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Tax incentives for foreigners and expatriates in Italy: new regime for expatriates, neo-residents regime, and foreign pensioners.

 

Tax Incentives foreigners expatriates Italy

Tax Incentives foreigners expatriates Italy

 

 

We have already seen how Italy can be attractive to foreigners, not only because of the historical beauty of its cities and the natural beauty such as the sea, lakes, hills and mountains or the varied food, but also from the point of view of certain tax advantages for foreigners who want to move in or expatriate Italians who want to return.

 

FISCAL REGIME FOR EXPATRIATES IN ITALY AND CHANGES FROM 2024

The special tax regime for expatriates has been, or perhaps it’s better to say it was, an attractive tax regime for Italian workers and foreigners who have decided to return or move to Italy for the first time for the envisaged reduced taxation.

Starting from 2024, following Legislative Decree no. 209 of December 27, 2023, Art. 5, several changes have been made, starting from the complete repeal of the previous favorable regime for so-called expatriate workers provided for in Article 16 of Legislative Decree no. 147/2015, amended in 2019, introducing new rules that are much more restrictive than the previous ones:

  • The required prerequisite is to have had residency abroad for at least 3 years (this period becomes 6/7 years if one continues to work in Italy with the same employer as before the transfer).
  • Commitment to reside in Italy for at least 4 years.
  • Essential possession of high qualification or specialization requirements as defined by Legislative Decree no. 108 of June 28, 2012, and Legislative Decree no. 206 of November 9, 2007.
  • Incomes eligible for tax relief now contribute to the formation of taxable income for IRPEF no longer to the extent of 30% with the remaining 70% of the income exempted, but the exempted income is to a lesser extent of 50% (60% if there are children).
  • The eligible incomes are those from dependent work, incomes assimilated to those from dependent work, and incomes from self-employment deriving from the exercise of arts and professions for a maximum of €600,000.
  • The regime applies for only 5 years.

The most important novelty is that this tax relief has been reduced to 50%, no longer provides benefits for those who move to the South, which previously reached up to 90% tax exemptions, has been reduced over time to only 5 years, and above all concerns only workers who have high specialization and qualification requirements.

It will be necessary to verify the actual existence of the required specialization and qualification requirements in light of any clarifications or future interpretations by the Revenue Agency. However, it seems like a reintroduction of the previous regulations where, according to the Revenue Agency’s opinion, in addition to at least a three-year degree, a higher professional qualification was also required, such as legislators, entrepreneurs, senior executives, professionals in scientific, technical, intellectual fields or those performing regulated professions such as doctors, nurses, veterinarians, pharmacists, architects, etc.

Sporting expatriates have been excluded from the new relief, while benefits for teachers and researchers remain in force with the exclusion of 90% of taxable income.

 

TAX REGIME FOR NEW RESIDENTS IN ITALY

The tax regime for new residents in Italy is an incentive aimed at individuals with high-income capacity or high net worth individuals (HNWI) as the option involves the payment of a lump-sum tax or flat tax of €100,000 for each tax year to which it is exercised but only on incomes generated abroad, that is, not generated in Italian territory.

The relief allows derogating from the application of worldwide taxation or taxation based on worldwide income, subjecting all incomes wherever produced in the world, applicable in Italy, by applying a sort of tax regime for NON-DOMICILED already known in some jurisdictions and also applied in Malta or in the UK.

The option is tacitly renewed from year to year, unless the taxpayer or a family member decides to revoke it, and has a maximum duration of 15 years.

 

FOREIGN PENSIONS IN ITALY WITH A 7% TAX RATE

Those who receive a pension from foreign entities (either a foreign citizen, for example, French, receiving a pension from France, or an Italian citizen residing abroad receiving a pension from Luxembourg) can benefit from a favorable tax rate if they move to live in Italy, more precisely in small towns in Southern Italy.

Based on Article 24-ter of the TUIR:

  • Individuals, holders of pension income paid by foreign entities, who move their residence to Southern Italy, in one of the municipalities belonging to the territories of the regions Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, and Puglia, with a population not exceeding 20,000 inhabitants, or in one of the municipalities affected by seismic events included in the lists, may opt for the subjection of incomes of any category, produced abroad, to a substitute tax, calculated on a lump-sum basis, at a rate of 7%.
  • The option can be exercised by individuals who have not been tax residents in Italy in the five preceding tax periods.
  • The residence must be transferred from countries with which Agreements to avoid double taxation are in force.
  • It is valid for 10 years.
  • It must be exercised with the tax return for the tax period in which the residence is transferred to Italy.

As reiterated by the Revenue Agency itself, “The nationality of the subject transferring is irrelevant, as access to the regime is allowed both to a foreign citizen and to an Italian citizen, provided that the prerequisite of fiscal residency abroad for the period indicated by the provision is met and the last residence was in a country with which agreements of administrative cooperation in the tax field are in force (essentially, in addition to European countries, countries with which Italy has signed a Convention to avoid double taxation)”.

If the individual receives, in addition to foreign source pensions, an Italian pension from INPS, they can still enjoy the 7% favorable treatment on foreign pensions, while the INPS pension received from Italy will be taxed according to the ordinary rules.

TRANSFER OF TAX RESIDENCE TO ITALY, what does it mean in legal and tax terms

Certainly, before making a choice to transfer one’s tax residence, it is necessary to evaluate all implications and advantages in light of both the current Italian legislation modified by the recent regulations issued on the tax residence of individuals and companies, and the laws of one’s country of citizenship and previous tax residence, in the complex intersection of national and international regulations.

Evaluating, before a transfer, the impact of a change in tax residence to Italy with all implications on one’s income and assets, with the help of experts in international taxation, is fundamental to avoid making mistakes or wrong choices.

 

INVESTING IN ITALY: buying a house

It is not difficult to spend a vacation in Italy and fall in love with a country, a place, or a house.

Buying a property is a financially challenging act, often one of the most demanding in a person’s life who decides to invest a large part of their savings, and any mistakes, oversights, commitments made without being aware of the related obligations and legal consequences, can entail significant burdens, so it is necessary to pay attention to what is done and, if necessary, to be assisted by a professional.

You need to start with the appropriate checks before purchasing or signing documents, or include clauses expressly for your protection and safeguarding in the documents.

Read and pay attention to what is subscribed with the irrevocable purchase proposal before making payments.

In drawing up the preliminary contract, specify in detail the terms of the agreement, indicating the cadastral data of the property, permits, the agreed price and payment methods, the state of the property and its freedom from mortgages and loans, the terms for reaching the notarial deed, as well as any specific agreements.

The final phase, which is also mandatory, is the signing of the definitive deed of sale by the two parties through a public act before a Notary.

At this moment, there is the actual transfer of ownership and related obligations.

Becoming the owner of a property in Italy also entails specific annual obligations to pay taxes and expenses in Italy, and any declarative and tax obligations in the country where you have foreign tax residence.

Read here an article on this subject

 

Contact MALTAWAY for a tax relief regime for expatriates in Italy, new resident regime, and foreign pensioners

 

For any clarification, consultation, legal opinion, support for procedures, and questions both about citizenship and special tax schemes in Italy such as the regime for new residents, that for pensioners, do not hesitate to contact us, Maltaway professionals make their international practice of over thirty years available to you.

The advice of an expert in the field can help you resolve all doubts and understand all CONSTRAINTS, implications, advantages, and disadvantages compared to your origin situation and country of residence and make an informed choice before considering a transfer.