Extremely Preferential Tax Arrangements for Prosperous New Residents in Italy, this very favourable tax scheme may apply to you

For many people considering relocation abroad, Italy is an extremely attractive option; for one sector of society, the prospect of living in Italy has become a great deal more appealing since the Italian government introduced a new legislative decree, Article 24-bis of Italy’s Tax Code (TUIR) particularly designed to attract affluent foreign citizens.

The aforementioned Article 24 provides a tax regime allowing new residents in Italy to pay tax, for all income generated outside Italy, (regardless of the amount), at an annual flat rate of tax of €100.000 with a similar provision for family members but a lesser amount of €25,000, following a qualifying period of time. The purpose of the law is to make Italy a more advantageous country for wealthy foreigners to live in, changing their residence to the Bel Paese (beautiful country)and bringing their wealth to Italy. It is a highly innovative tax system which is also present in the tax legislation of other European countries. The Italian law is in fact based on similar laws which have been tried over the years, with success in countries such as France, Ireland, Portugal, Belgium and Spain.

However there are conditions that must be met. Foreigners can take advantage of this highly attractive tax regime provided they have not lived in Italy for at least nine of the preceding ten years. They must transfer their fiscal residence to Italy. Once an individual has successfully applied to take up this option the scheme remains in place for 15 years, however this opportunity can be revoked by the individual at any time; likewise, the tax arrangement could also be revoked by the Tax Administration if the taxable person does not respect the deadlines for the annual payment of € 100,000. 

There is an option to request an assessment from the fiscal authorities, Agenzia delle Entrate, as to an individual’s suitability for the scheme and once an application has been submitted the authorities must reply within 120 days of receipt of the application and associated documentation. However, this is optional and not a mandatory condition related to the flat-rate tax scheme. If no reply is given within the time limit, this will be considered tacit authorization.

If for any reason the flat-rate tax scheme comes to an end for an individual, whether as the choice of individual or revocation by the fiscal authorities due to non-payment of the annual payment of €100,000 the individual will be subject to ordinary tax rate applicable in Italy on all income generated globally which could be at a rate of 43% of their total income.

The lawyers in the Giambrone wealth management team recommend a thorough assessment of all incentive schemes available in Italy to ensure that you are leveraging the best option for you and your family situation.

If you would like to know more about assessing your position with regard to your global assets and your tax liability please click here.