The Italian tax regime for “impatriates” – Recent amendments

Under the beneficial tax regime for “impatriates” employment income and related income (e.g. pensions), self-employment income, and business income, if produced in Italy by workers who transfer their residence in Italy pursuant to Article 2, Italian Tax Code, is taxable only for 30 per cent of its amount (10 per cent in the case of transfer to a city of a Southern region, i.e. Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia, Sicilia), subject to the following conditions:

1. the workers have not been resident in Italy in the two tax periods prior to their transfer and undertake to reside in Italy for at least two years after the transfer; and
2. the work activity is mainly performed in Italy.

Italian Tax Authorities recently¹ specified that, in the case of transfer to one of the Southern regions previously indicated, the worker will be entitled to the more beneficial regime even if they work in a region other than that of residence, providing they:

• keep their home in the latter,
• return whenever possible; and
• demonstrate the intention to keep the centre of their family and social relations in that region.

Foreign source income or other Italian source income (e.g. financial or property income) is subject to ordinary taxation.

This regime is applicable for a period of 5 years. However, it can be extended for a further 5 years in the event that:

• the worker (or a qualifying relative), after the transfer to Italy or in the twelve months prior to the transfer, becomes the owner of at least one residential property in Italy. Italian Tax Authorities² confirmed that the circumstance of already being an owner of real estate in Italy does not prevent the extension of the regime in the case of the purchase of additional real estate; or
• the worker has at least one minor or dependent child (this prerequisite may exist both before or after the transfer to Italy, provided the child has been born within the expiry of the first five years of application of the regime).

In the case of an extension to the regime, the taxable share of income is increased to 50 per cent in the extension years (but is lowered to 10 per cent if the worker has at least three minor or dependent children).

Workers who moved to Italy before 30 April 2019 have been subject to the former discipline of the “impatriates” regime, which did not provide the extension of the tax relief. The 2021 Italian Budget Law² extended this option to said workers (provided they become the owner of real estate and have at least one minor or dependent child) after payment of an amount equal to 10% (5% in case of three or more minor or dependent children) of the entire eligible employment and self-employment income produced in Italy, relating to the tax period prior to the one in which the option is exercised.

For professional sportsmen, the taxable share of income is 50%. The election is subject to the payment of a contribution equal to 0.5% of the tax base.

¹ Circular Letter December 28^th 2020 No. 33, Para. 4.
² Circular Letter December 28^th 2020 No. 33, Para, 3.2.
³ Art. 1, Para. 50, Law December 30^th 2020 No. 178

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