Collina was set to hang up his whistle after reaching the mandatory retirement age of 45 only for the Italian Football Federation (FIGC) to allow special dispensations to be granted to UEFA-Elite standard officials.
He won't be able to take charge of European games beyond the end of 2005 but will serve another 12 months in Italy's top flight.
Collina, famous for his excellence as well as his unusual physical appearance, has handled many high profile matches including the 2002 World Cup final between Brazil and Germany and the 1999 Champions League final between Manchester United and Bayern Munich.
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