Tax Benefits in Italy: Regimes for New Residents

Did you know that Italy offers attractive tax benefits for expatriates? If you intent to move to Italy, this article is for you. Below, we will examine two of the main tax regimes available for new residents: the Flat Tax Regime for New Residents and the Regime for Immigrant Workers.

Common Taxation for Permanent Residents in Italy

Before discussing the special regimes for new tax residents, it is essential to understand the general tax rates applied to residents. In Italy, income from salaried work is subject to progressive tax rates ranging from 23% to 43%, with the maximum rate of 43% applied to income above €50,001. In addition, there is a regional tax that varies from 1.23% to 3.33%, depending on the income level, and a municipal tax that ranges from 0% to 0.9%, depending on the municipality of residence.

Flat Tax Regime for New Residents

The Flat Tax Regime for New Residents is a fiscal strategy aimed at attracting high-income individuals to Italy. Despite recent changes implemented in 2024, the regime continues to offer significant advantages for those with substantial incomes. Since its introduction in 2017, at least 2,730 multimillionaires have decided to settle in Italy, benefiting from this measure.

This regime allows new residents to opt for an annual fixed tax of €200,000 on their income from abroad instead of being subjected to the conventional progressive rates. It is important to note that this fixed tax does not apply to income generated within Italy.

The regime operates by allowing new residents to opt for an annual fixed tax of €200,000 on their foreign income, instead of the traditional progressive rates. The regime does not apply to income generated within Italy

Main Requirement:

The new rules apply to individuals who become tax residents in Italy for the first time within the last three to seven years, starting from the Italian tax year ending on December 31, 2024 (FY 2024), and who register as residents in Italy on or after January 1, 2024. Individuals who were already benefiting from the previous regime as of December 31, 2023, or who registered as residents in Italy with effect until December 31, 2023, will remain in the current regime for the remainder of their natural period of 5 or 10 years and will not be affected by the new rules.

Key Features:

• Annual Fixed Tax: New residents can opt to pay a fixed tax of €200,000, regardless of the amount of foreign income and the value of assets and properties held abroad.
• Exemption from Additional Taxation: There is no tax on remittances of foreign income to Italy, and there is no need to declare foreign assets and properties in the Italian tax return.
• Expansion to Family Members: The possibility of extending the regime to family members with an additional cost per member, per year.

Regime for Immigrant Workers

The Regime for Immigrant Workers, implemented by Legislative Decree No. 209 of December 27, 2023, offers tax incentives for workers who transfer their tax residence to Italy. Through it, qualified workers will be taxed on only 50% of their Italian work income for an initial period of five years. It also applies to Italian citizens who have transferred their tax residence abroad and decide to return to Italy.

Key Features:

• Tax Reduction: Work or self-employment income is taxed at only 50%, with the possibility of increasing to 60% if the worker has minor children.
• Validity Period: The option is valid for five years, and can be extended for another three years if the worker acquires a residential property in Italy.
• Residence Requirements: The worker must not have been a tax resident in Italy in the previous three years and must commit to maintaining Italian tax residence for at least four years.

Requirements:

• Be highly qualified or specialized as defined by Italian law.
• Not have been a tax resident in Italy in the last three years.
• Maintain tax residence in Italy for at least four consecutive years. If this is not met, the worker will lose the benefit and must repay the reduced taxes, with interest.
• Perform the majority of work activity in Italy during the fiscal period.

Exclusions and Limitations:

• Foreign Income: Income generated abroad will be taxed according to the ordinary regime.
• Benefit Limit: The benefit is limited to income up to €600,000.

Tax Incentives for Retirees

For retirees, Italy also offers incentives for new tax residents in certain regions of the country’s south. Details are available on the Agenzia Entrate website of the Italian Ministry of Economy and Finance. This regime, implemented in 2019, allows for reduced taxation of only 7% on income from abroad. Additionally, there is an exemption from declaring assets and investments held outside of Italy, and exemption from taxes on these assets.

The tax benefits are available in regions such as Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, and Puglia, provided the retiree resides in municipalities with fewer than 20,000 inhabitants.

To qualify, the retiree must not have been a tax resident in Italy in the last five years. The program was created to attract foreign retirees to less populated areas, helping to boost the local economy without competing for jobs.

How to Take Advantage of Tax Benefits in Italy

To explore these tax regimes, it is advisable to consult a tax planning specialist to assess eligibility and maximize the benefits. Atlantic Bridge has a partnership with BDO, a global tax consulting firm present in 160 countries. All to ensure that your transition to a new European country happens safely, legally, and in a financially advantageous way for you.

If you are a digital nomad, retiree, or qualified worker thinking of moving to Italy, these tax regimes offer unique opportunities to optimize your financial situation and enjoy the Italian lifestyle with substantial tax benefits. Would you like to discuss your specific case? Request a consultation with our specialists!