1. What is the new regime?
The new Italian resident non-dom regime is an incentive regime which aims to boost investments in Italy by attracting high-net-worth individuals to move their residence to Italy, and levying a flat rate €100,000 p.a. substitute tax (in place of Italian tax) on their non-Italian worldwide income and capital gains.
Qualifying persons: individuals (also Italian returners), regardless of nationality or domicile, who have been non-tax resident in Italy for at least 9 years out of the 10 years preceding their transfer to Italy
Benefits: high-net-worth individuals transferring their tax residence to Italy may apply a €100,000 p.a. substitute tax to their non-Italian worldwide income and capital gains
Family members: the substitute tax regime may be extended to family members at a rate of €25,000 p.a. per family member. “Family members” include spouse, children (and, in case of their death, their descendants), parents, son / daughter in-law, father / mother in-law, brothers and sisters
Remittance of funds: (unlike the UK regime) worldwide income may be remitted into Italy without restriction
Italian income & IHT: Italian income and capital gains are taxed at the ordinary Italian rates. Italian inheritance and donation tax is applicable only for properties and assets within Italy (not on other worldwide properties or assets)
Reporting requirements: not required to report foreign assets or income
Non-EU investor visa:a non-EU citizen eligible for the resident non-dom regime may obtain an investor visa by (a) investing €2 million in Italian governmental bonds or (b) investing €1 million in securities issued by a company based and actually operating in Italy or (c) making a donation of at least €1 million to a “public interest” project (e.g. culture, education, handling of immigration or scientific research). The investment for (a) and (b) must be for a minimum of 2 years. An investor visa has an initial term of two years and it is possible to obtain extensions of 3 years each under certain conditions. Family members of the investor will be entitled to a “family connection” visa allowing residence with the investor
Validity of the regime: automatically renewed on an annual basis up to 15 years
2. Application process:
In order to benefit from the regime, an applicant should submit a “preliminary probatory ruling” request to the Italian Tax Authority (Agenzia delle Entrate) evidencing that he meets the eligibility requirements and requesting an advance tax ruling from the Italian Tax Authority confirming eligibility for the €100,000 substitute tax regime for a resident non-dom.
Timing: must be made before the transfer to Italy
Response timing: the Italian Tax Authority must respond within 90 days of the application (plus an additional 60 days if it has requested further clarification or documents from the applicant in order to issue the advance ruling). If the Italian Tax Authority fails to answer within the time limits, the applicant’s application is deemed to be accepted on the basis of a tacit consent
Benefits: the advance tax ruling is binding on the Italian Tax Authority, meaning that it cannot issue tax assessments or impose fines or penalties that would be contrary to the advance tax ruling
It is possible to avoid an advance tax ruling by simply filing an Italian tax return opting for the resident non-dom regime after the move to Italy has been made. However, Italy ordinarily taxes worldwide income and gains (except where the resident non-dom regime applies) so an advance tax ruling Italian Tax Authority will give an applicant the certainty he likely requires before moving to Italy that the regime definitely applies to him and that the Italian Tax Authority will not in the future open a tax assessment investigation.
The resident non-dom regime allows high-net-worth individuals to move their residence to Italy, protect their non-Italian worldwide income and capital gains from Italian taxation, and provide certainty on the applicability of such regime by the issuance of an advance tax ruling from the Italian Tax Authority. For non-EU citizens, a new investor visa regime is available and family members may benefit from a “family connection” visa allowing residence with the investor. The resident non-dom regime may also be utilised by Italian nationals returning to Italy who wish to protect their non-Italian worldwide income and assets, and who may at the same time additionally be able to utilise the returning tax incentives (“rientro dei cervelli” and “lavoratori impatriati”) which reduce the tax applicable on Italian income.
Article by Avv. Martin Pugsley
Tel:+39 334 656 7115
Martin is a corporate finance lawyer at Willkie Farr & Gallagher’s Milan office. He has lived and worked in Italy for 16 years, and was Vice President of the British Chamber of Commerce for Italyfrom 2012 – 2016. He regularly writes and speaks on Brexit-related matters.