Special tax regimes in Italy

Due to its history, culture, geography, cuisine, and quality of life, Italy is one of the most popular places in the world to live. Italian taxes, on the other hand, are a common factor that causes many people to pass on the relocation.

When you permanently move to Italy, you will be considered an Italian resident and will be required to pay taxes on your worldwide income. However, there are two favorable special fiscal regimes that can make the move more appealing: “Flat Tax for Wealthy Foreigners (HNWI) new residents” and “Inbound workers regime”.

High Net Worth Individuals (HNWI) are typically discouraged from changing their tax domicile to Italy because doing so would have a negative impact on their personal wealth. Italian income tax rates are among the highest in the OECD and, in order to address this issue, the Italian government in 2017 implemented a Flat Tax, a new tax structure designed specifically for new citizens of Italy.

To qualify, you must have not been resident in Italy for 9 of the last 10 years and meet residency requirements. HNWI new residents are required to pay a lump sum of €100,000 on all foreign income and €25,000 for relatives. This does not include incomes generated in Italy and must be paid on June 30th of each year.

A formal advanced ruling with the Italian Tax Authorities (called “interpello”) is not technically required, but it is desirable to do so. The decision might be requested before the taxpayer relocates to Italy because the Italian Tax Authorities would have 120 (up to 180) days to approve or deny the request, and during that period, the taxpayer could use that time to organize their move. The Tax Authority is not permitted to reject or claw back an application after receiving a favorable judgement, except in the case of false declarations.

This regime is valid for 15 years but can be revoked annually. This system permits income tax exclusions and withholding tax waivers or reductions under double tax treaties. In fact, by reorganizing their foreign assets and income and taking advantage of double tax treaty opportunities, we have seen numerous clients paying only € 100,000 on their global income.

Inbound workers regime (called “Impatriati”) is available to physical persons that haven’t been resident in Italy during the last two fiscal years and that must work in Italy and produce income in Italy. This includes being self-employed or an employee of an Italian company. Impatriati individuals will pay taxes on a “tax base” reduced by 70%. This regime is valid for 5 years but can be extended for an additional 5 years if the individual purchases a house, though the “tax base” reduction is reduced to just 50%.

It is important to note that these regimes are subject to change and it is recommended to consult with a Tax Advisor to ensure that you are taking advantage of all applicable fiscal advantages.

Overall, these regimes can make moving to Italy more financially appealing and provide a unique opportunity for foreign individuals to establish residency and contribute to the Italian economy.

If you have any questions or comments about these favorable tax regimes in Italy, please do not hesitate to contact me. I would be happy to put you in touch with our tax Advisor and provide you with more information.

Matteo Scandolera matteo@liguriahomes.com

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