The stock options must be taxed in the residence country at the vesting period, so if an employee in that period has carried out the job activity in Italy, the tax will take place in this country. This is the content of Agenzia delle Entrate’s reply n. 316 of 7th September 2020.
The taxpayer worked from 2003 to August 2016 in Italy, and then moved to Switzerland from September 2016 to June 30, 2019, enrolling in Aire. In 2010 he received stock options linked to an incentive plan for executives which provided for a vesting period of 3 years, starting from February 26, 2013, fully accrued while working in Italy. The exercise of the options took place on 31 and 19 August 2019. The taxpayer would like to tax income in Switzerland, where he was resident at the time of exercising the stock options.
The Agenzia delle Entrate’s opinion is different. First of all, according to Article 2, paragraph 2-bis, of the Tuir (decree 917/86), Italian citizens who have been canceled from the registries of the resident population and transferred to States or territories with a privileged tax regime (identified with ministerial decree of 4 May 1999) are considered tax-residents in Italy. This is a relative legal presumption which places the burden of proof on the taxpayer and which is also valid in the case of Switzerland, included in the list. With regard to the employment income, to which the fringe benefit is also connected, on the national side, taxation is established by articles 49 and 51 of the Tuir, while article 23, paragraph 1, letter c) establishes that income from employment performed in the territory of the State is considered realized in Italy. It is then necessary to look at the Italy- Switzerland convention. Now the OECD model also includes stock options in employee income (paragraph 2.1), clarifying that we look at the place where the activity is carried out, regardless of the time when the income is paid (paragraph 2.2) and the fact that taxation occurs when the employee no longer works in that State (paragraphs 12.1 and 12.3). In line with the OECD criteria, the connection with the Italian territory exists if in the vesting period (period of maturity of the right) the employee worked in Italy (circular 17 / E / 17 part III paragraph 2.1). Since the employee worked for the Italian office during the entire duration of this period, the corollary is the full taxation of the fringe benefit in Italy.