INDEX
The 2017 Budget Law introduced an optional tax regime that replaces the IRPEF (Personal Income Tax). This new regime applies to individuals (and, upon request, their family members) with significant assets held abroad. Under this law, these individuals can enjoy substantial tax benefits if they transfer their tax residence to Italy and meet certain requirements:
Transfer of tax and administrative residence to Italy.
Not having been a tax resident in Italy for at least 9 of the last 10 years.
Individuals meeting these criteria can benefit from the following advantages:
Substitute tax of €100,000 per year on income earned outside Italy. This tax regime can also extend to family members, with a substitute tax of €25,000 per family member.
Exemption from declaring foreign investments and financial activities.
Exemption from paying the tax on foreign real estate (IVIE) and the tax on foreign financial investments (IVAFE).
Exemption from taxes on donations or inheritances related to assets and properties held abroad.
Application for this tax regime is subject to approval by the Revenue Agency. Additionally, the option lasts up to 15 years and can be withdrawn by the applicant at any time.
The so-called “Investor Visa” represents one of the most important laws approved by the Italian Parliament in recent years to attract new investors to Italy. This regulation provides a simplified process and fewer requirements for obtaining a visa for Italy. The regulation stipulates that foreign investors intending to make an investment of:
- €2 million in Italian government bonds, which must be held for at least two years.
- €500,000 in an existing and operational capital company, to be held for at least two years.
- €250,000 in an innovative start-up, also to be maintained for 2 years.
- €1 million in philanthropic initiatives to support projects and activities of public interest in the fields of culture, education, immigration, scientific research, and cultural heritage restoration.
Foreign investors wishing to apply for this type of visa must meet the following requirements:
- Demonstrate that the investor is the actual beneficiary of the investment or donation.
- Make the investment or donation within 3 months of entering Italy.
- Show sufficient resources to support themselves and family members during their stay in Italy.
The visa is valid for 2 years and can be renewed for another 3 years if the original investment or donation is maintained. After 5 years (2 + 3), it is possible to apply for a long-term residence permit, which requires taking tax residence and filing income tax returns in Italy. After 10 years of legal residence and stay in Italy, one can start the process to apply for Italian citizenship.
The regulation to attract new workers to settle in Italy includes a series of measures and laws aimed at drawing human capital through special tax regimes. This law allows some individuals to move and live in Italy while achieving significant tax savings. This will be crucial in the coming years as remote work becomes increasingly prevalent.
The group of beneficiaries and the available incentives have been made even more attractive by recent regulations, including former Italian workers who have moved abroad, as well as foreign workers who are not Italian citizens.
Eligible beneficiaries are workers who:
- Have not been resident in Italy in the 2 years preceding the transfer.
- Establish new tax residence in Italy, to be maintained for at least 2 years.
- Carry out their work activity (employment, self-employment, or business) predominantly in Italy.
Additionally, EU or non-EU citizens (provided they come from a country with a double taxation treaty or a tax information exchange agreement with Italy) who:
- Hold a degree and have continuously worked in employment, self-employment, or business outside Italy in the last 2 years.
- Have continuously studied outside Italy for at least 24 months, obtaining a degree or post-graduate specialization.
The benefits for these individuals include a tax relief related to the reduction of taxable income. Income from employment, self-employment, or business is taxed at a reduced rate of 30% for 5 years. Moreover, if residence is established in one of the Southern Italian regions (Abruzzo, Molise, Campania, Puglia, Calabria, Basilicata, Sardinia, Sicily), the tax rate is reduced to 10%.
The benefit can be extended for an additional 5 years (up to 10 years from the transfer of residence to Italy) if the worker:
- Has at least one dependent minor child.
- Becomes the owner of at least one residential property in Italy.
The additional 5-year extension allows for a taxable income rate of 50%.
The elective residence visa allows foreigners to enter and stay in Italy for extended periods without needing a work visa or other special visas. This is a long-term visa for foreigners who wish to reside and travel in Italy for more than 90 days per year. Applicants must meet the following requirements:
- Purchase or lease a home in Italy.
- Have a total income of at least €32,000.
- Have a stable and regular financial situation.
This visa allows foreigners to enter and stay in Italy for an indefinite period. However, it is important to note that they may be required to pay taxes in Italy if:
- They are registered with the municipality where they reside.
- They live in Italy for more than 183 days during the fiscal year.
- Italy is the primary center of their interests and activities.
In such cases, the Revenue Agency may require the declaration in Italy of foreign properties, investments, and financial activities and may require the payment of taxes in Italy on these foreign assets.
This is an important fiscal measure for non-EU pensioners who wish to move to or return to live in Italy. The total taxation of foreign income for these individuals is 7% for a maximum of 10 years, not only on pensions but also on income from companies, financial investments, etc.
Non-EU pensioners in Italy who wish to benefit from this tax treatment must meet the following requirements:
- Have a pension paid by a foreign state.
- Have tax residence in a country with a tax treaty with Italy.
- Not have had tax residence in Italy in the last 5 years.
- Obtain a visa for entry into Italy, such as an investor visa, elective residence visa, etc.
- Declare residence in a municipality with fewer than 20,000 inhabitants in one of the Southern Italian regions (Abruzzo, Molise, Campania, Puglia, Basilicata, Sardinia, Sicily).
- Reside in Italy for at least 183 days per year.
