Italy’s Finance Act 2017 has introduced a special tax status for foreign tax residents under which they take Italian tax residence which enables all foreign income and capital gains, for a modest price, to be exempt from Italian taxation.
For this privilege a foreign tax resident makes a tax payment annually of €100,000 to exempt their foreign earnings from Italian tax. They will still remain subject to tax in Italy on income and capital gains generated in Italy. This special status is only open to individuals who have generally not been tax resident in Italy during the past decade and offers non dom status for up to 15 years in future so long as they keep paying the annual flat tax charge. Assets and income outside Italy is exempted from the annual reporting requirements for those taking Italian non dom status.
Applications made in Italy will be decided upon within 120 days, with silence at the end of that period signalling assent. One of the key requirements is that the applicant should state where they were tax resident immediately beforehand and inform the tax authorities in that country that they have moved their tax residence to Italy.
Many of our clients looking to buy property in Italy have asked about tax efficient structures and this may provide an answer for some, including Italian nationals looking to return home after an extended period living and working abroad. There are various details, and options such as electing to have certain foreign income taxed in that country, which make it important that specialist tax advice should be sought. A helpful article has been posted by international law firm Withers which you can read here: Italy a new non-dom system for HNWIs.
There is speculation as to why Italy has made this move now. Some believe that Brexit or the changes to non dom status in the UK may have been an influence, while others see this more simply as a means of attracting high net worth individuals and families to base themselves in Italy. Whatever the motivation, there is an attractive opportunity now available in Italy.