TAXATION OF INCOME PRODUCED OUTSIDE ITALY
Individuals who move their fiscal residence to Italy may opt for a substitute income tax regime on foreign income by a payment of a yearly substitute tax of Euro 100,000.
Such regime may be extended to family members by a pay-ment of an additional substitute tax of Euro 25,000 for each family member.
The option is valid starting from 1 January 2017 and is auto-matically renewed each year for up to 15 years, unless its effects are terminated otherwise, the option is revoked, or in case of forfeiture.
Italian tax authority considers those who opt for this new tax regime "residents" for DTTs purposes.
In order to determine whether or not such option is con-venient, it is necessary to consider international tax rules, in particular if there are other forms of taxation applicable in addition to Italian taxation.
The taxpayer may also submit an advanced (non-mandatory) ruling request to the Italian tax authority con-cerning the source of one's income, the perimeter of the optional tax regime, the presence of the necessary require-ments (also before moving to Italy), and the certification of one's status of individual subject to international DTTs.
Rules on Controlled Foreign Companies (CFC) do not apply to the new resident.
TAXATION OF INCOME PRODUCED IN ITALY
The substitute tax is not applicable to any income produced in Italy, any foreign income not included in the option and any capital gain resulting from the transfer of qualified shareholdings realized in the first 5 taxation periods start-ing from when the option is applied.
CHOICE OF COUNTRIES TO INCLUDE IN THE OPTION
Individuals electing this new tax regime may choose to ex-clude some countries — in which foreign revenue is accrued — from the option ("cherry picking").
With respect to countries that are not included in the op-tion for the substitute tax, individuals benefiting from the new regime are also exonerated from any obligation relat-ing to:
- tax monitoring rules concerning assets held abroad;
- tax on foreign immovable properties held abroad (IVIE);
- tax on financial assets held abroad (IVAFE).
INHERITANCE AND DONATION TAX
Assets which are not held in Italy are exonerated from in-heritance and donation tax if the testator or donor opted for the substitute regime.
If the new resident chooses not to include income produced in certain countries in the option, the exclusion does not apply to donations and inheritances concerning assets lo-cated in these "excluded" countries.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.