Tax Treaty Disputes in Italy

Abstract

This introductory section outlines the situation in Italy in relation to the legal standing of tax treaty law under the Italian constitutional system, and the treaty-making process. In the Italian constitutional system tax treaties are written conventions made by Italy with other sovereign States persons with international legal capacity, which contain criteria for the resolution or limitation of conflicts in tax claims advanced by the two States, denominated Contracting States. Italy basically follows the standard treaty-making process based on negotiations leading to authentication, a phase in which the treaty is ratified and there is the exchange of ratifications. Generally speaking Italian authorities follow the Vienna Convention of May 23 1969 (“VCLT”) in respect to negotiations and authentication. Usually the the treaty-making process requires three steps from an Italian perspective: negotiations, authentications, ratification and exchange of ratifications. At the first stage of the negotiations Italy is represented by a team delegated by the Ministry of Finance which meets up with the Competent Authorities of the other Contracting State to prepare the wording of the future tax treaty. So the power to negotiate in the field of taxation is essentially reserved to the government, but the approval by the legislative branch is required. The act which is used to conclude the treaty-making process of Italian tax treaties is called “parafatura” (i.e. “authentication”): its purpose is to fix a text of the treaty which is to be approved or modified by the legislative branches of the Contracting States.