Italy – Changes Coming for the Expatriate Regime

Background

After several legislative changes, Italy has an extremely liberal and easy-to-access expatriate regime with minimal conditions in order to benefit. The existing regime provides for a reduction of 70 percent in taxable Italian-source income (90 percent in the islands and south) for individuals who had not been resident in Italy for two preceding fiscal years and who undertook to transfer their residence for two fiscal years and in fact remained resident.² The relief lasted for five years and was then extendable by a further five years at 50 percent subject to certain conditions being met. The relief was easy to access, not requiring any ruling, and could be based on self-certification. It was successful in attracting new workers to Italy. 

Key Legislative Proposals

According to the draft legislation, from 1 January 2024, the following rules will apply.

1. The relief will apply to employment income, income assimilated with employment income, and self-employed income produced by workers who have transferred their residence to Italy in the sense of article 2 of the TUIR, (decreto del Presidente della Repubblica 22 dicembre 1986, n. 917); that is, they have become tax resident in Italy for the fiscal year 2024.
2. Relief of 50 percent will apply up to a limit of EUR 600,000. That is, the maximum relief available would be EUR 300,000 if income exceeds EUR 600,000, rather than being unlimited as at present.
3. Relief can be applied where:

• the worker was not tax resident in Italy for the three years preceding the transfer;
• the worker undertakes to stay tax resident in the state for at least five years;
• the activity in Italy should be in respect of a new work relationship with an entity different from that with whom the activity has been undertaken abroad, including members of the same group; 
• the activity must be performed for the greater part of the year in Italy (i.e., 183 days or more);
• relief is restricted to workers who are in possession of higher qualifications or specialisation (broadly qualifications which would entitle individuals to an EU Blue Card).

Relief applies to the period of tax in which residence in Italy occurs and for the four subsequent fiscal years. Wherever the tax residence is not maintained for at least five years following the year of transfer, the benefit is disapplied and the tax agency will take steps to recover the amount received with sanctions and interest.

Italian citizens returning to Italy are required to have been enrolled on the Anagrafe degli italiani residenti all'estero (AIRE) including those who may not be registered on the AIRE because they have their residence in another country under a double taxation treaty.

The facility to extend the relief for five years no longer applies, although it appears to apply still to those individuals who were resident in Italy at 31 December 2023.

Contacts