Impatriate Tax Regime in Italy: what are the characteristics?

Among the measures currently known in Italy aimed at encouraging the entry of new workers, the Impatriate Tax Regime in Italy is undoubtedly the most discussed, as well as the one for which there are increasingly requests for information.

The advantage that this regime grants to its beneficiaries concerns the possibility of taxing only a part of the income produced in Italy: 30% or 10% in the case of transferring residence to one of the southern regions of the country. The tax relief is granted for the first five tax periods, extendable for an additional five under well-defined conditions.

But what are the characteristics of the Impatriate Tax Regime in Italy? In this article, we will discover:

• The reference legislation
• The objective and subjective requirements for accessing the Impatriate Tax Regime
• The duration of the tax relief and how to take advantage of it
• The limits of the pre-ruling procedure

Impatriate Tax Regime and Requirements: Reference Legislation

The Impatriate Tax Regime was first regulated by Legislative Decree no. 147/2015, known as the “Decreto Internazionalizzazione”, which was later amended by Law Decree no. 34/2019 (or Decreto Crescita).

As anticipated, the purpose of the regulation has always been to encourage people to come to work in Italy, guaranteeing to these individuals, subject to certain conditions that we will see below, the possibility of taxing only 30% or 10% of the entire income produced in Italy, deriving from dependent work, self-employment or individual entrepreneurship.

Starting from Art. 16 of Legislative Decree no. 147/2015, let’s see all the requirements for accessing the Impatriate Tax Regime.

Subjective and Objective Requirements

Art. 16 of Legislative Decree no. 147/2015 defines the subjective and objective requirements necessary to access the Impatriate Tax Regime.

According to the first paragraph, the reduced taxation of income occurs subject to the following conditions:

• The worker must not have been fiscally resident in Italy in the two tax periods preceding the arrival in Italy
• The worker undertakes to be fiscally resident in Italy for at least the two years following the arrival in Italy
• The work activity must be mainly performed in Italian territory

In compliance with all three of these requirements, the following are eligible for tax relief:

• Income from dependent and similar work,
• Income from self-employment,
• Business income – on this point, the Revenue Agency with Circular 33 / E / 2020 specified that only the business income produced by the impatriated subject is eligible for relief, with commercial partnerships and the income attributed directly to each partner in proportion to their ownership stakes not being included

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Impatriate Tax Regime and Requirements: Duration of Tax Relief

As we have seen, in compliance with the aforementioned requirements, the Impatriate Tax Regime is granted for the first 5 tax years, in percentages of 30% or 10% depending on the region of residence in which the repatriate decides to settle.

According to Art. 16, paragraph 3 bis of Legislative Decree no. 147/2015, the tax relief can be extended for an additional 5 tax periods. In this case, however, the income subject to tax will be equal to 50% of the entire amount received, and not 30% or 10% of it.

In fact, quoting the regulation:

“The provisions of this article apply for a further 5 tax periods to workers with at least one minor child or dependent, also in pre-adoptive foster care – as well as – […] in the event that workers become owners of at least one residential real estate unit in Italy, subsequent to the transfer to Italy or in the 12 months preceding the transfer.“

In the specific case where the beneficiary of the Impatriate Tax Regime has at least three minor or dependent children, even in pre-adoptive foster care, for the additional five tax periods, the percentage of income subject to taxation decreases from 50% to 10% of its amount.

Focus on the Extension of the Benefit

The extension of the temporal benefit in the presence of at least one minor or dependent child, even in pre-adoptive foster care, is recognized both in cases where the minor child and/or dependent was born before the transfer to Italy and subsequently – provided, however, that this prerequisite exists within the deadline of the first five-year period of enjoying the tax relief.

If, after the arrival to Italy, the dependent children of the impatriated worker were to reach the age of majority or no longer be fiscally dependent, he or she would not lose the tax benefits provided for the second five-year period.

Regarding the purchase of real estate in Italy, this can take place both within twelve months before the return to Italy and after the return itself – provided that it falls within the first five tax periods.

The real estate can be purchased directly by the worker, spouse, cohabitant, or children, or even in situations of co-ownership. Conversely, the Revenue Agency has excluded the possibility of benefiting from the extension of the benefit in the case of a free transfer.

Impatriate Tax Regime and Requirements: How to Take Advantage of Tax Relief

In compliance with the requirements listed so far, the Impatriate Tax Regime can be granted both to dependent workers and self-employed workers.

But how should the latter apply for it?

Dependent Workers

Dependent workers, to apply for the tax relief provided by the Impatriate Tax Regime, must submit a written request to the employer, made through a self-declaration pursuant to Presidential Decree no. 445/2000.

After receiving the request, the employer can apply tax withholdings of 10%, 30%, or 50% of the overall income directly on the payslip. In the absence of this, the taxpayer can take advantage of it directly in their tax return.

Self-Employed Workers

Self-employed workers can access the favorable tax regime directly in their tax return. But not only that. In fact, they can also take advantage of the relief in the application of the withholding tax operated by the client. Similarly to what is provided for dependent workers, however, even here the self-employed worker must submit a self-declaration to the client pursuant to Presidential Decree no. 445/2000 to take advantage of the tax relief.

Impatriate Tax Regime and Requirements: Pre-Ruling Procedure

Recalling once again Revenue Agency Circular no. 33 / E / 2020, it is necessary to point out that access to the favorable regime cannot be subject to the presentation of a pre-ruling request by the taxpayer if the questions concern the existence or not of the prerequisites necessary to establish the actual tax residence or the requirements necessary for access to the special regime – since such verifications involve evaluations of fact not resolvable in a pre-ruling request.

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