27 January 2022 - Article
Earlier than expected, the Italian tax authorities have issued further implementation measures that have enhanced the new res non-dom rules, along with explanatory notes on assessing applicants' eligibility to the regime.
These new provisions are timely and bear witness to the Italian government's strong desire to attract HNWIs and successful business executives, sportspeople, artists and fashion designers. The non-dom rules allow for efficient wealth planning, and exclude non-doms from tax on foreign-sourced income, property taxes on foreign assets and provides exemptions on succession and gift taxes.
The details of the regime are now complete and it is immediately applicable from FY 2017. It is also available for those who became Italian tax residents for the first time in 2016 (although 2016 remains subject to the ordinary Italian rules). Below is a recap of the non-dom scheme's main features:
Disclosure of foreign assets/investments
Non-doms are exempt from disclosing their assets held outside of Italy as the ordinary reporting provisions do not apply. More specifically, the new regulations clarify that candidates:
- are not required to disclose their foreign investments/assets to the Italian tax authorities; and
- are required to complete a checklist aimed at providing evidence of their non-Italian domiciled status and focused on the candidate's link with Italy. In a nutshell, this is the main information that should be disclosed:
- general details of the applicant, including citizenship and last place of tax residence;
- personal, economic and cultural/social links with Italy, covering at least two of the last 10 years before the application is made; and
- the same details for family members who are to be included.
- Italian citizens resident in tax haven jurisdictions may also become res non-doms, provided that they meet the subjective conditions of the regime and disclose these details to the tax authorities.
How to apply
The implementing regulations are aimed at making the regime as accessible and appealing as possible. In fact, applicants' elections to the scheme are formalised through the first annual income tax return they file as res non-dom (or even, in some cases, in the following year).
This means that all the aforementioned details (relating to the subjective conditions and links with Italy) should be included in this annual tax return.
Nonetheless, the applicant also has the possibility running a preliminary (and in principle safer) check with the tax administration by filing a ruling before becoming an Italian resident. This allows the applicant to safely test out his/her application without experiencing unexpected obstacles (the tax authorities will have 120 days to approve or deny the request). Conversely, for plain vanilla cases (where the applicant has never had ties with Italy), this preliminary ruling step could be omitted.
The preliminary ruling will include all the aforementioned details (relating to the subjective conditions and links with Italy).
How to pay
An annual charge of € 100,000, which allows access to all the benefits of non-dom status, are to be paid in a lump sum within the deadline for paying Italian income taxes. An instalment payment process is not permitted: any omitted or partial payment will terminate the beneficial tax regime.
For each family member included, an additional annual charge of €25,000 is due.
Non-dom family members: what should they do?
Any family member under the regime must sign the preliminary ruling (when filed to the tax authorities) together with the main applicant and, more importantly, include all the aforementioned details (relating to the subjective conditions and links with Italy). Additionally, it is noteworthy that civil partners are included among the relevant family members.
Finally, the tax authorities have clarified that anything that causes non-doms to terminate their status does not preclude their family members from keeping their status as res non-dom for the remaining years permitted to them, and simply requires them to submit an autonomous application.
Coming out of the regime: a final tip
Non-dom status renews automatically year by year, until the final 15-year term expires.
It is understood that non-doms can legitimately decide to give up their status at any time before the final term expires, either by opting out in their Italian tax return or by moving their residence abroad and duly notifying the Italian tax authorities.
The final implementation measure also confirm that there is no exit taxation for res non-dom leavers.