People who want to live in Italy now can save more on taxes
The tax regime envisaged for “Impatriated” workers (ie those workers, Italian or foreign, who, after a period abroad of at least two years, transfer their residence to Italy and in Italy mainly carry out their working activity) has become more advantageous and attractive , since it is considerably enlarged, with reference both to the categories of beneficiaries and to the possible duration and amount of the incentive, following the changes made by Art.5 of the DL n. 34/2019.
These changes, introduced by the Decree, significantly increase the attractiveness for the subjects, Italian or foreign, who intend to move to Italy to carry out their working activity (as an employee, self-employed or entrepreneur). The differences from the previous regulatory framework include that:
- Tax base is reduced by 70% (instead of 50%) and even 90% for those who transfer their residence to the regions of Southern Italy (Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria Sardinia, Sicily).
- The duration of the benefit is confirmed in 5 years, but is increased to 10 years for individuals with at least one dependent child or who become owners of a residential property in Italy after the transfer or in the previous 12 months. In this case, the reduction in the tax base is 50% in most cases and 90% for workers with at least 3 minor children or dependent or in the case of transfer to regions of southern Italy.
- For Italian and European Union citizens, any reference to academic qualifications, managerial duties or requirements of high specialization or qualification disappears.
- For citizens coming from countries outside the EU, the rule is applied on the condition that they come from a State with which a convention against double taxation is in force and that they are workers with a university degree and who have carried out continuously an employment, self-employment or business activity outside Italy in the last 24 months, or have carried out a study activity outside of Italy continuously for the last 24 months or more, earning a university degree or specialization post graduate
- The period of necessary residence abroad before the return (or first entry) in Italy is reduced from 5 to 2 years;
- The reference to the need, for employed workers, for the activity to be carried out at a company residing in Italy disappears;
- For those who had previously resided in Italy, the non-compulsory registration of AIRE is expressly contemplated for the purpose of proof of residence abroad, provided that the worker has been effectively resident in another State with which there is an agreement against double taxation in the two tax periods prior to the transfer.
Who are the beneficiaries?
All citizens residing abroad (in Europe and outside Europe) who:
- Have not been resident in Italy for the last 2 years
- Establish their residence in Italy and undertake a dependent, autonomous or business activity.
- Promise to remain in Italy for at least two years.
What does the benefit entail?
The IRPEF taxable income, linked to employed, self-employed or business, is reduced to 30% (to 10% if you move to a region of Southern Italy).
When does the benefit fail?
If the condition of staying in Italy for 2 years is not met, the benefits already acquired are recovered together with the penalties, which range from 90% to 180% of the tax due and not paid, for each year of facilitation enjoyed.
Concept of Fiscal Residency
The decisive moment for the benefit of this advantage. The notion of fiscal residency is disciplined by art. 2 of the TUIR (Single text on taxation and earning). Those persons who are most likely to be registered in Italy, who have their domicile in the national territory, who are domiciled in the national territory, or who habitually live in Italy.
Therefore, based on the definition of “tax residence” established by art. 2 of the TUIR, which provides for the need to be resident in Italy for most of the tax period to be considered fiscally resident in Italy, the tax relief in question will be applicable by the subjects who will transfer the residence to Italy after 3 July 2019 , still with respect to the income received starting from 1 January 2020. As a result, any income earned in Italy during 2019 by these workers will be subject to ordinary taxation.
This article was originally published on The Florentine, a news magazine for the English community in Italy, with the ““Impatriated” workers: new rules, lower requirements and greater benefits from 2020”.