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Perhaps one of the reasons why Ronaldo moved to Italy … Italian “Flat Tax” for New Residents of max 100.000€ yearly

Maurizio Bottoni's picture
Published: 24/09/18 - Country: Italy

Italy is a wonderful country, not only for Italians, but also for millions of tourists from all over the world, who are joining Italy every year. The amazing combination of European culture, sunny and Mediterranean lifestyle with seductive cuisine, excellent wines, incredible music and fascinating design (fashion, furniture …).

Furthermore, Italy can compete with a rich history and numerous cultural monuments in all the 20 Regions and with legendary cities as Venice, Rome, Florence, Milan, Naples, Genoa, only to name some of them.

In the last years, Italy has become interesting also for tax purposes. Some retired people decide to move to Italy to spend the last years also because our inheritance tax legislation is appreciable and others take advantage of some special tax legislation provided for resident workers who move from abroad. Perhaps also Ronaldo has just decided to move in Italy, after the well-known problems with the Spanish tax authorities, to take advantage of the special flat tax regime (see my articles "Special Tax Regime for Res non Dom in Italy" and "Special Tax Regime on Foreign Income for New Residents in Italy").

The flat tax regime was introduced in Italy, effective from January 1, 2017, in favor of high net worth individuals who decide to move in Italy and were never resident in Italy during, at least, nine of the ten fiscal years previous the request for the special tax regime.

The option for the application of the special tax regime must be exercised with the Italian tax return related to the fiscal year (FY) in which they become resident in Italy (the option can be exercised also with the Italian tax return related to the FY following the FY in which they become resident in Italy but it is preferable to fill in the so called “interpello”). 

Before exercising the option, the taxpayer can request to the Tax Office - with a special procedure (so called “Interpello”) - to verify the existence of the conditions required by law. In this case, it must be filled in a “check list” which contains several questions related to the personal, social and economic situation of the taxpayer and his/her family. In this request, the taxpayer must indicate also the Countries where his/her different revenues are taxed and the Countries for which the taxpayer wants to tax in Italy the related revenues according to the ordinary regime (with the foreign tax credit) instead of the special tax regime (i.e. cherry picking).

If the taxpayer decides to exercise the option without filling in the above mentioned request (so called “Interpello”), the information requested in the check list must be indicated in the Italian tax return in which the option is exercised.

The option for the special regime applies for maximum 15 fiscal years and the taxpayer can stop it with a simple communication in the Italian tax return. During the validity of the option the Res non Dom:

  • shall pay in Italy a substitutive tax (all inclusive) on their foreign income, equal to Euro 100.000 (Euro 25.000 for each relatives);
  • shall pay the ordinary Italian tax on any capital gain realized during the first five years of the special tax regime (for example, sale of shares);
  • shall be exempt from the payment of IVIE (tax on real estate abroad) and IVAFE (tax on financial assets abroad):
  • shall be taxable for inheritance and gift tax purposes only with reference to the assets located in Italy (in spite of the world wide principle).

Interconsulting Studio Associato is at your complete disposal to deliver you further details and ensure the applicability of the above mentioned flat tax regime assisting international clients to move to Italy.

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Maurizio Bottoni's picture

Maurizio Bottoni is the senior partner of Interconsulting. As a consultant in one of the Big Four he has developed a deep knowledge of the Italian and International tax law, through the involvement in operations and reorganization of multinationals. Extraordinary transactions and international issues are his daily business.