Italy: Less Tax To Win Back Some Brains

Last Updated: 30 August 2018
Article by Calogero Boccadutri

Italy could not do without both its home-grown and foreign-born talent. To get accomplished people involved, it is looking to become "low tax".

On the 22 March 2018, the Italian Agency of Revenue published a guide (Fiscal incentives for attracting human capital) detailing which tax breaks you can enjoy in Italy if you fit into the so-called "human capital" category.

The purpose of the Italian Treasury is to work towards the economic, scientific and cultural development of the country. To accomplish this, it is pulling lots of levers and undertaking different measures that are perhaps little known but that have been effective for years.

In addition, recent tax breaks have been specially designed to give people the chance to live and work In Italy without the burden of excessive taxes.

Money and brains

In general, the professions affected by the tax breaks are:

  • teachers and researchers resident abroad that are returning to Italy, for whom the tax system provides tax breaks on income produced in Italy;
  • "re-patriated" workers: workers who have in the past graduated or worked abroad, as well as students who hold an academic title, managers and highly-skilled workers.
  • new residents, who are offered a substitute tax of €100,000 for fifteen years on annual income produced abroad (plus €25,000 per relative that also moves).
  • Requirements

The starting point for accessing any of these tax breaks is to transfer your tax residency to Italy, having also previously held residency abroad for a minimum period before moving.

This "minimum period" is not the same for everyone, but the duration varies depending on the tax break you are after. If you are Italian, you will have to have been taken off the residency register at some point.

Teachers and researchers

For teachers and researchers, four years of tax breaks are provided, beginning from the tax period in which tax residency is confirmed in Italy.

In greater detail, they will be exempted from IRPEF and any add-ons for 90% of their total income – whether this comes through self-employment or not – produced in Italy through teaching or research.
They will therefore only pay tax on 10% of the income that they produce. Furthermore, this income will be excluded from the value of the net production covered under regional taxation (IRAP).

Those who apply will have to demonstrate that they possess an academic position at a university or institution and that they have been teaching or carrying out research abroad for two consecutive years.

The tax break starts from the tax period in which tax residency is transferred to Italy and is applied for three years thereafter.

Those who come back to Italy

For those that move back to Italy from abroad, perhaps attracted by a favourable tax regime, article 16 of D.Lgs. 147/2015 Is applied: "Regulations pertaining to measures for the growth and Internationalisation of firms". This means preferential taxation for five years, to be applied on 50% of income produced in Italy (whether that be through self-employment or not).

To enjoy this advantage, you must have graduated or carried out work abroad, or be a student that holds an academic title abroad, or a manager or a highly qualified, specialised worker.

For salaried workers, the tax break is accepted through a request addressed to the employer, while self-employed workers can get it the moment they submit their tax return and can thereby enjoy a "discount" on the retention tax which takes place through their clients.

All those involved must transfer their tax residency to Italy.

New residents

The treasury provides a single fixed substitute income tax worth €100,000 per annum for new residents.

This tax break is regulated according to article 24bis TUIR, brought in by the Budget Law 2017. The hope is that this system will attract so-called "high networth Individuals" to Italy.

Instead of ordinary taxation, those who agree to move to Italy will pay, for fifteen years, a fixed substitute income tax of €100,000 per year.
If they wished their family to join them, they would pay a tax of €25,000 for every person that moved.

The total amount is paid in one lump sum, with the F24 model, by the deadline for the deposit of the final income tax payment.

To access the tax break you must have lived abroad for at least nine years before the period in which you start paying tax in Italy. This is also true for your relatives who are also looking for a tax break.

Other exemptions on income and goods related to life abroad make the "rich-person package" even more appetising.

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.

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