The Italian legislation is attracting High net worth Individuals (HNWI) and international property buyers through its new regulations with tax exemptions, deductions, and new fiscal options.
Taxation option n. 1 – Italian Budget Law 2019
- The new regime is applicable on all foreign-source income and gains (not only on the foreign pension) and provides for an exemption from wealth taxes on foreign assets;
- The election for the new regime shall be related to the tax period in which the tax residency has been transferred to Italy and it is valid for the next 5 years;
- The new 7% flat tax regime is applicable to international individuals that respect the following requirements:
- holding pension incomes and other remunerations paid by foreign private/public entities;
- who transfer their residence to Italy from Countries having administrative cooperation agreements (e.g. DTA, TIEA, FATCA) currently in force with our Country;
- that have not been Italian tax resident for the 5 years preceding the one for which the option is effective;
- There is “a catch”: individuals have to transfer their residency in one of the municipalities with a population not exceeding 20.000 inhabitants located in one of the regions of Southern Italy (so this taxation is applicable to Sardinia);
- Italian-sourced income is excluded from the flat tax and it is taxed under the ordinary regime.
The election for the new flat tax regime for Retirees shall be reported in the income tax return related to the tax period in which the tax residency has been transferred to Italy and it produces its effects for the next 5 years.
The option for the new flat tax regime for Retirees ceases its effects:
• at the end of the fifth year;
• if revoked from the individual, without any prejudice to the effects produced in previous fiscal years;
• if the Italian Tax Authority challenges the lack of the requirements provided by law;
• in case of omitted or partial payment of the 7% flat tax yearly due within the deadline.
Taxation option n. 2 – Italian Budget Law 2017
- UHNWI can have flat taxation at 100.000 € per year if they transfer their residency in Italy, independently of their incomes and turnover.
- There is also the possibility of transferring the residency of the family members that will pay 25.000 € each per year.
- The option will be deemed tacitly renewed each year, but the effects will cease 15 years after the first valid tax year.
Taxpayers should indicate in the application:
- personal information and tax code (if any), in addition to the address of residency (if already resident in Italy)
- verification of non-resident status in Italy for a period of at least nine tax years preceding the option’s effective date
- jurisdiction of the taxpayer’s residency prior to the exercise of the benefit
- foreign states or regions in relation to which the taxpayer wishes to exercise the right not to benefit from the substitute tax.
News about Taxes regarding Succession Law and Estate Planning
According to the changes introduced by the Growth Decree 2019, the new tax break is even more powerful and it is available to a larger number of taxpayers since 2020.
This is how the new regime works.
- The percentage of the worker’s income that is exempt from taxation has risen to 70%;
- A 90% exemption will now be available to those who move their residence in the South of Italy (ex. Sardinia);
- The tax break is very wide, in fact, it applies to income from employment or equivalent activity, to directorships and to self-employment:
This new tax break will be valid for 5 years and it could be renovated for 5 more years for an exemption of 50%.