Over the last few years Italian Government has introduced several favourable tax regimes and facilities aimed at attracting foreign residents to Italy. Such tax regimes are very competitive compared to similar ones provided for by other EU countries.
Also, Italy benefits from a wide range of tax treaties and its priceless cultural heritage beauty, quality of life, strategic location, and free circulation in the European Schengen area makes it a natural destination for individuals willing to relocate. Favourable tax regimes currently available in Italy are:
– the “Expatriates tax regime” (so-called “Impatriati” tax regime);
– the “High Net Worth Individuals tax regime”;
– the “Retirees tax regime”.
All the above mentioned regimes make the relocation to Italy extremely appealing and, for non-EU citizens, they also give the opportunity to benefit from an easier immigration procedure.
In a nutshell:
Expatriates tax regime
The EXPA regime provides for relevant tax incentives referred to inbound workers, entrepreneurs, researchers, professors and sport professionals who transfer their tax residence in Italy starting from 2020.
Under this tax regime, the new resident individual will be subject to Italian personal income tax (“IRPEF”) only for the 30% of his/her income deriving from activities performed in Italy (i.e. 70% of the Italian income will be tax exempt). A cap on tax saving applies to self-employment and business income only.
For individuals moving their tax residence to Sothern Italian Regions (i.e. Abruzzo, Basilicata, Campania, Calabria, Sardegna, Sicilia, Puglia) the taxable income is reduced to the 10% of the earnings (i.e. 90% is tax exempt in Italy).
The EXPA tax regime applies for 5 tax years. However, it can be extended up to 10 tax years if:
− the individual has at least one child (the taxable income is increased to 50% for the extended period); or
− the individual (orthe spouse, partner or children) purchases a residential property in Italy, (the
taxable income is increased to 50% for the extended period); or
− the individual has at least three child (taxable income is reduced to 10% for the extended period).
The new resident individual can benefit from the above regime provided however that he/she:
a) enrols with the Italian register of the resident population and spend the greater part of the tax year in Italy;
b) has not been tax resident in Italy for the previous two years before transferring the tax residence to Italy;
c) remain in Italy as a tax resident for the following two years;
d) mainly works or performs his/her activity in Italy.
One of the greatest advantages of the EXPA regime is that it embraces employees and self- employed professionals regardless of their qualifications (i.e. no degrees, masters, or similar are required) or role. Therefore, the tax regime would also apply to sport stars (both players and coaches) relocating to Italy and this makes Italian sports clubs (that typically negotiate salaries of sport professionals net of Italian income tax) more competitive when hiring international sport stars.
However, it has to be noted that the EXPA regime provides for specific limitations/rules with relation to sportsman/woman eg. (i) its duration is limited to 5 tax tax years; (ii) exempt income is 50% and cannot be reduced; (iii) a 0.5% additional tax is due on the gross income.
High Net Worth Individuals tax regime (“HNWI”)
According to the HNWI tax regime, a foreign resident moving his/her tax residence to Italy may opt to pay a yearly lump sum tax of Euros 100.000,00 on his/her foreign income regardless of its actual amount, instead of the ordinary progressive tax rates.
In addition, the tax regime can be extended – upon request – to one or more family members, provided that they satisfy the same conditions required to the “main” taxpayer. Family members qualifying for the tax regime will be required to pay a yearly lump sum tax of 25.000,00 Euro only, regardless of the amount of the foreign income earned.
As further benefit the HNWI tax regime also provides for an exemption from:
– donations and inheritance taxes relating to assets and real estate properties owned abroad;
– tax on real estate properties owned abroad and from wealth tax on foreign financial investments;
– reporting duties concerning foreign assets vis-à-vis the Italian tax authorities.
The tax regime is valid for 15 years. To benefit from the above regime individuals are required to (i) move their tax residence to Italy and register with the Municipal Registrar of the resident population; (ii) have not been Italian ta resident for at least 9 of the past 10 years.
Please note that the HNWI tax regime does not allow to deduct any foreign tax credit for taxes paid abroad. Also, it does not apply to:
− Italian source incomes (taxed according to general rules);
− for the first 5 tax years, to capital gain on qualified shares (i.e. shares representing more than the 5% of the share capital for listed companies or 25% of the share capital for non-listed companies).
Retirees tax regime
This tax regime is aimed at promoting the relocation of foreign Retirees to the Southern part of Italy. In particular, according to the tax regime for Retirees, non-Italian resident individuals holding foreign pension incomes, transferring their tax residency to South Italy, are allowed to elect for a 7% flat tax on foreign source incomes that provides for relevant effects for individual direct tax purposes, wealth taxes and monitoring duties.
The 7% flat tax regime is applicable on all foreign-source income and gains and not only on the foreign pension income. In addition, the tax regime provides for an exemption from wealth taxes on foreign (non-Italian) assets.
The election for the Retirees tax regime is valid for 9 tax years. The above tax regime is applicable to individuals:
– holding pension incomes and other similar remunerations paid by foreign (non-Italian) private/public subjects;
– who transfer their residence to Italy from Countries having administrative cooperation agreements (e.g. DTA, TIEA, FATCA) in force with our country;
– that have not been Italian tax resident for the 5 years preceding the one for which the option is effective;
– who actually transfer their tax residency in one of the municipalities with a population not exceeding 20.000 inhabitants located in one of the regions of Southern Italy (Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise and Puglia).
We will be glad to assist you on the analysis of your tax position and the election of the more suitable tax regime. Please note our assistance will include:
▪ preliminary feasibility assessment with the individual willing to transfer to Italy;
▪ analysis of the impact of the regime, highlighting the main consequences of the regime;
▪ day-by-day tax compliance of the individual and family office services;
▪ assistance with the relocation to Italy;
▪ drafting and filing of the annual Tax return of the individual.