Tax Law Update
The 2017 Budget Law 2017 introduced a substitute tax optional regime (equal to € 100,000 per each tax year) for non-resident individuals wishing to transfer their tax residence to Italy.
This measure is inspired by the so-called "resident non domiciled" regime which is in force in the UK and is aimed at favoring investments, consumption and settlement in Italy of high-net-worth individuals and families.
Article 1, paragraph 152, of the 2017 Budget Law introduced Article 24-bis in the Italian Income Consolidation Code ("TUIR"). Pursuant to this Article, the individuals not resident in Italy for at least nine of the ten tax years prior to the first year of effect of the option can transfer their residence to our Country by exercising the option for a substitute tax on all foreign-source income and gains (the "Flat Tax").
The option for the Flat Tax is communicated in the income tax return for the fiscal year in which the individuals transfer their residence to Italy or in the following year.
On March 8, 2017, the Italian Tax Authority provided the operating instructions for exercising this option and clarified that the taxpayer can also file a ruling request to access the regime.
The new regime can be extended to family members of the new-resident (spouse, children – including adopted ones, parents, in-laws and sisters/brothers-in-law, etc.), provided that they transfer their residence to Italy and pay the Flat Tax at a reduced rate.
If the Flat Tax option is exercised:
The regime is automatically renewed each year and shall apply up to a maximum of fifteen years.
The taxpayer who has exercised the option or the family member to whom it has been extended may revoke the option at any time starting from the year after the first application.
The regime ceases in the event of any failing or partial payment of the Flat Tax and in case the tax residence is transferred to another State.