Following the success of the Italian non-dom system for HNWIs, the Italian Parliament has recently passed a new tax measure, which confirms the intention of the Italian government to attract foreigners into their Country. Therefore, the stability of the Italian non-dom regime is no longer questionable.
In particular, a new favourable tax regime has been introduced with the aim to attract foreign tax resident individuals holding foreign pensions (“Retirees Regime”). The new rules share some features with the Italian non-dom system for HNWIs, although the Retirees Regime could also be suitable for individuals owning smaller estates.
Whether to opt for the Italian non-dom system or for the Retirees Regime depends on an in-depth analysis of the individual’s personal situation in terms of foreign assets and income sources. Upon certain conditions, a combination of the two regimes can also be evaluated.
Who can apply?
The Retirees Regime is available to any individual, holding a foreign pension, who is interested in moving to Southern Italy.
There are only two conditions to be met: (i) you must not have been an Italian tax resident for the past five years and (ii) you must move your tax residence to an Italian municipality that has less than 20,000 inhabitants, located in an Italian Southern Region (namely Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise and Puglia).
The Regime is currently only available to individuals residing in countries holding an administrative cooperation agreement (“accordo di cooperazione amministrative”) with Italy.
Should you apply for the Retirees Regime, you will become an Italian tax resident.
All foreign source income earned under the Retirees Regime is subject to a seven per cent flat tax rate, to be paid in a lump sum no later than June 30th following a given tax period.
How to apply
The application process is quite straightforward, as it is simply an opting feature in the income tax return of the tax period in which you have transferred your tax residence to Southern Italy.
You may apply for the Retirees Regime for up to six years. The Retirees status can be revoked whenever you wish.
The new regime also provides for exemptions from wealth taxes on foreign assets (a.k.a. “IVIE” and “IVAFE”) and, more importantly, from the ordinary reporting regime set forth under Italian law (a.k.a. “RW Form”). Unlike the Italian res non-dom system, inheritance and gift tax would remain applicable according to ordinary rules. An ad-hoc estate planning analysis is therefore advisable.
In the light of the above, wealth planning opportunities for an individual relocating in Italy have become even more appealing: in fact, it is possible to choose between different special regimes such as, among others, the inward expatriates regime, the Italian res non-dom regime and now the Retirees regime.