“Impatriated” workers: new rules, lower requirements and greater benefits from 2020

People who want to live in Italy can now save more on taxes

MGI Vannucci & Associati
November 5, 2019 - 15:14

The tax regime envisaged for “Impatriated” workers (i.e. those Italian or foreign workers who, after a period abroad of at least two years, transfer their residence to Italy and who mainly work in Italy) has become more advantageous and attractive, since it has been enlarged considerably, with reference both to the categories of beneficiaries and the possible duration and amount of the incentive, following the changes made by Article 5 of the Italian Legislative Decree no. 34/2019.

 

 

The new discipline - The changes introduced by the decree significantly increase the allure for Italian or foreign subjects who intend to move to Italy to work as an employee, self-employed or entrepreneur.

 

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What are the differences from the previous regulatory framework?

 

- The tax base is reduced by 70% (instead of 50%) and even 90% for those who transfer their residence to the regions of southern Italy (Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia and Sicily).

 

- The duration of the benefit is confirmed as 5 years, but is increased to 10 years for individuals with at least one dependent child or individuals who become owners of a residential property in Italy after the transfer or in the previous 12 months. In this case, the reduction in the tax base is 50% in most cases and 90% for workers with at least 3 minor or dependent children or in the case of transfer to regions of southern Italy.

 

- For Italian and European Union citizens, any reference to academic qualifications, managerial duties or requirements of high specialization or qualification no longer applies.

 

- For citizens coming from countries outside the EU, the rule is applied on the condition that they come from a country with which a convention against double taxation is in force and that they are workers with a university degree and who have been continuously employed, self-employed or have continuously carried out a business activity outside Italy in the last 24 months, or have studied outside of Italy continuously for the last 24 months or more, earning a university degree or postgraduate specialization.

 

- The period of mandatory residence abroad before the return (or first entry) to Italy is reduced from 5 to 2 years.

 

- The need, for employed workers, for the activity to be carried out at a company headquartered in Italy no longer applies.

 

- For those who had previously resided in Italy, the non-compulsory registration of AIRE is expressly contemplated for the purpose of proof of residence abroad, provided that the worker has been effectively resident in another country, with which there is an agreement against double taxation in the two tax periods prior to the transfer.

 

 

Who are the beneficiaries?

 

All citizens residing abroad (in Europe and outside of Europe) who:

 

- have not been resident in Italy for the last 2 years

 

- establish their residence in Italy and become an employee or run a business.

 

- pledge to remain in Italy for at least two years.

 

Photo by Brooke Cagle on Unsplash

What does the benefit entail?

 

The IRPEF taxable income, linked to employed, self-employed or business, is reduced to 30% (or 10% if you move to a region in southern Italy).

 

 

When does the benefit not apply?

 

If the condition of staying in Italy for 2 years is not met, the benefits already acquired are recovered together with the penalties, which range from 90% to 180% of the tax due and not paid, for each year of facilitation enjoyed.

 

Photo by Ruy Albcrem on Unsplash

 

Concept of Fiscal Residency

 

The decisive moment for the benefit of this advantage. The notion of fiscal residency is disciplined by article 2 of the TUIR (single text on taxation and earnings). Those persons who are most likely to be registered in Italy, who have their domicile in the national territory, who are domiciled in the national territory, or who habitually live in Italy.

 

Therefore, based on the definition of “tax residence” established by article 2 of the TUIR, which provides for the need to be resident in Italy for most of the tax period to be considered fiscally resident in Italy, the tax relief in question will be applicable by the subjects who transferred their residence to Italy after July 3, 2019, still with respect to the income received starting from January 1, 2020. As a result, any income earned in Italy during 2019 by these workers will be subject to ordinary taxation.

 

 

This article was written by MGI Vannucci & Associati, a member of MGI Worldwide. Our membership in a Top 20 international accounting network means we can help any client set up or grow their business internationally.

 

Read other legal articles here.

 
 

 

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