Italy moves to attract high net worth foreigners

Italy has introduces a Flat-Tax regime in a bid to compete with similar incentives offered in other Countries (Britain, Spain, Switzerland), which have successfully attracted numerous high net worth individuals. Due to Brexit and to the changes taking place in the Swiss forfeit rules taxation Regime for individuals,  which may cause an outflow of capital from UK and Switzerland, Italy aims to collect some of that cash outflow that will change the balance of wealth in Europe.

If compared with similar incentives of the panorama worldwide, the Italian flat-tax regime brings together many of the attractive aspects of the various existing incentives. Among which:

• no limit to the use in Italy of income produced abroad;
• no taxation on donations and inheritances for all assets held abroad;
• absence of requests for information on assets held abroad;
• extension of benefits to the whole family group;
• possibility of carrying out a business activity in Italy;
• possibility of selecting countries to be excluded in order to take advantage of the DTA;
• application also to Italian citizens, in compliance with the foreign residence for at least 9 of the last 10 years.

How does the Italian Flat Tax work:
Wealthy foreigners and Italians living abroad for at least nine years who decide to transfer their  residence to Italy may take advantage of the interesting Flat rate Tax of € 100.000/year which will apply to all their worldwide income.

The flat tax regime applies at the time of submitting the tax return, referring to the tax period in which the tax residence was transferred to Italy.

To ascertain the right to be able to take advantage of the flat tax regime, we recommend first to apply for a ruling to the ruling commission of the Taxpayers Division. The application must contain:

• personal data and, if already assigned, the tax code (codice fiscale), in addition to the residence address in Italy, if already resident;
• the status of non-resident in Italy for a period of at least nine tax periods during the ten preceding the transfer of the residence to Italy;
• the jurisdiction (or jurisdictions) in which the flat tax payer had his last tax residence;
• the countries to be excluded in order to take advantage of the Double taxation agreements (DTA).

The specific checklist provided for by art. 24-bis of the TUIR has to be attached to the application together with the relevant supporting documentation.

The flat tax system will be available to all individuals, regardless of the nationality or domicile, and has a term of 15 years. It can be extended to family members at a cost of € 25’000/year per member.

The Flat Tax Regime cannot be extended to Italian-source income and gains, which will be taxed in the usual way. 

FLD, specialized in international taxation and immigration law, provides tailored advice to individuals interested in establishing their residence in Italy.