An article published on 7 September 2026 in Il Sole 24 Ore addresses the tax treatment of Trattamento di Fine Rapporto (TFR) severance payments made annually to Italian cross-border workers employed in San Marino. Unlike the standard lump-sum payment at termination, annual TFR payouts trigger distinct withholding tax obligations under the Italy-San Marino tax treaty and domestic San Marino tax law. The piece clarifies that each annual installment is treated as employment income subject to San Marino withholding tax, with a credit mechanism in Italy to avoid double taxation.
Key Takeaways
- Annual vs. Lump-Sum Taxation: Annual TFR distributions are taxed as periodic income in San Marino, not as a capital sum, altering the applicable tax rates and withholding mechanics.
- Treaty Application: The 2002 Italy-San Marino Convention allocates taxing rights to San Marino as the source state, with Italy granting a tax credit for the foreign tax paid.
- Compliance Action: Employers must adjust payroll systems to withhold San Marino tax on each annual TFR payment and report correctly on cross-border worker certifications.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
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