15 March, 2017

Emilio Abruzzese
Article: La nuova tassazione sostitutiva per i “ricchi immigrati”, published on Il Bollettino Tributario

The Italian new Non-Dom Regime of taxation to attract high-net-worth foreign individuals

Italy has recently introduced a completely new territorial Regime of taxation to attract high-net-worth individuals who transfer their fiscal residence from abroad.
The goal of the new tax regime is to attract wealth individual to live and invest in Italy.
The measure is contained in the Italian Budget Law 2017, the Law no. 232 of the 11th December 2016. Moreover, the Italian Tax Authority has published a specific Resolution, dated 8 of March 2017 in order to clarify the procedure and specify the required documentation.
The new tax regime applies only to all non-Italian-residents and their relatives willing to move to Italy, who have been non-tax resident in Italy at any time during the nine years (out of ten) preceding their relocation to Italy.
It is applied, upon specific option, as a flat substitutive tax equal to euro 100,000 per year for the newly Italian resident, with the possibility of extending the tax regime to family members by applying a flat rate of €25,000 per year.
It has to be clarified that this newly introduced tax regime is not applied to the Italian source income, which will be treated with the ordinary Italian income tax rules.
Notably, capital gain from the disposal of qualifying shareholding (in case of a closely held company, an interest with more than 20% of the voting rights in the company, or an interest of more than 25% regardless of its voting rights. In case of a publicly-traded company, it means an interest with more than 2% of the voting rights in the company, or an interest of more than 5% regardless of its voting rights) is excluded from the Non-Dom Regime and ordinary taxation therefore applies, if the capital gain is realised in the first 5 years following the exercise of the option.
It must be noted, that in order to be qualified as Italian tax residents a subject must reside in Italy for more than half the year (183 days).
The option for the Non-Dom Regime is exercised within the term for the submission of the annual tax return for the tax period in which the eligible taxpayer becomes an Italian tax resident, subject to the previous approval by the Italian tax authorities.
The ordinary Italian tax law of this new Non-Dom Regime provides the application of a specific tax ruling with the Italian tax authorities in order to establish if the eligibility criteria are satisfied.
This substitutive Regime of taxation is available for up to 15 years, however the taxpayer can revoke the option at any time.
In case the tax flat amount is not duly paid, the regime is repealed starting from the relevant tax period (i.e. the previous application of Non-Dom Regime is not effected). Revocation and disqualification preclude the exercise of a new option.
Eligible taxpayers can ask to participate in the new regime when they present their tax returns for the fiscal year during which they moved the tax residence in Italy or during the immediately following year.

Article available here