Italy As The New Tax Eldorado For Private Individuals

The Law Decree No. 34/2019 (Growth Decree) - definitively approved by the Italian Parliament on June, 28 2019 - introduced new tax incentives referred to inbound workers, entrepreneurs, sports stars, researchers and professors who transfer their tax residency to Italy. The new provisions are aimed at attracting individuals (including wealthy individuals) and new capital resources by providing more appealing tax incentives which will give a real boost to human capital relocation in Italy. These new measures extend the actual range of Italian tax incentives for individuals who currently reside abroad, opening new opportunities for tax and wealth planning purposes.

The Italian Law currently provides five different attractive tax regimes for new resident:

workers and entrepreneurs; professors and researchers; high net worth individuals and families; retired individuals moving to the South of Italy; professional sportsmen (players, coaches, sport managers). Special tax regime for inbound workers and (individual) entrepreneurs

Starting from FY 2020, an individual such as an employee, a self-employed professional, a manager or an individual entrepreneur shall be subject to Italian personal income tax (IRPEF) on only 30% of the income (getting a 70% exemption) deriving from the activity performed in Italy if collectively he/she:

becomes an Italian tax resident, pursuant to Italian tax law. Note that individuals are considered as Italian tax resident if, for the greater part of a given tax period, they are enrolled in the Italian register of the resident population, have their residence in Italy or have their domicile in Italy pursuant to Article 43 of the Italian Civil Code. For instance, individuals who are enrolled in the Italian register as of July 4th, 2019 are considered Italian tax resident starting from 2020 and, therefore, can benefit from the new tax incentives as from tax period 2020; has not been tax resident in Italy for the previous two years before transferring the tax residence to Italy; endeavors to remain in Italy as a tax resident for the following two years; and mainly works or performs the activity in Italy. For individuals who meet these criteria, Italian personal income tax can be reduced to 13% approximately (30% of taxable income *43% highest personal income tax rate).

The tax exemption is increased to 90% - and, consequently, only 10% of income shall be subject to income tax - if inbound workers move their residency to one of the southern Italian regions (i.e. Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia or Sicily). In this case, the individual income tax can be reduced to approximately 4.3% (10% of taxable income *43% highest tax rate).

The new incentives apply for five years and can be extended for further five years (in total ten years) - with a 50% income exemption...