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Analysing tax rules around repatriated employees and the brain gain scheme

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Gian Luca Nieddu and Barbara Scampuddu of Hager & Partners analyse the new tax provisions concerning repatriated employees as well as brain gain tax advantages.

The Italian law decree 34 which came into effect on April 30 2019 (the so-called Growth Decree) was converted into Italian law 58 on June 28 2019 (Italian Official Gazette 151, June 29 2019) and became effective on June 30 2019.

A set of provisions included therein regards repatriated employees and the brain gain scheme.

The amendments to the provisions on repatriated employees under Section 16 of the Italian law-decree 147/2015 and to the brain gain scheme under the Italian law-decree 78/2010 were confirmed.

More specifically, the income gained from employment or self-employment in Italy of taxpayers that become resident in Italy from 2020 adds only 30% to total income (reduced to 10% if they relocate to the regions in the south of Italy), provided that:

a)    workers have not been resident in Italy in the two previous tax years and that they undertake to stay resident in Italy for at least two years;

b)    work is carried out mainly in Italy. 

As of 2020, the tax advantage also applies to individuals starting a business. Half of the tax advantage applies for a further five years if: a) workers have at least one dependant child under the age of 18 (reduced to 10%  if they have at least three dependent children under the age of 18); b) workers become owners of at least one residential property in Italy after or in the 12 months prior to relocating to Italy. 

The brain gain tax advantages under Section 44 of the Italian law-decree 78/2010 were re-confirmed for six years or for eight, 11 and 13 years under specific conditions (number of children under 18 and purchase of a residential property unit in Italy). Both tax advantages do not require beneficiaries to be registered with the Registry of Italians Resident Abroad (AIRE) for the period of actual residence abroad. This applies also to past years. However, if objections have already occurred, no refunds will be made.

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