Since 2017, the Italian tax authorities (Agenzia delle Entrate) have been promoting the new enhanced non-dom rules to attract HNWIs and successful business executives, sportspeople, artists and fashion designers.
Our Wealth Management team has been advising many clients since, as these non-dom rules exclude non-doms from tax on foreign-sourced income, property taxes on foreign assets and provide exemptions on succession and gift taxes. One of the advantages is that the non-dom residency scheme allows for efficient wealth planning especially in relation to the 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).
An annual charge of ? 100,000, which allows access to all the benefits of non-dom status, must be paid in a lump sum within the deadline for paying Italian income taxes in Italy and unfortunately, the law does not permit any installment payment plan because 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.
The applicants 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 their link with Italy.
The non-dom status renews automatically year by year, until the final 15-year term expires but the clients can 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. There is no exit taxation for res non-dom leavers.
Preliminary Ruling - Richiesta di Interpello
Normally, the application for the scheme is done with the first annual tax return at the end of the fiscal year where the applicants have moved to Italy. If someone moves during 2021 fiscal year, they will need to apply with the 2022 tax return without knowing whether the application will be successful. This poses some risks to the applicants as they have no certainty from the outset that the application will be successful.
Being in Italy, one element of discretion for the Italian Tax Authorities is that they are entitled to decline an application if the applicants do not disclose sufficient evidence of personal, economic, and cultural/social links with Italy, covering at least two of the last 10 years before the application is made; more importantly, the same details are required for all family members who are to be included in the application.
In order to provide more certainty from the outset, we advise potential applicants to apply for a preliminary "approval" with the tax administration by filing a ruling before becoming an Italian resident. The process is known as "istanza di interpello" which is filed by an associate in the Tax Team in Italy.
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 the details relating to the subjective conditions and links with Italy). In same-sex relationships, which are now recognized in Italy, the civil partners are included among the relevant family members.
The advantage of the preliminary ruling application is that the applicant can safely have certainty in advance of lodging the full application without experiencing unexpected obstacles and the tax authorities only have 120 days to approve or deny the request.
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.
