12 Oct INTERESTING ITALIAN TAX REGIME
The Italian 2017 budget Law introduced a new special regime for foreigners and an investment visa aimed at high net worth individuals willing to invest in the country.
Like other existing regimes (also called non-dom regimes) in Malta, Switzerland, Portugal and the United Kingdom, this regime offers an attractive direct taxation for individuals which will trigger a transfer of tax residences for sure.
Who is this regime for?
This special regime, available since January 1st, 2017, was created for those individuals who transfer their tax residence to Italy without being Italian tax residents for at least 9 out of the 10 years preceding the year of application.
The mentioned regime should be applied for in front of the Italian Tax Authorities, which would ascertain if that flat tax regime can be successfully opted for.
This regime once opted for, expires after 15 years from its date of application or it is lost if the tax payer resigns to the special regime (it can’t be restored).
How does it work?
The main characteristics of the Italian flat tax regime are the following:
– The tax payer is subject to an anual fixed tax or a flat tax of € 100,000 per year on foreign source income.
– Tax payers can exclude from the flat tax any jurisdiction of their election, which will be taxed under Italian ordinary tax rules. This form of the “Cherry picking” will allow the exclusion from the flat tax those incomes which generate deductions and / or incomes protected by Non-double taxation treaties.
– Italian source income is subject to the ordinary Italian tax rate.
– The flat tax also includes any kind of income obtained through interposed entities and funds established outside Italy. The anti-avoidance CFC regime does not apply in these cases.
– As an exception, capital gains realized upon the transfer of non-Italian qualified (those representing >25% of the share capital of a company or entitling to >20% of the voting rights) will be taxed under the ordinary Italian tax regime during the first 5 years of the regime.
– Taxpayers are exempt from paying donations and inheritance taxes relating to assets and real estate owned abroad.
– No mandatory submitting of information to Italian tax authorities arises regarding foreign allocated assets.
– The regime can be extended to the individual’s family members upon request, with an additional payment of € 25,000 per year for each member.
Who could be interested?
This special tax regime was developed for attracting high net worth foreign individuals and workers to transfer their residence to Italy.
However, this regime could be specially interesting for professionals athletes which obtain a great part of their income outside the country where they reside.
We certainly believe that tennis players, golfers, motorcycle riders, among other athletes, will study the possibility of choosing for this regime.
The possibility of paying a flat tax for all your foreign income instead of the ordinary tax rate is a very attractive benefit.
The new “investment visa”.
Furthermore, this regime has been established along with an Investment visa aimed at attracting non-European wealthy individuals or athletes.
The mentioned investment visa is for foreign investors who are willing to invest at least (i) 1 million Euros in Italian companies (ii) 2 million Euros in Italian public Bonds; or (iii) 1 million Euros to be donated in immigration or research organizations and allows the foreign citizen to quickly obtain an Italian residency permit.
This procedure applies to the investor and to all his/her dependents.
In this sense, the Italian government has foreseen this “fast track” for granting residencies to high net worth individuals outside the EU which can benefit from the flat tax regime (granted in two weeks approximately).
In the current international context of high tax burdens in the eurozone, the existence of this regime along with the mentioned regimes in Portugal, Switzerland, UK, Malta implies an authentic “tax competition” for those countries which have not developed similar tax regimes.
If you have any question regarding this matter, do not hesitate to contact us. Through our partners all around the Italian main cities, we can help you reviewing your personal situation and seeking the best alternative.