Italy: Italian Incentive Tax Measures For Individuals Moving To Italy

Last Updated: 26 January 2018
Article by Gianluigi Strambi

After the entrance into force of the 2017 Finance Bill, the Italian tax framework foresees two main alternative incentive tax regimes optionally eligible by individuals who transfer in Italy their fiscal residence, which are aimed at reducing the tax burden:

  1. on the incomes gained outside Italy (which could be of main interest for high net worth individuals); or, alternatively,
  2. on the employment income (which could be of main interest for top managers).

1. SUBSTITUTE TAX REGIME FOR FOREIGN SOURCED INCOME

1.1. Individuals who transfer their residence in Italy and were not resident in Italy for tax purposes at least in nine of the previous ten years can opt for a flat taxation due yearly in the lump sum of Euro 100.000,00 (the "Flat Tax") which is substitute of:

  • the Italian individual income tax applicable to the foreign sourced income and related local surcharges1 ("IIT"); and of
  • the tax on real estate assets held outside Italy ("IVIE"); and of
  • the tax on foreign financial assets ("IVAFE"); and of
  • the inheritance and gift tax on the foreign assets.

1.2. In order to evaluate the convenience for the Flat Tax regime, it has to be considered that (i) IIT applies with progressive rates up to 43% (for the global taxable income exceeding Euro 75.000,00), plus local surcharges due with an overall proportional rate up to around 2,5% (varying from regions and municipalities) and, in lieu of IIT, financial income (capital gains, with certain exceptions, and income from capital such as dividends and interest) is usually subject to a 26% flat proportional rate; (ii) against these taxes, a tax credit is acknowledged in relation to taxes paid abroad; (iii) the flat IVIE rate is currently 0,76%, the flat IVAFE rate is currently 0,2%, and they apply (in general) on the value of the relevant foreign assets. Below is a numerical example comparing the ordinary Italian tax regime with the Flat Tax, whereby an individual holds bond and stocks abroad for an overall amount of Euro 10.000.000,00, exempted from taxation abroad (i.e., no tax credit):

Item Amount Italian ordinary taxation Flat Tax
Interest on bonds € 100.000,00 € 26.000,00 -
Dividends from non qualified shareholdings € 200.000,00 € 52.000,00 -
Capital Gains € 250.000,00 € 65.000,00 -
Foreign investments (stocks, bonds) € 10.000.000,00 € 20.000,00 -
Total € 163.000,00 € 100.000,00

1.3. Furthermore, the option for the Flat Tax regime relieves the tax payer from the reporting compliance for the foreign investments generating the income subject to the Flat Tax regime.

1.4. This Flat Tax regime can be extended also to certain relatives2, with the payment of an additional yearly lump sum amount of Euro 25.000,00 per relative.

1.5. The payment of the Flat Tax amount is due within the time for payment of the balance of income taxes (usually 30 June of the year following the one of reference).

1.6. The option for the Flat Tax regime:

  • can be exercised in the income tax return regarding the year of transfer of residence or the following one; and
  • is subject to the previous positive ruling by the Italian Revenue, concerning the occurrence of the foreign residence requisite, which must be obtained before the statutory term for the filing of the first Italian income tax return regarding the Flat Tax regime (even if the implementing regulations issued by the Italian Revenue treat the filing of the ruling as discretionary – rather than mandatory – and allow the issuance of the response even after the tax return expiration term).

    The request of ruling must contain (inter alia) the indication of the foreign Countries of last residence and a filled check list regarding certain kind of relationships between the taxpayer and Italy. The Italian Revenue has a 120 day period to provide its response, during which it will exchange the information contained in the ruling with the relevant foreign tax authorities.

1.7. The Flat Tax regime lasts for fifteen years, but expires in advance (without possibility of renewal) starting from the year affected by a (even partial) failure of the payment of the yearly lump sum amount, from the year in which the taxpayer decides to revoke it or from the year of transfer abroad of the tax residence.

1.8. During the period of option, the taxpayer can decide to exclude from the Flat Tax regime the income deriving from one or more foreign Countries. These incomes, therefore, will concur to the ordinary IIT taxation regime and could give title to a tax credit.

2. BENEFICIAL TAX REGIME FOR EMPLOYEES OR PROFESSIONALS MOVING TO ITALY

2.1. Alternatively to the Flat Tax regime, employees and professionals moving to Italy can exempt 50% of their employment or professional income for IIT purposes for 5 years, starting from the one of moving of residence.

2.2. The requisites for the application of this benefit are the following:

  • during the five preceding tax years, the tax payer must have been resident outside Italy (in a Country entered into a convention for avoiding the double taxation on income or regulating an exchange of information with Italy) and undertakes the obligation to stay in Italy for at least two consecutive years; and
  • the professional or employment activity is mainly carried out in the Italian territory.

For employees there are the two additional requisites:

  • they must have managerial roles or must be highly skilled or highly qualified (graduation and carrying out outside Italy in the last 24 months of employee, professional or business activity, or superior study and graduation or post graduation specialization); and
  • the activity is to be carried out in favor of an Italian resident enterprise and the employment agreement is entered into with this company or with the controlling entity, a controlled entity or with an entity controlled by the same entity controlling the former.

Footnotes

1. Foreign sourced income has to be identified adopting criteria symmetrical to those applicable for identifying Italian sourced income in case of tax payers resident abroad, and include the following: (a) income from real estate (lands and buildings) located abroad; (b) income from capital paid by foreign entities (there including foreign Countries); (c) income deriving from employment activities carried out abroad; (d) income deriving from professional activities carried out abroad; (e) business income derived from permanent establishments abroad; (f) capital gains deriving from the disposal of participations in resident companies resident abroad (with the exclusion of capital gains realized in the first five years of application of the Flat Tax regime and deriving from the disposal of qualified shareholdings, i.e. the disposal, during a 12 month lapse of time, of participations or rights giving title to participations exceeding 20% of ordinary voting rights or 25% of equity – reduced respectively to 2% and 5% for participations held in listed companies – starting from the time in which the seller holds a stake exceeding these percentages); (g) other income deriving from miscellaneous activities carried out abroad and assets located abroad.

2. Sons, daughters, grandchildren, parents, grandparents, daughters or sons in law, parents in law, brothers and sisters.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions