Chiara Pirrone is Tax Manager at EY Milan. She is also Certified Accountant and Academic Fellow at Bocconi University. Before EY, Chiara worked as tax consultant and wealth planner at Tavecchio Caldara e Associati, Credit Suisse and Pirola Pennuto Zei & Associati. Chiara graduated in Law and Business Administration at Bocconi University.
Q: In June 2019, the Italian Government approved the Law Decree n° 34/2019 which expands and strengthens the existing “inpatriates tax regime” by introducing new favourable tax incentives for employees moving to Italy. What are the new requirements and benefits?
Chiara: On 27th June 2019, the Italian Government introduces a set of key changes to the existing “inpatriates tax regime” with the aim of attracting more workers to Italy, including professional sportsmen, researchers and professors. As a result, the new inbound tax regime will be more attractive and significantly easier to access, compared to the existing one.
Under the new rules, individuals who transfer their tax residency to Italy starting from 2020 will be eligible to benefit from a special tax regime, if they meet the following conditions:
- they have been qualified as non-tax resident in Italy for at least two years prior their transfer to Italy (instead of five years);
- they commit to live in Italy for at least two years after their transfer to Italy, and to work mainly in the Italian territory.
Access to the regime is possible also for taxpayers who have not enrolled with “AIRE” (Registry of Italian population residing abroad) when residing abroad, if resident in another State on the basis of a Double Taxation Treaty in place with Italy.
Therefore, starting from 1st January 2020, the tax incentives that the new regime provides with are the following:
- a 70% reduction of taxable income (in lieu of 50%), for up to five fiscal years;
- a 90% reduction of taxable income for taxpayers who transfer their fiscal residence to certain regions of the South of Italy, for up to five fiscal years;
- an extension (50% reduction) of the favourable regime for further five years for workers who have bought a real estate property in Italy after the transfer of residence or in the preceding 12 months;
- the same 5-year extension applies also to taxpayers with a dependent child (50% reduction) or with at least three dependent children (in this case, 90% reduction).
Q: The Law Decree modifies also the special regime for professional sportsmen, researchers and professors. What are the main changes?
Chiara: Professional sportsmen, as defined by the Italian law:
- can benefit from a 50% reduction of the taxable income for 5 tax periods from the year of acquisition of tax residence in Italy;
- are subject to the payment of a contribution equal to 0,5% of the taxable income.
However, the 90% reduction of the taxable income for professional sportsmen who transfer their fiscal residence to certain regions of the South of Italy, and the extension of the period of applicability of the favourable tax regime, from the 5 tax years to the 10 tax years, are not applicable.
But despite that, sportsmen can now consider Italy as a good destination for wealth planning reasons, as they can get substantial savings on their salary.
Moreover, fiscal incentives for researchers and professors are even more interesting.
Article 5 of the Law Decree confirmed a 90% exemption of the self-employment or employment income produced in Italy in relation to research/teaching activity, by researchers and professors who:
- hold an university degree or an equivalent qualification;
- have been resident abroad, not occasionally (also if not enrolled with “AIRE”);
- have carried out documented research and teaching activities abroad for at least 2 continuous years at research centres or at universities (public or private);
- carry out teaching and research in Italy;
- move their residence to Italy starting from 1st January 2020.
The amendments introduced with the new Law Decree concern mainly the relevant timeframe of the tax benefits. In other words, the tax exemption applies starting from the year in which the professor or researcher become tax resident in Italy, and for the following five periods (for a total six years).
In addition, the tax benefit period could be extended up to eight years if the taxpayer:
- has one dependent child;
- has bought a real estate property in Italy after the transfer of residence or in the preceding 12 months.
Moreover, should the children be two or three, the professor or researcher shall benefit from the above-mentioned regime, respectively, up to eleven or thirteen years.
Q: What would you suggest to individuals and companies willing to apply for the new “inpatriates tax regime”?
Chiara: With the new Law Decree, Italy is expected to attract a significant number of employees and self-employed individuals currently working and residing abroad.
The procedures for applying for the new tax incentives for employees moving to Italy require detailed tax and legal planning. Eligibility requirements, domestic tax law, current assets and estate structures should be carefully analysed in order to assess how the new rules affect the individuals’ tax positions and the overall tax costs, for both employees and their employers.
Companies and employers should be aware of the new guidelines, and therefore should seek for professional advice to assess whether these tax incentives can be granted.
For more info visit the Agenzia delle Entrate website at this LINK
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