Special Tax Regime for Foreigners

A special tax regimes have been introduced in order to create incentives for individuals to become tax residents in Italy. These optional regimes include a 100k euro lump-sum tax regime, meant to attract high net worth individuals to Italy, and a 7% flat rate of tax, meant to attract pensioners to certain regions of Italy, including Sardinia. These regimes are briefly described, in general, and non-exhaustive terms, below. We would be delighted to provide further information or connect you with an Italian tax expert that can provide advice.

1. The 100k euro lump-sum tax regime

The lump-sum tax regime is available to individuals who become residents of Italy, provided that they have been non-resident in at least 9 of the 10 previous years.

The lump-sum tax regime can be summarised as follows:

• All foreign source income and gains are subject to an annual substitute tax equal to €100,000.
• Foreign-held assets are not subject to wealth taxes.
• Foreign-held assets are not subject to reporting obligations on foreign-held assets.
• Foreign-situs assets are not subject to inheritance and gift tax.
• As an exception, foreign source capital gains on substantial participation realised in the first five years of Italian residence are subject to income tax according to general rules. However, this exception can be disapplied through an advance ruling.

The option for the substitute tax regime is effective up to a maximum period of 15 years.

Qualifying family members may benefit from the same regime against the payment of an annual substitute tax of €25,000 (rather than €100,000).

2. The pensioner's tax regime

The pensioner's tax regime is available to individuals who become residents of Italy, subject to the following conditions:

• The individual must have been non-resident in the 5 previous years;
• The individual must receive payments of ‘pension income’, as defined under Article 49, paragraph 2 of the Income Tax Act, from a non-resident entity;
• The individual must transfer his or her residence to a municipality with no more than 20,000 residents in one of the following regions: Sicily, Sardinia, Calabria, Campania, Basilicata, Abruzzo, Molise or Puglia (or to one of the municipalities hit by the earthquakes of 24 August 2016, 26 and 30 October 2016 or 18 January 2017 with fewer than 3,000 residents); and
• The individual must transfer his or her residence from a foreign state that has an administrative cooperation agreement in force with Italy (qualifying States include, among the others, all EU member states and all countries that have signed a tax treaty against double taxation or a tax information exchange agreement with Italy).

The pensioner's tax regime can be summarised as follows:

• All foreign source income and gains (not just the foreign pension) are subject to a 7% flat rate of tax;
• Foreign-held assets are not subject to wealth taxes;
• Foreign-held assets are not subject to reporting obligations on foreign-held assets.

The option for the pensioner's tax regime is effective up to a maximum period of 10 years.

For Any Information about the special tax regime or for any other need please feel free to contact us

[email protected] -+39.0789.754.500