Italy: the new flat rate tax regime on foreign income
Italy has introduced a new tax regime aimed at encouraging non-resident high net worth individuals to move their fiscal residence to the country.
The new rules mean that Italian-source income is taxed as usual, while foreign income and gains are sheltered from Italian tax, subject to the taxpayer paying a flat rate charge of €100,000 each calendar year. It can also be extended to family members, at a cost of €25,000 per member. This flat tax replaces any personal income tax normally due on foreign income.
To be eligible for this non-domiciled tax status, the individual must:
- transfer their place of residence to Italy
- not have been resident in Italy in the last nine years out of the previous ten preceding their relocation to Italy
- apply for and receive a favourable ruling from the tax authorities, and submit their annual personal income tax return for their first tax year as an Italian tax resident.
This privileged tax status is available for up to 15 years, unless the individual misses any tax payments. It is important to point out that there are some foreign countries to which these rules will not apply.
The annual charge also exempts individuals from the usual requirement to disclose foreign investments in their tax return. Furthermore, inheritance and gift tax will be due only on assets located in Italy.
The annual charge must be paid in a single installment. It does not give any credit for taxes paid overseas on non-Italian source income.
For more information, contact:
Dirk Prato or Gian Luca Nieddu
Hager & Partners, Italy
T: +39 (02) 7780711