There’s no shortage of excellent reasons to immigrate to Italy, from magnificent landscapes to cultural delights and cuisine. You can now add taxation to the list thanks to the Italian tax system, which offers various tax incentives for expats, remote workers, retirees and high-net-worth individuals to move to Italy to live or work there. Here’s everything you need to know about tax incentives to move to Italy.
Tax relief scheme for new residents.
The tax relief scheme for new residents aims to attract investments in Italy by encouraging individuals to transfer their residence to Italy. The scheme features an incentive on Italy tax on foreign income for individuals who move to Italy regardless of nationality. To qualify, you must have been a non-tax resident in Italy for at least 9 out of the 10 years preceding your transfer to Italy.
Residence is defined as the place of habitual abode or where you usually live for a particular period, while domicile refers to the principal place of business or personal interests. If either of these conditions exists, you can qualify as a resident in Italy for tax purposes.
The incentive allows high-net-worth individuals to pay a substitute Italy tax on foreign income for a maximum period of 15 years and can amount to €100,000 for each fiscal year. The expat tax Italy scheme can also be extended to family members and allows the payment of substitute tax amounting to €25,000 on the foreign income generated by each member.
Income concerned
The substitute income tax in Italy for foreigners only applies to income generated abroad and can include different types of income, such as:
- Self-employment income from activities carried out abroad
- Income from permanent establishment business activities carried out abroad
- Income from employment carried out abroad
- Income from properties that new residents own abroad
The ‘lavoratori impatriati’ scheme
The lavoratori impatriati scheme is a kind of Italy expat tax break intended for freelance workers and employees who transfer their place of residence to Italy. Under the scheme, income from employment or self-employment generated in Italy by workers is taxed at 30% of the amount or 10% if you become a resident of regions like Molise, Abruzzo, Apulia, Campania, Sardinia, Basilicata, Sicily or Calabria.
Who qualifies for the lavoratori impatriati scheme?
A decree by the Ministero dell’Economia e delle Finanze or the Minister of Economy and Finance notes that the favourable tax regime under the lavoratori impatriati scheme applies to workers holding university degrees and are citizens of the European Union or citizens of non-EU countries with whom agreements exist for double taxation or exchange of information for tax purposes. Such citizens must:
- Have worked continuously as an employee, self-employed or in business for the last 24 months outside Italy or studied abroad and acquired a university degree or post-graduate qualification.
- Work in Italy as an employee or in self-employment.
Self-employed workers must commit to staying for at least 2 years and not have been resident in Italy for the 5 tax periods before the move. They must also work mainly within Italian territory.
Employees must ensure that:
- They hold managerial roles or possess high specializations or qualifications.
- They commit to staying for at least 2 years and have not been residents in Italy in the 5 tax periods before the move.
- They work mainly within the Italian territory
- They work in local enterprises or a company that directly or indirectly controls the enterprise.
Both fixed-term and permanent employment contracts are considered valid, and other employment relationships are treated as such for tax purposes. You can also qualify for the benefit if you move to Italy to work in a permanent establishment of a foreign company where you were already employed. Workers are then seconded to Italy under an employment relationship that was set in place abroad with a company that is connected to an Italian company can also qualify.
How to benefit from tax incentives
To benefit from the tax incentives, employed workers must submit written requests to their employers, and the request must contain the following:
- General personal information like your name and date of birth
- Your tax identification number
- Indication of the date of the first employment contract in Italy
- Declaration certifying you meet the conditions for the tax incentives for which you’re applying
- An indication that you currently reside in Italy
- Commitment to promptly communicating a change in residence before the end of the minimum period
- A declaration certifying that you’re not simultaneously benefitting from other tax incentives
The employer will apply the benefit from the pay period following the request and at the time adjustment from the hiring date. If the employer cannot grant the benefit, you can still benefit from it directly in the tax return, provided you meet the requirements established by law.
If you’re self-employed, you can benefit from the tax regime directly when submitting your tax return. Alternatively, you can benefit from incentives when applying the withholding tax your client makes on the fees received, which requires you to submit a written request to your clients.
Such requests should be made according to Presidential Decree No. 445/2000, which includes completing the Italy tax exemption application form for non residents. Various online tools provide you with an expat tax calculator and allow you to modify tax exemption application form for non residents online.
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The FinGlobal team can help you with taxes, money transfers, pensions, and with cashing in South African retirement annuities and ensure your emigration process is as smooth as possible. They can help increase your chances of success and provide professional support and advice during and after your immigration to Italy. Contact FinGlobal today by calling +27 28 313 5600 or emailing info@finglobal.com.