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Favourable tax regimes applicable to expatriates or individuals moving to Italy

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Copia-di-Copia-di-Other-incentivesExpat regime (art. 16 D.Lgs. n. 147/2015)
Introduced in 2015 and in force as from 2016, the Italian Expat regime is a favorable tax regime which lowers the taxable base of professional income for expatriates moving to Italy. It aims at attracting in Italy highly qua- lified professionals.

It applies to individuals who hold a degree (university level) and are EU citizens or non-EU citizens whose country of origin has a double tax treaty in force with Italy (in 2016 it was limited to EU citizens only).
In order to be eligible for the regime, the individual must:
• move in Italy and become tax resident of Italy according to domestic law (art. 2 TUIR);
• hold a degree (university level) and have worked as employee or self-employed outside of Italy for at least 24 months, or
• have studied (university level) and graduated abroad.
After arrival, the individual must carry out a professional activity in Italy, either as employee or self-employed, either in the private or in the public sector.
The expat regime is applicable also to individuals (both EU citizens and non-EU citizens as above) who do not hold a degree (university level), provided that they cover management roles or are highly-qualified or highly- specialized. In order to be eligible, the individual must:
• move in Italy and become tax resident of Italy according to domestic law (art. 2 TUIR);
• have not been a tax resident of Italy for 5 years prior to moving to Italy;
• have a professional activity in Italy for at least 183 days over each tax year;
• work for an Italian resident company (also as assignee in Italy from a foreign company);
• cover management roles or be highly-qualified or highly-specialized.
After arrival, the individual must carry out a professional activity in Italy, either as employee or self-employed, in the private sector only.
The application of the expat regime allows to benefit from a lower taxable base, which is, for the fiscal year 2016, 70% of employment income only and, for the fiscal year 2017 onwards, 50% of professional income (both employment and self-employed income).
The benefit lasts for 5 years starting from the first year of tax residency in Italy.
The applicability of the regime terminates if the individual breaks his tax residency in Italy prior to 2 years from the first year of benefit.
Substitute personal income tax regime for new Italian tax residents (art. 24-bis TUIR – income tax code)
This favorable tax regime has recently been introduced in the Italian tax law and is in force as from 2017. It aims at attracting in Italy high-wealth individuals.
It is an optional regime, and is applicable to individuals of any nationality, Italian or foreign, who
• move to Italy and become tax resident of Italy, and
• have been tax resident outside of Italy for 9 years out of the 10 preceding the applicability of the re- gime.
The requirements above are cumulative. It is given the possibility to extend the regime to family members of the eligible individual, if they meet the 2 conditions above.
The regime implies a taxation principle that is alternative to the principle of worldwide tax liability normally ap- plicable to Italian tax residents. Under the regime, eligible individuals are taxed in Italy on Italian-source income according to domestic tax law, and on foreign-source income on a lump-sum basis. In particular, the regime foresees the application of a substitute personal income tax on any income of foreign source whilst any income of Italian source is instead taxable in Italy according to the regular progressive taxation on personal income. The substitute personal income tax is a flat tax of 100,000 euro per year, regardless the amount of income of foreign-source.
There is the possibility to extend the substitute flat taxation on foreign-source income to family members of the eligible individual. In such case, the flat tax on foreign-source income amounts to 25,000 euro per year.
The benefit lasts for a maximum of 15 years starting from the first year of option.
The option for the applicability of the regime has to be made through the filing of the personal income tax return. It is possible to request an upfront ruling with the Italian tax authorities to determine the eligibility to the regime, in particular with respect to the residency requirements (specific cases apply when prior residency is in black-listed countries).
It is possible to revoke the application of the regime through tax return.
The regime ceases to apply in case the substitute tax is not paid by the due date or in case the tax residency in Italy is broken.

 

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