operational establishment is situated; in a global market that protects the freedom of establishment, legitimate tax planning is thus clearly distinguished from purely formal structures.

The centrality of "economic substance" makes meticulous planning essential; only a preventive technical analysis and a correct business structuring can protect a company from risky disputes.

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