On 8 March, Italian tax authorities finalised guidance for expats and returning citizens looking to relocate their tax residence to Italy.
The freedom to remit funds to Italy, and the length of time this can be done, makes it more appealing than many expat tax systems, according to a note from lawyers Baker McKenzie in Milan.
How to qualify
Under the beneficial tax regime, eligible taxpayers, who must not have qualified as Italian tax residents for at least nine of the past 10 years, may apply to pay an annual €100,000 (£87,000, $123,120) substitute tax on their foreign-sourced income.
Qualifying individuals will also not incur the Italian statutory progressive tax on foreign-sourced income, provided the annual €100,000 substitute tax is paid and irrespective of the actual amount of the foreign income and its remittance to Italy.
“The regime seems to offer better and more straightforward conditions than the regimes currently implemented by many other jurisdictions.”
Additionally, there is an exemption from gift and inheritance tax on the assets transferred into, and those located outside of, Italy.
Capital gains arising out of transfers of significant interests in foreign companies generated in the first five years are subject to Italian statutory taxation, which grants an exemption of roughly 50%.
Those interested in joining the regime must submit a tax return for the fiscal year in which they became an Italian tax resident (ie by September 2018 for financial year 2017) or the year after.
Individuals can pull out of the regime at any time.
Apply in advance
“However, it is advisable to seek an advance ruling from the tax authorities at least four months before the deadline for filing the tax return in which the election is made (the tax authorities have 120 days to respond to a request),” advise counsels Francesco Florenzano and Giulio Allevato in a note on the regime.
“Furthermore, the guidelines clarify that a request for an advance ruling can be filed even before the individual moves to Italy.”
Expedited visas
The new legislation also provides for an expedited visa process for foreigners wishing to take advantage of the regime. It is possible to exclude income generated in certain jurisdictions from the scope of the regime, provided that those jurisdictions are expressly listed in the application form.
This foreign-sourced income will be liable to Italian statutory taxation (or to a relevant double tax treaty) and benefit from a tax credit.
Relatives
Furthermore, the regime can be extended to one or more relatives of the qualifying individuals, provided that the relatives meet the requirements and relocate their tax residence to Italy.
“The regime seems to offer better and more straightforward conditions than the regimes currently implemented by many other jurisdictions,” comment Florenzano and Allevato.
“However, as we believe that it will take a considerable amount of time to collect and file the inherent documentation and to accurately evaluate all of the relevant aspects of an individual’s position, it is advisable that those individuals who are interested in adhering to the regime beginning in [financial year] 2017, initiate their consultation with their tax and wealth advisers as soon as possible.”
