Starting from 2015, to support the economic, scientific, and cultural development of the Italian country, country governments have introduced specific tax regimes designed to attract foreign workers, as well as bureaucratic simplifications in VISA issuance to lure non-EU investors.

To attract high net worth individuals (HNWI), a specific tax regime was introduced by the so-called 2017 Budget Law (Law No. 232 of December 11, 2016), that allows individuals who transfer their tax residence to Italy to opt for a substitute tax on income produced abroad. The requirements include (1) transferring tax residence from a foreign country to Italy, and (2) not having been a tax resident in Italy for at least 9 of the 10 previous tax periods.

The income covered by the regime includes only income generated abroad in various forms, such as employment income, self-employment income, business income, income from foreign properties, interest from non-resident bank accounts, and capital gains from the sale of non-qualified shares in foreign companies.

The only exclusion for foreign income refers to the capital gains arising from the sale of qualified participations (held in companies and non-resident entities) for the first 5 years of the regime’s application (calendar years, as in Italy individual tax periods always coincide with the calendar year), for which the taxation is 26% of the income received.

It is possible to exclude the income generated in one or more foreign countries from the application of the substitute tax (cherry picking) by using the ordinary taxation scheme, but the option must cover all income generated in the excluded country subject for the entire period of the regime.

The option for this regime consisted of a yearly fixed tax of €100,000 for new residents until August 9, 2024. However, a recent regulatory amendment provided by Article 2 of Decree-Law No. 113 of August 9, 2024, has raised this tax to €200,000 as the UK’s non-dom regime is phasing out, and Italy expects a strong inflow favored by this tax relief [and hopes to increase national revenues –Ed]. The regime can also be extended to family members, with a yearly fixed substitute tax of €25,000 for each family member included in the option.

The substitute tax applies not only to the ordinary individual income tax (IRPEF), but also entails exemption from the payment of taxes on foreign real estate and financial income (IVIE and IVAFE). Additionally, the regime exempts beneficiaries from [the Italian really consistent --Ed] monitoring obligations for foreign real estate and financial assets, as well as inheritance and gift tax on assets located abroad.

The HNWI option is valid for a maximum of 15 years from the first date of validity and is renewed annually unless the regime is terminated, revoked, or lapsed.

In case of specific income, to avoid disputes with the Italian Revenue Agency, the applicant may file a specific ruling to obtain prior approval from the tax authorities regarding the existence of the requirements for access to the regime.

While the HNWI applies to income produced abroad, a regime for impatriates is available for qualified professionals and workers. The impatriates regime has been modified in various ways over the last 10 years since its introduction in 2015. Due to the common abusive uses of the tax benefit, the renewed version of the regime, introduced by Legislative Decree No. 209/2023, applies only to workers who meet the requirements of high qualification or specialization.

The impatriates regime tax benefit consists of a taxable income equivalent to the 50% of the total income generated in Italy by employers or self-employed individuals, with a maximum total income limit of €600,000.

The requirements for the impatriates regime include (1) maintaining tax residence in Italy for at least 4 years, (2) carrying out work activity for most of the tax period in Italy, the aforementioned requirement of (3) possessing high qualifications or specializations, and (4) not having been a tax resident in Italy in the 3 years preceding the transfer. As an anti-abuse clause, the requirement of not having been a tax resident in Italy is raised to 6 or 7 years if the activity continues with the previous employer, or with entities linked to the previous employer.

Additionally, a specific bureaucratic simplification related to investors’ visas is available for non-EU citizens who want to invest in the Italian economy, also introduced by the 2017 Budget Law.

Investor visas are issuable for those who decide to:

• Investing at least €2,000,000 in Italian government securities.
• Investing at least €500,000 in an Italian corporation.
• Investing at least €250,000 in an Italian innovative startup.
• Making a philanthropic donation of at least €1,000,000 in Italy in the areas of culture, education, immigration management, scientific research, or conservation of cultural and landscape heritage.

While the investments must persist for the entire duration of the permit, the permit lasts for 2 years and can be renewed as long as the investment persists. Investors visas offer freedom of residence and travel within the Schengen area, and opportunities for permanent residence after 5 years of continuous residence in Italy.

In conclusion, the various tax regimes and bureaucratic simplifications introduced by the Italian governments in recent years have significantly enhanced the country's appeal to foreign workers and high net worth individuals, and non-EU investors. The governments hope that these measures will support Italy's economic, scientific, and cultural development, addressing the challenges posed by the traditionally stringent taxation and bureaucratic system, which have often been unappealing to foreigners.

The firm

JPA Studio Sala a JPA Italia were born from the shared experience of several consultants with the aim of creating a center of high competence for small and medium-sized multinationals entities. Over the years, compliance and audit activities have been combined with M&A activities.

If you need details from this article you can contact:

Daniele Sala                                                                                                                d.sala@jpaitalia.it