This new tax, that is to be applied with a rate of 4,25%, is to replace several taxes that until last year were applied to the same taxpayers. As a result, local income tax (ILOR), net worth tax , health tax, tax related to VAT registration number and communal tax on the exercise of productive activity (ICIAP) have been abolished.

Even if this fact has greatly simplified taxpayer’s life, Irap may be considered as a tax exposed to the risk of double taxation for non-residents operating in Italian territory.

The first problem, given the tax ‘’hybrid nature’’, implies for the foreign taxpayer’s country of residence the possibility of giving a tax credit against Irap payment in Italy. As a rule, tax Treaties subscribed according to the model Ocse are referred to the income tax that in Italy’s case are solely represented by Irpeg, Irpef and Ilor and not by Irap which, as seen beforehand, is a tax that hits not so much the income produced by taxpayer but a ‘’net production value’’, which determination differs remarkably in relation to the taxpayers’ activity. The fact is that Irap cannot be considered as income tax, and so it cannot be included in the subjects dealt by tax Treaties. The problem has been partly solved by the Italian legislator by stating that Irap is a tax that can be assimilated to other income tax and so, it gives right to an income tax credit against the income tax liabilities in the taxpayer’s country of residence.

In any case, the real problem, as it is the most difficult to solve, lies in the fact that none of the 59 Tax Treaties subscribed so far by our country is including Irap among the taxes considered in order to avoid double taxation. A problem that the Italian legislator, pushed by the heavy pressure exerted by U.S.A. multinational companies present in our country, has considered to be able to solve definitively by stating that, as far as international tax Treaties are concerned, the new tax is equal to the taxes that were abolished in the moment from which the new discipline came into force; in this case, the problem is to be solved just by those Treaties that should include at least one of the taxes substituted by Irap, in order to avoid double taxation that could be born from Irap.

But the problem remains for all the other Tax Treaties, such as those subscribed with Ireland, Australia and Greece, that do not consider the taxes substituted by the new tax; in this case, income produced by a non-resident individual will be subject to taxation either in Italian territory, being Irap a tax that hits any income deriving from the exercise of a commercial activity, or in his own residence country which will not recognise any tax credit for Irap paid in Italy.