New Flat Tax Regime for Foreigner
Flat Tax: A new tax regime is available for 15 years to Wealthy Individuals who become Italian residents
A new regime comparable to the UK resident NON Domiciled regime has been adopted in Italy with effect as of January 2017.
According to the new law, the individuals who become Italian tax residents may opt for a flat yearly tax of Euro 100,000, which covers all income having source outside Italy, regardless of the amount of that income.
An individual who wants to be admitted to such a regime must have been a tax resident in countries other than Italy for a minimum of 9 years (in the 10 years preceding the one in which the residency is transferred to Italy). This option is available to both Italian and non-Italian citizens, as long as the residency condition is met.
The Flat Tax is replacing any other tax which would otherwise apply to Italian residents on their sources outside Italy.
The law contains only one exception to the principle above. Such exception applies to the capital gains derived from the sale of “qualified participations” in a foreign company. According to the Italian Laws a participation is “qualified” when: (a) in a privately owned company, the holder owns more than 20% or 25% respectively of the voting rights or any interest, regardless the voting rights in the said participation; (b) in a publicly-traded company, the holder owns more than 2% or 5% respectively of the voting rights or any interest, regardless the voting rights in the said participation.
Note that incomes having Italian sources will be taxed according the ordinary Italian regime. It is worthy to mention that no tax credit will be granted against the payment of the flat tax amount (Euro 100,000), for taxes paid abroad.
Any family member (e.g. spouses, sons, daughters, parents as well as brothers and sisters) who also receive incomes from non-Italian sources, will be liable of a reduced amount of Euro 25,000 instead of Euro 100,000.
An important exception concerns:
(i) the obligation to report in the annual return of any assets owned outside Italy. The new resident is indeed exempted to report any financial investments and properties which are owned outside Italy;
(ii) the liability to pay donation or inheritance taxes. The new residents will be exempted from the gift and inheritance tax which would otherwise apply on transfers of assets located outside Italy.
The new tax resident may request to the tax authority for an approval of its flat-tax status by means of a ruling process.
A modification in the immigration law also allows individuals which are not EU-Nationals, to obtain an investor Visa on the condition that an investment having duration of minimum 2 years is made on Italian Government Bonds or in other securities issued by Italian Companies (respectively in the amount of 2 Million and 1 million). The investor visa will have a duration of an initial period of 2 years which could be extended for an additional 3 years period (a Visa will also be granted to the family members of the investor).