Expat workers have even more reason to consider a move to Italy after the government expanded its already-generous tax incentive scheme.
The ‘lavoratori impatriati’ regime was previously aimed at skilled and qualified professionals; such as managers, executives and entrepreneurs, living in Italy.
But, with the introduction of the ‘Decree of Growth’, a wider set of people can apply.
“The ‘impatriate’ regime provides for a partial exemption applicable to Italian-sourced employment income and self-employment income,” Nicola Saccardo, partner at Italian law firm Maisto & Associati, told International Adviser.
“It applies for the tax year in which the transfer of tax residence occurs and the following four tax years.”
The criteria
Any worker, qualified or not, will now be able to apply for tax exemption on any Italian-sourced income, as long as they were not resident in the country in the two years prior to their application.
They also need to commit to residing in the country for at least two years and also carry out their main working activities there.
In addition, the government increased the value of the tax exemption to 70% for the first five years – creating a very favourable regime for expatriates, considering that, usually, Italian progressive rates of income tax range between 23% to 43%, according to law firm Baker McKenzie .
The decree also states that the 50% exemption applies if the expat has at least one minor child, and it increases to a 90% exemption if they have at least three underage children.
Saccardo added: “The decree provides that in some cases – [such as the] purchase of Italian residential real estate – the exemption of either 50% or 90% of the income, depending on the circumstances, is available for an additional five years.”
Be mindful of geography
The tax exemption is also impacted by where in Italy the expat chooses to live.
If they decide to reside in any of Italy’s more ‘deprived’ regions, the tax relief can rise sharply.
“The decree increases the exemption from 50% of the income to 70%. In cases of individuals moving to a southern region (Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia), Sicily or Sardinia, the partial exemption is increased to 90%,” Saccardo told IA.
Those conditions are similar to the regime available to retired expats living in the Mediterranean country.
Italians are also included
Italian citizens who have been tax residents abroad can also apply as long as they have resided in a country with a double taxation treaty for the previous two years.
They must, however, still be registered on the official Italian population list.
The move likely stems from Italy being criticised by the European Commission earlier this year, because some of its incentives were only targeted at foreigners and, as a result, “discriminated” against its own citizens.
The legislation was passed on 1 May 2019, but the changes will only be available from 2020 after the existing scheme expires.
Saccardo added: “The amendments have significantly increased the appeal of the regime. Furthermore, the broadening of the scope has made it applicable to [people like] athletes or coaches.”
