The Italian tax law grants different special tax regimes addressed to inbound individuals meeting certain conditions. Each special tax regime provided by the Italian tax law grants different benefits to the taxpayer.
Special tax regime for inbound
The special tax regime provides for the application of ordinary tax rates (IRPEF) on 30% on the employment income produced in Italy (reduced to 10% under certain circumstances). The special tax regime is applicable for five years that could be increased to ten years under specific circumstances.
The requirements to qualify for the special tax regime are:
- The individual should have qualified as non-tax resident of Italy for the two years preceding the arrival in Italy
- The individual should commit to live and work in Italy for at least two years, qualifying as tax resident of Italy according to art. 2 of the Italian tax law (TUIR)
- The individual should work predominantly in Italy (ie 183 days per year at least).
The individual is required to pay taxes on the 100% of employment income produced during the previous years if that individual fails to meet the requirements. Penalties apply.
Special tax regime for athletes, football players, and sports professionals
Individuals falling under the definition of professional athletes provided by Law n° 91/1981 and meeting the requirement listed under 'special tax regime for inbound', can benefit from the application of ordinary taxation on the 50% of the taxable income produced in Italy. Further to the ordinary taxation, a solidarity surcharge of 0.5% of the taxable income is due. The special tax regime is applicable for a maximum of five years.
Special tax regime for high net worth individuals (HNWI)
The special tax regime provides that foreign income is subject to a substitutive tax, amounting to €100,000 per year. The law provision on HNWI is applicable to any individual who meets both the following requirements:
- They become an ordinary tax resident of Italy according to the Italian tax law, as explained above
- They have not (or ever) been a tax resident of Italy during nine tax years over the previous ten.
Further to the payment of substitutive taxation of foreign income and investments, the law also provides:
- for the exemption from disclosure obligations relating to foreign investments (so-called RW Form)
- from the payment of wealth taxes (IVIE and IVAFE)
- from the payment of inheritance or donation taxes on assets held abroad which would be due in case of tax residency of the deceased or of the donor.
The tax regime applies for 15 consecutive years.
The income produced in Italy, under the application of the special tax regime for HNWI, is subject to ordinary taxation.
Exceptions to the substitutive tax are capital gains realised during the first five years under the new tax regime, on foreign investments and deriving from the sale of qualified shareholdings. These are not subject to the flat tax but rather to the ordinary Italian taxation.
Special tax regime for retired people
Retired individuals moving tax residency to specific regions of the South of Italy could benefit from the substitutive taxation of foreign-sourced income (including pensions) at a 7% flat tax rate, calculated on foreign-sourced income and investments.
The special tax regime is applicable to retired individuals meeting any of the following requirements:
- they receive a foreign-sourced pension
- the individual qualified as a non-tax resident of Italy for the five tax years preceding the arrival to Italy
- the individual moves and registers with the Anagrafe of one of the Municipality of Southern Italy. The law provides the list of the Regions where the individual should transfer the residency and specifies that the municipalities should have no more than 20,000 resident individuals
- the last country of residence of the pensioner must have entered into an administrative cooperation arrangement with Italy.
If the retired individual fails one or more of the conditions above, taxation will occur at the ordinary rates applicable to different incomes.
The tax regime grants the exemption from the disclosure of investments held abroad and from the payment of wealth taxes on assets held abroad (IVIE and IVAFE). On the contrary, the tax regime does not grant the exemption from inheritance and gift tax.