The various favorable tax measures for individuals who intend to transfer residence to Italy

In order to attract individuals, Italy has introduced a number of facilitative measures in favour of those who transfer their tax residence in Italy.

1.   Transfer of residence

First of all, pursuant to Article 2(2) of the Consolidated Income Tax Law (TUIR), as amended by Article 1 of Legislative Decree No. 208/2023, individuals are considered to be resident in Italy if, for most of the tax period (183 days), also considering fractions of a day, they, alternatively:

• reside in Italy, ex Art. 43(2) of the Civil Code;

• are domiciled in the territory of the State (having there their personal and family relationships);

• are present in the territory of the State;

• are listed in the registers of the resident population.

Once one of the previous requirements has been met, the person transferred to Italy is, for domestic purposes, tax resident in the territory of the State; however, it cannot be ruled out that conflicts of residence with the country of origin may exist (to be resolved by applying the Bilateral Conventions against double taxation).

2.    Favourable tax regime for 'impatriated' workers

Article 5 of Legislative Decree No. 209/2023 regulates the preferential tax regime in favour of 'impatriate' workers.

This regime applies in favour of persons who transfer their tax residence to Italy and who produce:

• income from employment and income assimilated to employment;

• self-employment income from the exercise of arts and professions.

Under the new regime, such income is included in taxable income for only the 50 % of its amount (reduced to 40 % if the worker moves to Italy with a minor child or in case of birth/adoption of a minor), up to an annual limit of €600,000.

The following conditions must be met in order to access to this regime:

• maintaining tax residence in Italy for at least four years; otherwise, the worker forfeits the benefits and those already enjoyed will be recovered, with interest;

• having been residence abroad for at least three tax periods prior to moving to Italy. This condition, for Italian citizens only, is considered fulfilled if they have been enrolled in the registry office of Italians resident abroad (AIRE) or have been resident in another State, pursuant to a convention against double taxation on income. The period of residence abroad, required for the application of the regime, increases if the employee continues working with the same employer with whom he worked before the transfer:

          -  six years, if the employee works in Italy for the same entity or an entity belonging to the same group for which he/she was employed abroad before the transfer;

          - seven years, if the employee works in Italy for the same entity or an entity belonging to the group for which he/she had worked in Italy before his transfer abroad;

• the employment or self-employment activity must be carried out predominantly in the territory of the State (the period must exceed 183 days within a year);

• the workers must meet the requirements of high qualification or specialisation as defined by Legislative Decree No. 108/2012 and Legislative Decree No. 206/2007. These requirements are met by:

• having a higher education qualification, issued by the competent authorities, attesting the completion of a higher education course of at least three years' duration and the relevant higher professional qualification, falling within level 1 (legislators, entrepreneurs and senior management), level 2 (intellectual, scientific and highly specialised professions) and level 3 (technical professions) of the ISTAT classification of professions CP 2011;

• exercising a profession listed in Legislative Decree 206 of 6 November 2007.

The duration of the favourable regime is five tax periods; this period may be extended for a further three years only for taxpayers who moved in 2024 and who had already acquired, by 31 December 2023 and, in any case, in the 12 months preceding the transfer, a residential property used as their principal residence.

3.    Favourable tax regime for 'new residents

Article 24-bis of the TUIR provides the favourable tax regime in favour of 'neo-residents', in order to attract high-potential individuals due to the availability of significant capital and financial resources that can be invested in our country.

In particular, the so-called 'high net worth individuals', instead of the ordinary taxation regime, can opt for the possibility of paying a substitute tax on all income produced abroad, determined as a lump sum in the amount of EUR 100,000 for each tax period.

This scheme has a maximum duration of 15 years and can be accessed by individuals, regardless of nationality, meeting the following conditions:

• transfer of tax residence from a foreign country to Italy;

• never having been tax resident in Italy for at least nine of the previous ten tax periods.

At the request of the person who has exercised the option, the flat-rate regime may also be extended to one or more of his family members, who, in turn, have transferred their tax residence to Italy and who have not been resident in Italy for at least 9 out of the 10 tax periods preceding the one in which the option is valid. In this case, each family member will be required to pay the substitute Irpef tax in the amount of Euro 25,000, for each tax year.

Moreover, the exercise of the option produces further effects for the persons concerned, in all tax periods in which the optional regime operates. Those who have exercised the option, in fact:

• are exempt from the tax monitoring obligation concerning foreign assets and investments;

• are exempt from paying IVIE (tax on the value of property held abroad), as well as IVAFE (tax on the value of financial products, current accounts and savings accounts, held abroad);

• are exempt from paying inheritance and gift tax on assets and rights existing abroad (Art. 1, par. 158, Law No. 232/2016). In particular, this exemption means that, on successions and donations made during the periods in which the option is valid, the tax is payable by the beneficiaries limited to the assets and rights located in Italy.

4.    Cooperative compliance for natural persons

Recently, in order to further incentivise individuals to transfer their residence to Italy, the last tax reform contemplates the possibility of extending access to the cooperative compliance regime for companies (established by Legislative Decree No. 128/2015) to natural persons as well.

In particular, Paragraph 1(g)(3) of Article 17 of Law No. 111/2023 provides that the Government shall introduce a collaborative compliance regime for:

• natural persons who transfer their residence to Italy. For example, these persons include those who wish to opt for the impatriate workers' regime provided for in Article 5 of Legislative Decree no. 209/2023 or for the preferential regime in favour of new residents provided for in Article 24-bis of the TUIR;

• those who continue to reside abroad and, therefore, are not interested in transferring their residence to Italy, but who possess, even through intermediaries or trusts, in the territory of the State a total average income of €1 million or more.

The future adoption of the cooperative compliance regime for natural persons could entail the following facilitative measures:

• the strengthening of the preventive and procedural cooperation with the Office, which would reduce the taxpayer's risk of tax assessment;

• the introduction of simplified procedures for the regularisation of the taxpayer's position, in accordance with the indications of the Italian tax Authority;

• numerous favourable effects, including: (i) the reduction, or exclusion, of administrative and criminal penalties; (ii) the reduction of assessment deadlines; (iii) the provision of special tax settlement institutions in the presence of certifications issued by qualified professionals.

5.    Inheritance and gift tax

Italy is attractive for individuals wishing to transfer their residence, providing also an inheritance and gift tax characterised by particularly low rates, compared to the average in other European countries (so much so that it has been described as an inheritance tax haven).

Moreover, while in many European countries taxation on donations and hineritance reaches almost 50% (up to 60% in France, 40% in England), in Italy the following rates apply:

• 4 %, for transfers made in favour of a spouse or relatives in a direct line, to be applied on the total net value exceeding, for each beneficiary, 1 million euro;​
• 6 %, for transfers in favour of siblings, to be applied on the total net value exceeding, for each beneficiary, 100,000 euro;
• 6%, for transfers in favour of other relatives up to the fourth degree, collateral relatives up to the third degree, to be applied on the total net value transferred, without application of any deductible;
• 8%, for transfers in favour of all other parties, to be applied on the total net value transferred, without application of any deductible.

Dott.ssa Noemi Ragusa