Italy is one of the most attractive countries in the world due to its wonderful cuisine, fascinating history and culture, and stunning landscapes which vary from one region to the other making the Bel Paese a very special and diverse country to live in.
In 2017 the Italian government introduced a flat tax regime which consists of a flat tax charge of €100,000 per tax year, in lieu of standard tax rates for high-net-worth foreign individuals who are willing to relocate to Italy and to establish their residency there. So what does the regime entail specifically? This article will provide you with an insight into the Flat Tax regime and how to apply.
What is “residenza fiscale”?
This term refers to a place where an individual is registered for tax purposes. In order to be considered a resident for tax purposes, an individual must be registered at the “Anagrafe”, the registry office in a municipality’s town hall for at least 183 days, or 184 in leap years.
Arguably, one of the reasons why many people decide not to establish their residency for tax purposes in Italy is due to the fact that Italian income tax rates are quite high among the OECD. Nevertheless, in 2017 the Italian government introduced a new Flat Tax regime for high-net-worth individuals.
Who can apply for the Flat Tax regime?
This aim of the regime is to encourage investments and attract high-net-worth individuals (HNWI), who have not been Italian tax residents for at least 9 out of the 10 years preceding their move to Italy. In essence, the benefit consists of the possibility for these individuals who transfer their tax residence to Italy to apply a substitute flat tax, which is equal to €100,000, to their foreign income. This can also be extended to their family members who will need to pay a flat tax of €25,000 each.
This tax provision is valid for a 15-year period only.
What does the Flat Tax regime apply to?
It is worth mentioning that the Flat Tax regime is applicable to the following:
– a salary
– rental income
– financial compensations
– earnings from self-employment
– dividends.
How do you apply?
In order to have access to this regime, taxpayers need to obtain an advance tax ruling from the “Agenzia delle Entrate”, (Italian Revenue Agency).
The above-mentioned advance tax ruling (in Italian “Imposta 
Anticipata”) enables resident and non-resident taxpayers to prevent litigations with the Revenue Agency by requesting a preventive, written clarification of how the tax provisions are applied. When the taxpayer submits this enquiry, he or she will need to provide detailed information about his or her specific circumstances. In particular, the individual will need to submit a valid form of ID and his or her Italian tax code, and indicate the jurisdiction or jurisdictions under which the individual was a tax resident prior to the year in which he or she applied for the flat tax regime.
The Revenue Agency will then have 90 days to reply and an additional 60 days if further details or documentation are missing. If the Revenue Agency does not reply within the above-mentioned time limit, the taxpayer’s interpretation of the taxation that applies to his or her case is considered to be accepted.
Taxpayers are free to terminate the flat tax regime at any time; however, their foreign income will be taxable at progressive tax rates. Furthermore, if the payment of €100,000 is not provided, or the taxpayer renounces his or her Italian tax residency, the flat tax regime is discontinued.
Finally, it is worth pointing out that if you are a high-net-worth individual and you are planning on relocating to Italy you might want to consider applying for the elective residence visa or the investor visa as the flat tax regime does not come with any specific visa.
In conclusion, if you are a high-net-worth individual who is considering relocating to Italy, and you do not want to pay ordinary taxes on your foreign income, applying for the flat tax regime may be the best option for you.
If you would like further information about this regime or if you are seeking assistance to apply, please contact our team at info@italianrealestatelawyers.com. We will be happy to assist you!
