Italian Tax Residency Rules: Tax Benefits for Inpatriate Workers

The special rules for “inpatriates” (expatriates transferring to Italy for working reasons) have been changed in the Italian Budget Act 2021. Income taxation is made easier when taxpayers relocate and commit to live and work in Italy for at least two tax years.

Who are the beneficiaries of this special tax regime?

Tax residency rules for Italian citizens
Under the following conditions, just 30% of employment income and income from self-employment sourced in Italy of workers who transfer their residence to the territory will be treated as taxable income:

  • The workers were not resident in Italy in the two fiscal years prior to the transfer and undertake to reside in Italy for at least two years.
  • The work is carried out mainly in Italian territory.

EU and non-EU citizens
The tax benefits also apply to citizens of the European Union or a non-EU state with which a double taxation agreement or an agreement for the exchange of information in tax matters is in force, with the following requirements:

  • Possession of a degree and having previously been an employee or in self-employment outside of Italy continuously for the last 24 months or more.
  • Having studied continuously outside of Italy in the last 24 months or more, earning a degree or a postgraduate specialisation.

Main features of the “inpatriate tax regime”

Duration
The special regulation is limited in time. It is valid for a period of five years. This begins with the tax year in which the employee moves his tax residence to Italy and includes the four following tax years.

Tax reduction
Following a recent change in the tax legislation, the amount of income contributing to the total taxable amount has been lowered to 30% (50% in the previous legislation), thus providing an exemption for 70% (50% in the previous legislation) of the taxable income.

Extension of the facility (+5 years)
The recent change in the tax legislation also introduced a possible extension of the tax benefit for further five fiscal years. From 2020, the taxable income can be reduced to 50% provided that certain conditions are met. These include:

  • Having at least one minor or dependent child, even in pre-adoptive foster care.
  • Purchase of residential real estate in Italy directly by the worker or their spouse, cohabitant or children, even in joint ownership. This purchase must be carried out “after the transfer to Italy or in the twelve months preceding the transfer”.

The taxable percentage of eligible income produced in Italy in the additional five tax periods can be reduced to 10% if the taxpayer has at least three minors or dependent children, explain the Ecovis advisers.

Budget Law 2021
The 2021 Budget Law changed the definition of ‘inpatriates’ and allows the temporal extension of the tax regime to those who transferred their residence to Italy before 2020 and who, as of 31 December 2019, are already beneficiaries of the inpatriate regime. These subjects can benefit from the reduction of 50% of taxable incomes for an additional five years, provided they meet the specific conditions required by the tax legislation.

Transfer of residence to one of the regions of central and southern Italy (90% reduction)
The taxable income is reduced to 10% for individuals who transfer their residence to one of the following Regions: Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia and Sicily. The reduction also applies to an inpatriate who establishes his/her residence in one of these regions, even if he/she carries out their work activity in a municipality different from the one in which they have established their residence.

For further information please contact:

Antonio Argenio, Partner, Tax Consultant, Certified Public Accountant, ECOVIS STLex Studio Legale Tributario, Milan, Italy
Email: antonio.argenio@ecovis.it

Michaela Simone, Senior Tax Consultant, Certified Public Accountant, ECOVIS STLex Studio Legale Tributario, Milan, Italy
Email: michaela.simone@ecovis.it

Über ECOVIS AG Steuerberatungsgesellschaft

Ecovis is a leading global consulting firm with its origins in Continental Europe. It has almost 8,500 people operating in nearly 80 countries. Its consulting focus and core competencies lie in the areas of tax consultation, accounting, auditing and legal advice.

The particular strength of Ecovis is the combination of personal advice at a local level with the general expertise of an international and interdisciplinary network of professionals. Every Ecovis office can rely on qualified specialists in the back offices as well as on the specific industrial or national know-how of all the Ecovis experts worldwide. This diversified expertise provides clients with effective support, especially in the fields of international transactions and investments – from preparation in the client’s home country to support in the target country.

In its consulting work Ecovis concentrates mainly on mid-sized firms. Both nationally and internationally, its one-stop-shop concept ensures all-round support in legal, fiscal, managerial and administrative issues.

The name Ecovis, a combination of the terms economy and vision, expresses both its international character and its focus on the future and growth.

Firmenkontakt und Herausgeber der Meldung:

ECOVIS AG Steuerberatungsgesellschaft
Ernst-Reuter-Platz 10
10587 Berlin
Telefon: +49 (30) 310008555
Telefax: +49 (30) 310008556
http://www.ecovis.com

Ansprechpartner:
Gudrun Bergdolt
ECOVIS AG Steuerberatungsgesellschaft*
Telefon: +49 (89) 5898-266
E-Mail: gudrun.bergdolt@ecovis.com
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