The new measure was initially announced last December in Italy’s Finance Bill for 2017 and was approved by parliament a week later before former prime minister Matteo Renzi resigned following an embarrassing defeat in the Italian referendum.
Similar to the UK’s non-dom system, the new flat rate tax of €100,000 ($107,865, £86,306) a year, which went live on 8 March, will give foreigners a special status exempting them from paying Italian tax on any offshore income and gains.
This charge can also be extended to family members, at a cost of €25,000 per person.
One of the conditions is that the individual must reveal their tax residency location to the Italian authorities and would have had to have resided abroad for nine of the last ten years.
The regime is available for up to 15 years, unless the individual fails to pay the charges.
A person is considered an Italian resident for tax purposes if they are in the country for more than 183 days, or six months.
Non-dom style regime
International law firm Withers has previously said that it had lobbied the Italian government to introduce this special tax status.
“This timing, which coincides with the changes to the UK’s ‘res-non-dom’ regime, suggests that Italy might be seeking to woo high net worth individuals looking for a new home following Brexit or deterred by the tightening of rules in the UK.
“The approved rules contain recommendations to simplify Italy’s immigration law in connection with the new tax system,” said the firm in a note published in December.
Brexit
Meanwhile, a former Italian tax official told Bloomberg BNA the initiative is an attempt to entice UK-based high net-worth individuals (HNWs) to set up residency in Italy as a way to remain in the European Union following Brexit.
“The idea is that it will help raise revenue through the taxes collected from these individuals as well as from their economic activities: workers they may hire, property sales, and so on,” Francesco Brandi, former tax official turned university professor told the publication.
Italy’s local media are speculating the measure could attract at least 1,000 wealthy individuals, adding an additional €100m to state coffers.
