Italy: ‘Flat tax’ for new residents introduced

Details of a scheme for foreigners wishing to take advantage of the country’s new flat tax on foreign income have been released. The option, which was introduced with the Budget Act 2017, provides for the payment of a flat-rate tax of €100,000 for each tax period, in order to attract of High Net Worth Individuals to the country. A checklist form to be attached to the request has also been approved. This allows a pre-assessment by the tax authorities on eligibility for this preferential regime.

Taxpayers who meet the requirements can join the new regime at the time of submission of the tax return related to the tax year in which their fiscal residence was moved to Italy, or in the year following. It is also possible to send a specific prior request to a specific office of the country’s Internal Revenue Service. The request can be delivered by hand, by registered mail with return receipt, or electronic communication, via certified mail.

In any case, the taxpayer must indicate:

• their personal data and, if already granted, the tax code, in addition to their home address in Italy, if already a resident;
• the status of non-residence in Italy for a time at least equal to nine fiscal years during the ten preceding the start of validity of the option;
• the jurisdiction or jurisdictions in which he/she had the last tax residence before choosing the validity of the option;
• the states or overseas territories to which he intends to exercise the option of not using the flat tax.

The taxpayer must also prove that they are eligible for the scheme by completing a checklist, and to present supporting documentation.

The flat-rate scheme can be extended to one or more family members who meet the requirements, through a specific indication in the tax return relative to the tax period in which the family moved the tax residence in Italy or in the following. In this case, the flat-rate tax is equal to €25,000 for each member of the family to which the effects of the same option are extended.

The option must be chosen within the term for submission of tax returns, even when a response from the Revenue Service has not arrived yet. The application may be filed even if the term to entrench tax residence in Italy is not elapsed. The option is automatically renewed from year to year, while the effects cease, in any case, fifteen years from the first tax period of validity.

The tax payment, amounting to €100,000, must be made in one amount, for each tax period, by the deadline for the payment of the balance of income tax.