Share with your friends

Italy: Tax treatment of pensions under tax treaty with Portugal (CJEU judgment)

Italy: Tax treatment of pensions under tax treaty

The Court of Justice for the European Union (CJEU) today issued a judgment finding that pensioners in the private and public sectors may be subject to different national tax regimes, and that the Italian tax treatment stemming from the Italy-Portugal income tax treaty does not infringe the principles of freedom of movement and non-discrimination.


Related content

The cases are: HB v. Istituto Nazionale della Previdenza Sociale (C-168-19) and IC v. Istituto Nazionale della Previdenza Sociale (C-169/19) (30 April 2020)

As explained by a release [PDF 152 KB] from the CJEU, individuals HB and IC (both of Italian nationality) are former Italian public sector employees receiving a retirement pension from the INPS (Italy’s social security system).

After transferring their residence to Portugal, they requested from the INPS, in 2015, that they receive, pursuant to the Italy-Portugal income tax treaty, the gross amount of their pension without deduction (withholding) of tax at source by Italy, so as to be able to benefit from the tax advantages offered by Portugal. The INPS rejected those requests, taking the view that those rules apply only to Italian private-sector pensioners who have transferred their residence to Portugal and to Italian public-sector pensioners who, in addition to having transferred their residence to Portugal, have acquired Portuguese nationality (a condition which HB and IC did not meet). 

HB and IC then brought actions before an Italian regional court that, in turn, asked the CJEU whether the Italian tax system (flowing from the treaty provisions) constitutes an obstacle to the freedom of movement of Italian public sector pensioners and discrimination on grounds of nationality.

By today’s judgment, the CJEU answers both questions in the negative.

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Want to do business with KPMG?


loading image Request for proposal