The Italian tax authorities do not stop at the border, nor at ground level. With ruling no. 25 of 25 November 2025, the Ravenue Agency established that non-resident pilots employed on international routes are subject to taxation in Italy on a portion of their income corresponding to the hours flown in Italian airspace. It’s a conclusion with uncertain implications, which frequently conflicts with the provisions of double taxation treaties.
Beyond Takeoff and Landing
Italy taxes employment income if the work is performed within the State’s territory, which affects non-resident employees. Since a non-resident pilot operating international routes may also work on segments that transit through Italian airspace, the issue is anything but abstruse. The trade association that raised the issue proposed a restrictive interpretation of the rule, suggesting that Italian taxation should be limited to work on domestic flights only or on services departing from or arriving in Italy. The Revenue Agency rejected this interpretation, stating that the portion of income apportionable to flight hours carried out within Italian airspace is taxable in Italy; a principle that, for reasons of systemic consistency, is also intended to apply to flight attendants and to non-resident maritime workers navigating, even partially, within Italian territorial waters.
Cascading Consequences
The practical implications are potentially far-reaching. Airlines that are fiscally established in Italy may find themselves obliged to withhold tax on the portion of income thus identified, even in those limited cases where no such obligation previously existed. Indirect consequences also arise for non-resident carriers without a permanent establishment in Italy; their pilots would be required to declare income and pay taxes in Italy on their own, with administrative burdens that could ultimately prompt claims for adjustments to their remuneration. Added to this are the uncertainties surrounding the correct determination of the “portion” of income produced in Italian territory and subject to taxation, a particularly delicate issue where bonuses and variable pay components are involved.
The Shield of International Treaties
A way out may exist: the application of a double taxation convention. If the pilot resides in a country that has concluded such a treaty with Italy, the relevant rules prevail over domestic law. The main conventions entered into by Italy provide, under Article 15(3) or 15(4), that remuneration for employment exercised aboard ships or aircraft operating in international traffic is taxable exclusively in the State where the effective management of the enterprise (i.e. the carrier) is located. Within this framework, navigation through Italian airspace or territorial waters, as well as the worker’s residence, become entirely irrelevant.
This holds so true that, with judgment No. 4951 of 4 August 2025, the Regional Tax Court of Appeal of Lazio excluded any tax liability in Italy on the employment income of a pilot fiscally resident in Italy but employed by a UK carrier. The Court upheld the claim for a refund of Italian taxes paid precisely on the basis of the aforementioned rule, as set out in the Italy-United Kingdom Convention.
When the Hangar Becomes a Trap
However, a further aspect must be considered. A specific provision (Article 38(1) of Decree-Law No. 179 of 18 October 2012) states that “an air carrier holding an operating license issued by a Member State of the European Union other than Italy is deemed to be established in the national territory when it carries out, on a stable, continuous, or habitual basis, an air transport activity from a base,” where “base” means “a set of premises and infrastructure from which an undertaking carries out, in a stable, habitual, and continuous manner, an air transport activity, making use of employees who have their center of professional activity at that base, in the sense that they work there, report for duty there, and return there after performing their activity.” Thus, a foreign carrier could be found having its effective management in Italy.
Finally, as from 2017 the OECD Model Tax Convention changed the previous approach and now provides that, in cases such as those under discussion, taxation should lie with the pilot’s State of residence. This principle is expected to guide future conventions entered into by Italy and those that will be renegotiated (the most recent conventions with Colombia, Kosovo, and Uruguay are already aligned with this new principle).
The overall picture that emerges can be summarized as follows. In principle, a non-resident pilot would be subject to taxation in Italy on the portion of income corresponding to the hours flown in the Italian airspace. However, if the pilot resides in a “treaty country” and is employed by a foreign carrier, it is highly likely that the tax obligation falls entirely in the foreign State where the effective management of the employer carrier is located or, in the future, in the pilot’s State of residence. This conclusion becomes questionable, however, when the carrier, although not fiscally resident in Italy, maintains on a continuous basis premises and infrastructure there from which the pilot reports for duty and to which they return after each assignment, as in such cases it would have a permanent establishment in Italy and this factual element is still the driving one under the applicable tax convention.
Navigating these waters, aerial and otherwise, requires an up-to-date legal compass.
