Italian legislator offers several advantageous tax incentives for foreign individuals who decide to transfer their tax residence to Italy to enjoy the beauty and the serenity of this marvelous and friendly country.
The legislator's aim is to attract to Italy people with an high level of professional and educational background, HNWI and other investors.
Among them, it is worth underlying in this occasion, the beneficial tax regime introduced with the Budget Law of 2019, approved on 30 December 2018.
In particular, the article 24-ter of the Italian Income Tax Code provides a 7% flat tax regime to pensioners residing abroad who become resident in one of the Municipalities having a population not exceeding 20,000 units, belonging to the Regions of Southern Italy (such as Sicily, Sardinia, Puglia, Campania, Basilicata, Abruzzo or Molise) or to pensioners who move to one of the Municipalities, with a population of less than 3,000 inhabitants, affected by the seismic events of the year 2016 (belonging to a specific list provided by law).
Moreover, the tax payer must not have been resident for tax purposes in Italy for at least five tax years before the year in which he makes the option for the tax incentive involved.
Limitations also exist with regard to the country of departure.
The applicant must in fact be a former resident of a country with which, at the moment of the exercise of the option, tax cooperation agreements are in place, such as the OECD Multilateral Convention on Administrative Assistance in Tax Matters, the EU Directives on Administrative Cooperation and Tax Recovery (respectively, Directive 2011/16/EU and Directive 2010/24/EU), a tax treaty, or a TIEA.
The existence of a tax cooperation agreement is necessary to enable Italian Tax Authorities to transmit information about the exercise of the option for the special tax regime to the Tax Authorities of the last country in which the individual was a former tax resident.
The Italian Tax Authority and the Italian Government also periodically give clarifications on this matter, especially when it has to deal with giving response to pensioners that receive foreign retire incomes from the supplementary pension systems in force abroad (i.e. Substantial Equal Periodic Payments in the United States or group pension insurance in Finland).
Furthermore, the maximum period to benefit from the flat tax regime has been extended to nine years starting with the year after the year in which the transfer of tax residence becomes effective.
These constant initiatives demonstrate the great attention that Italy deserves to people who move and wish to apply for special tax regimes.
Considering all the above, good tips could be provided for private clients who plan to spend their retirement abroad while taking advantage of this favorable regime, since it also includes, as consequences, the exemption from declaring foreign assets (which means no need to compile section "RW" of the tax return) and from wealth taxes on foreign assets (so called "Ivie" and "Ivafe").
Finally, if the pensioner renounces to the Flat Tax regime or the latter is denied by the Tax Authority, he would not be able to exercise a new option.
This retirement Flat Tax regime now proves to be even more convenient than before for retirees living abroad, who in the past had not moved to Italy for the high tax burden of our country, which has now become "fiscally attractive".
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.
