Flat tax for wealthy newly residents in ITALY – an opportunity for billionaires?


Forbes recently published a list of the 100 richest people in tech. See here: https://www.forbes.com…  None of these people are Italian residents. After considering the benefit of the new Italian flat tax for billionaires, they might want to reconsider their options.

The 2017 Italian Budget Law (Law n. 232, dated December 11, 2016) introduced measures aiming at bringing foreign investments to Italy.

People with large fortunes may want to consider moving to Italy using the combination of two dispositions contained in the 2017 Budget Law:

  • tax benefit for newly-domiciled tax payers establishing a flat tax on income generated abroad;
  • “Investor’s Visa”.

Under the flat tax benefit, non-resident individuals moving to Italy will pay – instead of the ordinary tax brackets– a substitute flat tax of EURO 100,000 per year for all their foreign income. Family members can also benefit paying EURO 25,000 per year.

Eligible individuals. People who transfer their tax residence to Italy if they haven’t been tax residents of Italy for at least 9 tax periods out of the last 10, including people who moved to Italy in 2016 if they had been abroad for the previous 9 tax periods.

Benefits. The flat tax covers all the income generated abroad (not income produced in Italy), including employment income, rental income, capital gain, self-employment income, dividends, and other.

Prior request (interpello) Article 24bis of the Italian tax law (TUIR) allows (but does not require) to file a prior request (interpello) to the Agenzia delle Entrate (italian tax authority) to assess eligibility.

The application. Taxpayers must submit a checklist allowing the Italian tax authority to verify requirements, which include:

  • personal information, the tax code (if assigned), home address in Italy (if already resident);
  • status of non-resident in Italy for a time of at least nine tax periods during the ten preceding tax periods;
  • country or countries in which taxpayer had his or her last tax residence during the last 10 years before the request;

A complete checklist, including the documents to be submitted, is available here.

When to apply for the flat tax. Taxpayers who meet the requirements can benefit of the new status at the time of submission of their tax return. The application can be submitted even if the applicant hasn’t moved to Italy yet.

The flat tax and the treaties against double taxation. Individuals who opt for flat rate are considered to be resident of Italy for purposes of relevant income tax treaties, unless it is established otherwise.

Deadline. The flat tax benefit must be exercised within the period for submission of tax return and cannot be renewed. Once the benefit is approved, it will last fifteen years.

US citizens. Because United States taxes its citizens (resident or nonresident in the US) on their worldwide income using the same tax brackets for both foreign and U.S. income, the  impact of the Italian flat tax on US taxation should be carefully assessed.

 

Agenzia delle Entrate Circular no. 17/E of May 23, 2017 (here in Italian) provides guidance on the flat tax.

 

Avv. Federica Romanelli. Thanks to Francesca Giannoni-Crystal for her advice and feed back on this blog.

This blog is a shortened and modified version of a blog originally published by Avv. Carlo Bottino, at https://www.angloitalianlaw.com…