The Italian flat tax regime for new residents
The Flat Tax Regime for the New Residents in Italy
The rapid global economic crisis has raised some arguable difficulties for Italy regarding tax rates. In response to those scandals, the government of Italy has introduced a new provision in the “Budget law of 2017“. The brochure is known as the ‘Flat Tax regime.’ Within this, it has now debuted in the lump-sum taxation league of Europe.
In general, the purpose of the regime is to encourage non-Italian residents to migrate and invest in Italy. Individuals transferring their residential tax to Italy and who have not been paying their residence tax for 9 to 10 years are eligible to enjoy this benefit.
The Execution Process of the Italian Flat Tax Regime
Under this new provision:
- The individuals who are paying non-residential tax in Italy are now eligible to pay a substitute amount of flat tax for a maximum of 15 years. They can choose to pay a rate of Euro 100.000 per year on all types of non-italic sourced income.
- As for the entry of their family members such as spouse, parents and siblings, the flat tax rate is Euro 25.000.
- Any other non-italic source income produced under the non-domiciled tax residence will fall under the ordinary taxation rate applicable in each year.
- In the first five years, the capital gain on non-Italian ‘qualified’ shareholding will be classified under the ‘Cherry picking mechanism’. It ensures that foreign assets and investments do not activate any kind of income taxation in Italy.
- Inheritance and gift tax will only be calculated based on the assets physically held in Italy.
The Advantage of the Lump-Sum Tax Regime
- There is no tax for foreign real estate and financial investment abroad.
- The managers and professionals can avoid paying 50% of taxable income in 5 years.
- The taxable remuneration is calculated at a 90% rate for three years for the researcher and professors.
- The investors are elected to get a fast track visa for two years. The extension of three years is possible under certain conditions.
Since its inception, the regime has gone through some significant changes to fill a gap between the previously benefited flat taxpayers and the recently qualified ones. The bill that was improvised in 2020 allows an extension of five years for the 2021 tax bill. The rate for the extension period is 50% which is similar to the previous rate. This way, no new residents will get left out of the provision.
If you are a new resident in Italy and are interested in the flat tax, lawyer Chiara Tosi can help you understand how it works and assist you with all the paperwork.