Italy wants to attract wealthy foreigners with flat tax
Italy has introduced a flat rate of tax aimed at attracting wealthy expats to its shores as it looks to compete with similar regimes offered in the UK and Spain. Similar to the UK’s non-dom system, the new flat rate tax of €100,000 ($107,865) a year, which went live on 8 March, will give foreigners a special status exempting them from paying Italian tax on any offshore income and gains. This charge can also be extended to family members, at a cost of €25,000 per person.
The regime is available for up to 15 years, unless the individual fails to pay the charges. A person is considered an Italian resident for tax purposes if they are in the country for more than 183 days, or six months.
An individual applicant is subject to certain requirements:
the person, regardless of nationality (foreign or Italian), has not been tax resident in Italy for at least nine of the ten fiscal years preceding the start of the option period;
the person must submit the tax return related to the tax period in which it overflowed fiscal residence in Italy or in the immediate aftermath;
the person must first submit a specific request for ruling to the Central Assessment Office Revenue Agency to verify that the requirements for this special status.
The applicant also has the possibility running a preliminary check with the tax administration by filing a ruling before becoming an Italian resident. This allows the applicant to safely test out his/her application without experiencing unexpected obstacles (the tax authorities will have 120 days to approve or deny the request). Instead when the applicant has never had ties with Italy, this preliminary ruling step could be omitted.
Non-dom status renews automatically year by year, until the final 15-year term expires.
It is understood that non-doms can legitimately decide to give up their status at any time before the final term expires, either by opting out in their Italian tax return or by moving their residence abroad and duly notifying the Italian tax authorities.
Italian-sourced income and gains for individuals opting into the scheme will remain taxable in the normal, progressive way, although there are also benefits for applicants in terms of gift and succession taxes and tax reporting.
Observers have suggested that the Italian authorities may have their eyes on capturing wealthy UK expats post-Brexit.
Economy Minister Pier Carlo Padoan told reporters Wednesday during Bloomberg forum in London on post-Brexit opportunities "that Italy and Milan can be an opportunity for Europe and the United Kingdom", adding "we are introducing a bigger cut in taxes on businesses and tax benefits for those who want to return to Italy, which will be extended", as well as a "flat tax for those who want to work in our country".