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The Italian government has recently adjusted the amount of substitute tax due on non-Italian sourced income from €100K to €200K, for those who decide to move to Italy and opt for the so-called 'flat tax regime'. This is part of the framework of the Italian non-dom scheme aimed at HNWIs. Click here to watch our video.
The flat tax increase is the only amendment to the regime and confirms the Italian government's commitment to the stability of the flat tax regime for years to come.
Italy is expected to stay at the top – or even to increase its position - in the most desirable destinations for individuals with ultra-high incomes and assets: compared to flat tax regimes provided by other countries, the Italian scheme is much more developed and straightforward.
It is important to mention that, according to the new "rule", the €200K flat tax rate applies to individuals who have moved their residence to Italy after 10 August 2024.
Who can apply
The Italian flat tax regime for HNWIs is available to any individual who is interested in moving to Italy.
There are only two conditions to be met:
- residence must be transferred to Italy; and
- the person/people moving to Italy must not have been an Italian tax resident for at least nine of the ten years prior to relocating to the country.
The flat tax regime can be extended to one or more family members with an additional payment of €25K per year.
The rule
The Italian flat tax regime provides for a substitutive tax on all non-Italian sourced income. In other words, the substitutive tax is applied on any foreign-sourced income, at a flat rate of €200K, regardless of the amount of non-Italian sourced income. Any Italian-sourced income will be taxed according to the ordinary Italian tax rules.
Individuals also have the right to choose not to apply for the flat tax with respect to income arising in one or more foreign countries, if convenient (so-called "cherry picking").
The advance tax ruling for the flat tax regime
In contrast to other countries, Italy offers the possibility to request a tax ruling before arriving in the country: thanks to this opportunity, tax authorities provide the applicant with an advance and binding assessment regarding the eligibility for the flat tax regime.
Therefore, the applicant can submit their tax ruling to the Italian tax authorities in order to verify in advance whether they meet all the requirements to qualify for the flat tax regime.
The tax ruling application process is straightforward if supported by an Italian tax advisor with adequate experience: drafting the application usually takes between 15 and 30 days, while the Italian tax authorities will have 90 days (plus an additional 60 days if further information is requested) from the filing to issue a response.
The terms
The flat tax regime is valid for 15 years and the individual can terminate it at any time, without exit taxation. Once expired or terminated, the flat tax regime may not be renewed.
Other related advantages
Under the flat tax regime individuals are exempt from Italian taxes on foreign real estate and Italian wealth tax on foreign financial investments (so called "IVIE" and "IVAFE"). Furthermore, they are also exempt from reporting obligations on foreign investments (so-called "RW Form").
Inheritance and gift tax are not imposed on real estate and financial assets owned abroad.
How we can help
Since helping a UK client to become the first HNWI to benefit from the flat tax regime when it was introduced in 2017, we have guided a significant number of people through the process, acquiring a unique level of experience. A move can be challenging for families but with our help we can ensure the process is efficient and successful.
From January 2017, Italy has in place a new Italian regime for a new individual resident based on the payment of an annual flat tax that is equal to €200,000 for the main applicant and €25,000 for each family member moving to Italy together with the main applicant. The Italian regime is addressed to all the high net worth individual category attracted to move to Italy, such as sportsmen, artists, designers. Only one condition is to be met. The applicant should not have lived in Italy for the last 9 out of 10 years. The applicant will become an Italian tax resident whenever nationality is admitted, even Italian retournee.
Italian source income and gains are ordinary tax, but foreign incomes are sheltered from the Italian tax, provided that the applicant pays an annual flat tax equal to €200,000. The amount has been recently increased, but this has been the only change that’s occurred. The applicant can file a preliminary request to the tax authority. The procedure is clear and the requirements are clear too. The authorities must reply within 90 days, giving a green light or a red light. If they don't reply, the applicant has a green light automatically.
Once the applicant has the green light for the special regime, the same regime is valid up to 15 years. The regime might be revoked any time by the applicant, and Italy has not an exit tax. The new regime has also a very beneficial impact on succession and gift tax planning. Those taxes are also sheltered on foreign assets, during the 15 years time of duration of the regime. The regime also exempts from property taxes on foreign assets and more importantly, from the ordinary reporting regime under the Italian law. The Italian regime, in fact, could be really an opportunity to optimize the applicant’s wealth planning.
Giulia Cipollini discusses Italy’s flax tax regime
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