Italy: Non-resident individuals who transfer their place of residence to Italy
Gian Luca Nieddu
Starting from 2017, non-resident individuals who transfer their place of residence to Italy may opt for a preferential tax regime with regard to foreign source income.
The new tax regime will apply under the condition that the individuals have not been resident in Italy for nine years out of the previous 10 years (in this regard, a specific ruling may be submitted to the Italian tax administration).
The option can be exercised by the deadline for filing the income tax return for the fiscal period in which the individual's residence is transferred to Italy, or in the following year.
The detailed rules for exercising this option are provided in the Decree of the director of the Italian tax agency dated March 8 2017. Although the option can be revoked, it is valid for a maximum of 15 years.
Under an objective standpoint, the preferential tax regime regards the individual income tax (IRPEF), the inheritance and gift tax and other indirect taxes applicable to immovable properties and financial activities held abroad (IVIE and IVAFE).
Individual income tax (IRPEF)
According to the preferential tax regime, individuals will be taxed as follows.
With regard to national source income, individuals will be taxed according to the income tax return according to the IRPEF ordinary rates, which range between 23% and 43%.
Income of a financial nature will normally be subject to a withholding tax of 26% (in some cases, 12.50%) levied by the intermediary.
Foreign source income
With regard to foreign source income (immovable property existing abroad, dividends of foreign companies, capital gains from the sale of non-qualified shares of foreign companies, etc.), individuals will pay a flat tax equal to €100,000 ($106,000) for each fiscal year.
Capital gains from the sale of qualified shares (shareholding higher than 20%), realised in any of the five fiscal periods following the option, are excluded and subject to the ordinary income tax. Starting from the sixth year after the option, those incomes will also be subject to the preferential tax regime. Any family member who meets the conditions requested may apply for the preferential tax regime and pay a flat tax equal to €25,000 for each fiscal year.
Inheritance and gift tax
With regard to individuals whose estate is being administered during the period of validity of the option, the inheritance tax will apply only to goods and rights existing in Italy. The same rules will apply with regards to gifts made over the lifetime of the option. Thus, goods and rights existing abroad will not be taxable for inheritance and gift tax purposes.
IVIE and IVAFE
Furthermore, such individuals and their family members are exempt from the real estate abroad value tax (Imposta sul valore degli immobili all'estero, or IVIE) and from the financial activities abroad value tax (IVAFE), respectively applicable at a rate of 0.76% and 0.2%.
Lastly, such individuals and their family members do not have to comply with the rules regarding the so called "monitoraggio fiscale". Thus, they do not have to show in their tax return the goods and rights held abroad.
Barbara Scampuddu (firstname.lastname@example.org) and Gian Luca Nieddu (email@example.com)
Tel: +39 02 7780711