Italy: Statistics On Individuals Opting For The Italian Attractive Tax Regimes

Over the last few years, the Italian Government has introduced several favorable tax regimes and facilities in order to attract foreign residents to migrate and invest in Italy.

Such tax regimes are very competitive compared to similar benefits provided by other European countries.

There are different favorable tax regimes in Italy, and the most relevant are:

1. the "Impatriates" Regime (Expats Tax Breaks) provides that the new resident individual will be subject to Italian personal income tax only for the 30% of his/her income deriving from their employment or self-employment working activities performed in Italy. For individuals moving their tax residency to the Southern Italian Regions (i.e. Sardegna, Sicilia, Puglia) the taxable income is reduced to the 10% of the earnings. The new resident individual can benefit from the above regime provided that he/she: enrolls with the Italian register of the resident population and spend the greater part of the tax year in Italy; has not been tax resident in Italy for the previous two years before transferring the tax residence to Italy; remain in Italy as a tax resident for the following two years; mainly works or performs his/her activity in Italy. The regime is applicable for a period of 5 tax years. However, an extension for a further 5 years with a taxable income reduced to 50%, is applicable if alternatively: the individual has at least one child; the individual (or the spouse, partner, children) purchases a residential property in Italy. If the individual has at least three children, the 5 years extension will grant a taxable income reduced to 10%.
2. the "New Resident" Regime (Flat Tax) is a special tax regime addressed to High-Net-Worth Individuals that consists in the possibility of paying an annual flat tax of 100.000 euro on the foreign sourced income, irrespective of the nature and the amount of the income and of its remittance in Italy. The flat tax absorbs and replaces any tax (income and wealth tax) on non-Italian sourced income and assets (i.e., financial, real estate and working activity income). Individuals can opt for the regime if they have been resident out of Italy for tax purposes for 9 out of 10 of the previous calendar years. The regime is applicable for a period of 15 tax years. Individuals applying for such regime can extend it, on a voluntary basis, to some or all family members: in this event, an additional flat tax of EUR 25,000 is due for each additional family member opting for the benefit.
3. the "Retirees" Regime (Pensioners Tax Breaks) is a special tax regime addressed to pensioners and provides for the application of a substitutive tax of 7% on all income from non-Italian source. The 7% substitutive tax does not cover Italian-source of income which will be liable to ordinary progressive tax rates. Individuals moving to Italy qualify for the "Retirees" regime if they are entitled to a foreign pension and have not been tax resident in Italy at least in the previous 5 years; relocate to a Municipality of a southern Region of Italy having a populations with no more than 20.000 inhabitants. The regime is applicable for a period of 9 tax years.

In order to benefit from such tax regimes, the individual is requested to obtain the Italian tax residence status, which is acquired when one of the conditions below is met in Italy for more than 183 days in a calendar year:

• enrollment in the register of resident population; or
• physical presence; or
• the localization of the center of life interest in Italy.

All the above-mentioned regimes make the relocation to Italy extremely appealing and, for non-EU citizens who apply to the "New Resident" regime, they also give the opportunity to benefit from an easier immigration procedure.

In light of the above, the last few years have seen an exponential increase of the number of people who opted for the special tax regimes.

Thanks to the Italian Ministry of Economy and Finance, it is possible to analyze the latest statistics that show that in the fiscal year 2020 the "Impatriates" Regime was opted by more than 15.080 individuals with an average gross amount of 121.991 euros, the "New Resident" Regime was opted by 400 individuals who produced a total income of 94.4 million euros in Italy represented mainly by income from employment, and the "Retirees" Regime was opted by only 159 individuals reporting foreign pension income in the amount of 4.6 million euros (28.347 euros on average) and total foreign source income in the amount of 7.3 million euros.

These numbers are very huge considering that, after the introduction, in 2017 the "Impatriates" Regime was opted by 3.700 individuals with an average gross amount of 123.612 euro while the "New Residents" Regime was opted by 94 individuals (75 of which opted as principal taxpayers and 19 subjects as family members to whom the facilitation scheme was extended by the principal taxpayer joined the facility) who produced a total income of 5 million euros in Italy represented mainly by income from employment.

At that time, the "Retirees" Regime was not in force.

Therefore, in 2020 the total number of "New Resident" individuals were 1.083, "Impatriates" individuals were 36.880 and "Retirees" individuals were 207.

Considering all of this, Italy has worked very hard to keep and improve the special tax regimes so to attract more people to transfer their tax residency to our country.

As a consequence, people trust the Italian legal system and keep choosing Italy as a place to live in.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.