During 2017 the Italian Government introduced a new tax regime: The Resident Non-Domiciled Tax Regime (also known as the "Flat Tax Regime"), with the aim of attracting high net worth individuals who want to relocate to Italy.
The new legislation introduced a key change to the general principle of worldwide taxation for Italian tax residents. According to these provisions an individual who meets certain conditions can be considered resident, but non-domiciled, in Italy. This allows them to pay ordinary tax on income generated in Italy and a single, lump sum payment of €100,000 per annum, to cover tax due on non-Italian income. This is irrespective of the type, or source, of international income.
The Resident Non-Domiciled Tax Regime
The Resident Non-Domiciled Tax Regime is available to individuals who:
- Transfer their tax residence to Italy (the maximum time that this favourable tax regime can be enjoyed is 15 years and it can be revoked at any time by the taxpayer).
- Have not been tax resident in Italy for 9 of the previous 10 years, preceding their application to this tax regime.
- Obtain formal approval from the Italian Tax Authorities.
Benefits of the Flat Tax Regime
On receipt of non-domiciled status, taxpayers will be liable to progressive tax rates on Italian-source income. A lump sum tax payment of €100,000 per year will be due on income from foreign investments, foreign financial assets and any other foreign source income, for a maximum of 15 years.
Individuals can exclude pre-determined income from certain countries, the so called "cherry picking" principle, if beneficial for the client (for example if tax credits are due), and this income will be subject to ordinary Italian taxation. Any income sourced in the "non-chosen countries" is excluded from the Flat Tax Regime (as well as any Italian sourced income) and is therefore subject to ordinary Italian taxation of up to 45%.
Foreign assets and income can be remitted any time and will not trigger income tax in Italy.
The annual lump sum tax payment replaces the need to pay income tax, local taxes and wealth taxes. Taxpayers also become exempt from certain tax and financial monitoring obligations. The Italian Controlled Foreign Companies (CFC) regime does not apply to non-Italian participations held by the individual and no tax credit is granted for any tax paid abroad.
Capital gains from the disposal of qualifying shareholdings is excluded from the Flat Tax Regime, if the capital gain is realised in the first 5 years following application to this regime. In these circumstances, ordinary Italian taxation will apply.
Another significant benefit is that the Flat Tax Regime allows a full exemption from inheritance and gift taxes on all foreign situs assets held by individuals, who have elected to use this special regime. This is relevant for the years that the individual takes advantage of the regime.
The regime can be extended to family members for an additional €25,000 per person, per annum. Family members are defined very broadly and are not limited to a spouse and children.
Who Can Move to Italy?
The Flat Tax Regime is available to EU and non-EU nationals.
EU, EEA and Swiss nationals do not need a visa to visit Italy and do not need immigration permission to take up residence in Italy. They will, however, need to register themselves, and their family members, with the Italian Tax Authorities in order to obtain a tax registration number.
Non-EU nationals need a valid travel document to travel to Italy, and in certain circumstances, a Schengen Visa is also required. They will then need to make an application to the Italian Investor Visa Programme.
The Italian Investor Visa Programme
The Italian Government introduced an Investor Visa Programme in 2017 for non-EU citizens who wish to become resident in Italy. Applicants must invest in one of the following:
- A minimum investment of €2 million in Italian Government bonds, to be held for a period of at least 2 years; OR
- Invest a minimum €1million in equity instruments in a company that is operating, or located in Italy; OR
- Invest a minimum of €500,000 in a start-up company; OR
- Invest a minimum €1million in philanthropic funding, supporting projects in the sectors of: culture, education, immigration, scientific research, and/or the recovery of cultural assets and landscapes.
Successful applicants will receive a 2 year residence permit, with the option of a 3 year extension. Family members are also able to apply.
Italy does not have a Citizenship by Investment scheme, however successful residency applicants can obtain citizenship and an Italian passport, after living and working in Italy for 10 years.
Dixcart offers advice and assistance to individuals and families seeking to relocate to Italy. Dixcart services include:
- Staff who can provide detailed information about the country, lifestyle and tax advantages that are available.
- Assistance in organising visits to Italy.
- Advice regarding efficient structuring of worldwide assets.
- A comprehensive range of individual and professional commercial services once relocation has taken place.
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.