Impatriate Regime: What’s new? Over the years, Italy has introduced a number of tax breaks aimed at reducing labour costs for companies and increasing the disposable net income for employees or customers in an effort to stimulate investment and growth in the economy. The positive amendments to tax regimes evidence the Italian government’s commitment to attracting skilled foreign workers who bring the benefit of their experience from abroad to aid the development of the country. The latest beneficial changes have been introduced in the form of the Impatriate Regime which will be the focus of this article. Continue reading to learn what the Impatriate Regime is, who is eligible for tax relief under this scheme and top tips for filing correctly to avoid retroactive tax penalties. What is the tax-benefit? On 14 September 2015, the Italian Government approved the Internationalisation decree which introduced tax incentives for highly-skilled EU and non-EU individuals who meet certain criteria. On 8 June, a further decree was issued confirming the start of the law and the requirements for an individual to apply for relief. Under the Impatriate Regime, the taxable income assessable in Italy for qualifying individuals is reduced to 50% of the total income received. Before changes came into effect in 2017, 70% of income was taxable. The new special regime benefit became available during the 2016 fiscal year and was extended in 2017 until the 2020 fiscal year. The tax benefit for impatriate workers applies to the tax year in which they transfer their tax residence to Italy and the following four years. Please continue reading for further explanation of when the qualifying tax year begins. Who is Eligible?
Individuals who have NOT been resident in Italy anytime during the previous five fiscal years before coming to Italy or two years if the individual is an EU citizen or a citizen of Non-EU DTT/IEA country (meaning from a country which holds a Double Taxation Agreement or Information Exchange Agreement with Italy). Impatriates must also satisfy both of the following conditions:
They must have lived, worked or studied continuously abroad during last 24 months and;
They must have decided to move to Italy immediately after studying, working or gaining post-graduate qualifications abroad continuously for a period of the last 24 months or more.
Other requirements:
They must commit to remain tax resident in Italy for at least two consecutive fiscal years.
They must be employed by an Italian resident company either directly or indirectly and all work activity must be performed primarily in Italy and carried out for an Italian resident company.
An additional new requirement from the fiscal year 2018:
Individuals must hold a university degree. This applies to either an Italian university-level degree or to a degree obtained abroad, but they must be certified with a “declaration of value” by the Italian Consulate in the country issuing the degree. The declaration attests (in the Italian language) that it is, in fact, a university-level degree.
When is an individual disqualified and what happens? The impatriate worker loses the tax benefit if the residence in Italy is not maintained for at least two years. The two-year period starts from the tax period in which the worker becomes fiscally resident in Italy, and they must perform employment activity in Italy for more than 183 days in each tax year that they special regime in operated. For example, if an individual has moved to Italy in February 2016, and has therefore acquired the tax residence for the entire year, the two-year period will be completed on 3 July 2017, that is to say, after 183 days which determines the tax residence for the entire year. On the other hand, if the worker has moved to Italy in October 2016, he cannot be fiscally resident in Italy in that year and the two-year period will begin to run from the next tax period (2017). If the impatriate worker fails to maintain his residence in Italy for two consecutive tax periods, then the benefits claimed to date are recovered, along with relevant penalties and interests. Get in touch Hopefully this article has answered all of your questions regarding important changes to the Italian Impatriate Regime, but our consultants are able discuss requirements in more granular detail based on your individual situation. Please get in touch if you have any questions.