In 2017, the Italian executive approved a special impatriate regime and a flat tax or forfait with the aim of attracting high-net-worth foreigners to invest in the country.
Similar to the impatriate (also called non-dom) regimes in Malta, Portugal and England, this regime offers very attractive direct taxation and is already known as the ideal regime for the “mega-rich”.
Who is it aimed at?
The Italian flat tax regime is mainly aimed at high net worth individuals or “megariches” who have never resided in Italy or have not done so for a long time.
In fact, this flat tax has attracted Russian oligarchs, Latin American millionaires, IT geniuses and even Cristiano Ronaldo to Italy.
Thus, the regime is applicable to those who move their residence to Italy and have not been resident in Italy for at least 9 of the last 10 years from the time of opting for the flat tax.
This flat tax has to be applied for with the Italian tax authorities and once granted expires 15 years from the date of application.
How does it work?
The main features of the Italian flat tax are as follows:
- The individual pays an annual flat tax or flat rate of EUR 100,000 on all foreign source income. The rest will be exempt, i.e. 0%.
- The taxpayer can exclude from the flat tax those countries he/she considers, which will be taxed at ordinary Italian taxation. This allows the so-called “Cherry Picking”, which makes it possible to exclude from the flat tax rate those that generate deductions and/or are income under a beneficial Double Taxation Agreement.
Ordinary taxation on income generated in Italy.
- The flat tax also includes any income obtained through investment vehicles and funds established outside Italy. The Italian anti-abuse rules of fiscal transparency will not apply in such a case.
As an exception to the rule, capital gains derived from the sale of qualifying shares (holding more than 25% of the capital or 20% of the voting rights) will be taxed at ordinary Italian income and will not benefit from the flat tax during the first 5 years of application of the regime.
- The taxpayer will be exempt from paying inheritance and gift tax on assets located abroad.
- No obligation to submit information on foreign assets (companies, real estate, etc.) to the Italian authorities.
- Possibility to extend the regime to more family members (partner, children) for an additional amount of EUR 25,000 for each additional member added to the regime.
Who is it attractive for?
The scheme is designed to attract large fortunes and highly qualified professionals.
However, it may be of particular interest to professional sportsmen and women who earn most of their income outside their country of residence.
Tennis, golf and motor racing professionals will no doubt consider opting for this regime.
Being able to replace the tax you would have to pay on all your foreign income with a one-off payment of 100,000 euros is undoubtedly a great attraction.
Can I apply if I am not European?
This special regime has also been accompanied by an “Investment visa” to attract non-European high net worth individuals or sportsmen.
Foreign investors should be willing to make one of the following investments:
- 1 million euros in Italian companies
- 2 million euros in Italian government bonds
- 1 million euros donated to charities, the Italian government offers the possibility to obtain a resident visa in Italy for a minimum period of two years
The abovementioned procedure applies to both the taxpayer and their descendants.
In this regard, the Italian government has provided for this “fast track” to grant residency to non-EU high net worth individuals who can also benefit from the special regime for non-residents (approximately 2 weeks according to external sources).
What are you waiting for to make an appointment with our Italian trusted advisor?
In the current international context of high tax pressures in most Eurozone countries, the existence of this regime, in addition to the aforementioned Switzerland, Portugal, Malta and the United Kingdom, represents a real “tax competition” for those countries that do not adopt similar tax regimes, since the change of residence of large fortunes and sportsmen to Italy is almost assured.
Are there better tax destinations than Italy?
If you are seriously interested in changing your tax residence, we recommend you to download and read our free report “The three best tax destinations of the moment”, available below.