Tax incentives for attracting human capital in Italy-Favorable Tax Regime for New residents

The tax incentive for new residents is intended for individuals who move their residence for tax purposes to Italy and consists in the possibility of paying a substitute tax on income generated abroad.
It is possible to opt for this benefit regardless of nationality.

In fact, access is allowed both to foreign citizens and to Italians, provided they have been fiscally resident abroad for at least 9 of the 10 tax periods preceding the one in which the choice becomes effective.

Individuals already resident in Italy can also benefit from it. In this case, also the tax period in which the residence for tax purposes in Italy has been obtained must be considered in the assessment of the time requirement. Italian citizens cancelled from registers of the resident population and who moved to States or territories having a preferential tax regime can also benefit from the incentive.

However, they must be able to overcome the presumption of residence in Italy. In other words, the Italian citizens who move to Italy from a State with preferential tax regime “tax haven” can benefit from the incentive provided that s/he proves that s/he has not actually been resident in Italy for at least 9 of the 10 previous tax periods.
Moreover, this favourable tax regime may be extended also to the spouse/husband/children of the taxpayer.

In order for the tax incentive to be extended to family members, they also need to move their residence to Italy. Also family members must have been residing abroad for at least 9 of the 10 tax periods prior to the one in which person moves to Italy.

The regime can be applied for a maximum of 15 tax years, starting from the first year in which the taxpayer and his family members transfer their residency to Italy.

Only income generated abroad is subject to the substitute tax. Income generated in Italy is taxed according to the ordinary rules. The following items of income fall within the scope of the regime:

– income from self-employment generated from activities carried out abroad;
– income from business activities carried out abroad through a permanent establishment;
– income from employment carried out abroad;
– income from a property that the new resident owns abroad;
– interest from bank accounts paid by non-residents;
– capital gains generated by the new resident following the sale of unqualified shareholdings in foreign companies.

In order to access this favourable tax regime, it is mandatory to request its application through a tax ruling (so-called interpello) to the Italian Tax Authorities.
This is a specific request to provide an overview on the background/conditions met and the relevant supporting documentation.

Once the tax ruling is submitted, Italian Tax Authorities must provide feedback on the application of the regime within 120 days.
However, before the expiry of the 120 days, the Italian Tax

Authorities may issue a request for supplementary information. In this case, the formal reply of the application of the regime will be issued within 60 days from the day on which the supplementary information was provided.

This favourable regime, provides the possibility to pay a flat-tax on an annual basis covering all income earned outside Italy for each fiscal year.

In details, individuals benefitting from the incentive are equal to €100,000 for each tax year in which the option is valid, regardless of the type and amount of the income generated abroad. If the scheme is extended to the family members, the payment of the substitute tax on the foreign income generated by each member amounts to €25,000.

The payment of the tax must be made through the F24 form in a single payment within the deadline for the payment of the income tax.

The parties concerned, both as principal taxpayers and as family members, must pay the tax by themselves. With the payment of the tax, the tax obligation due in Italy on foreign source income is deemed fulfilled.