Fiscal benefits in Italy for foreign investors and workers

Fiscal benefits in Italy for foreign investors and workers

The Italian government is encouraging foreigners to move to Italy through several legislative measures. Since 2015, different governments and different majorities have passed several laws in order to grant fiscal and administrative benefits for foreign investors and workers, who want to live, work, and do business in Italy.
In this article we will explain briefly the most important measures that are in force in order to attract new workers and investors in Italy.

1. Advantageous taxation for newly domiciled subjects (flat-rate tax on earnings generated abroad).

2. The so-called “Investor’s Visa”.

3. Fiscal benefits for “impatriate” workers.

4. Elective residence Visa.

5. Fiscal benefits for non-EU pensioners.

1 – Advantageous taxation for newly domiciled subjects

The 2017 Budgetary Law introduced an optional taxation regime that substitutes for the IRPEF (Tax on Earnings of Natural Persons). The new regime concerns natural persons (and at their request, their family members) with sizeable assets around the world. It is possible to apply for this fiscal benefit if the person has transferred the fiscal residency to Italy and meets the following requirements:

• Transfer their own fiscal and administrative residence to Italy.

• Have not been fiscally resident in Italy for at least 9 taxation periods over the past 10 years.

The subjects who meet these requirements can benefit from the following advantages:

• Substitute tax equal to € 100,000.00 per year for earnings from non-Italian sources. This fiscal regime can be extended to family members, and the substitute tax is € 25,000.00 for each family members.

• Exoneration from the obligation of declaring foreign financial investments and activities.

• Exemption from the obligation of paying the tax on foreign properties (IVIE) and the tax on foreign financial investments (IVAFE).

• Exemption from taxes on donation and succession on assets and properties held abroad.

The request for this fiscal regime is subject to the approval of the Italian tax agency (Agenzia delle Entrate). Moreover, the option lasts a maximum of 15 years and can be withdrawn by the applicant at any time.

2 – Investor Visa

This is one the most important laws passed by the Italian Parliament in order to attract new investors in Italy. It provides an easy procedure and less strict requirements for an Italian visa. This regulation provides the possibility for the entrance and stay in Italy for more than 3 months to foreigner investors who wish to carry out an investment of:

• € 2 million in Italian government bonds, which must be maintained for at least 2 years.

• € 500,000.00 in an Italian limited company which is created and operative, maintained for at least 2 years.

• € 250,000.00 in an Italian innovative start-up, maintained for at least 2 years.

• € 1 million in a philanthropic initiative in order to support a project of public interest in the sector of culture, instruction, immigration management, scientific research, and restoration of cultural heritage and landscapes.

The foreign investors, in order to apply for this type of visa, must meet the following requirements:

• Demonstrate that the investor is the effective beneficiary of the investments or donations.

• Carry out the investments or the donation within 3 months of the date of entry in Italy.

• Demonstrate to have sufficient resources to maintain itself and family’s members for the duration of the stay in Italy.

The visa lasts 2 years and it is possible to renew it for 3 more years if the original investment or donation is maintained. After 5 years (2 + 3), it is possible to apply for a long-term permit of stay, but they must register their fiscal residence and filed tax returns in Italy. After 10 years of permanent and legal stay in Italy, an individual is eligible to apply for the Italian citizenship.

3 – Fiscal benefits for “impatriated” workers

The new regulation for attracting foreign workers to move in Italy involves several measures. All these legislative measures aim to attract new human capital through a special tax system. It is an important law that allows workers to live in Italy and save a considerable amount in taxes, especially in the near future where smart working will be increasingly widespread.

The system has broadened the scope of beneficiaries and incentive, and it includes former Italian workers who have moved abroad, as well as foreign workers who are not Italian citizens. The beneficiaries are workers who:

• Have not been residents in Italy for the 5 years preceding their transfer.

• Establish their new residence in Italy for at least 2 years.

• Have to conduct their job mainly from Italy.

• Come from a country which has a treaty against the double taxation with Italy or a deal of exchange tax information with Italy

• Have at least a bachelor’s degree.

• Have been an employee, self-employed or an entrepreneur in the previous 2 years.

The benefits for these workers are very important because the earnings of dependent or autonomous workers are taxed at 30% of the common tax rate for a maximum of 5 tax periods. Furthermore, if the new residency in Italy is taken in one of the southern regions (Abruzzo, Molise, Campania, Puglia, Calabria, Basilicata, Sardinia, Sicily) the tax rate is 10% of the common tax rate.

4 – Elective Residence Visa

The Italian elective residency visa allows entry to Italy for a long period without having an employment or other special visa. This is a long-term visa for foreigners who want to stay and travel in Italy more than 90 days per year. The individuals, who want to apply for this visa, must meet the following requirements:

• Purchase or rent a house in Italy.

• Have a total income of at least € 32,000.00.

• Have regular and stable financial resources which are likely to remain steady in the future.

This type of visa allows foreigners to enter and stay in Italy for an indefinite period of time. However, it important to take into account that these individuals have to pay taxes in Italy if they:

• Are registered at the City Hall (Comune).

• Live in Italy more than 183 days during the fiscal year.

• Have their habitual abode in the country.

Otherwise, the Italian tax agency (Agenzia delle Entrate) can ask them to declare their worldwide assets, properties and financial activities, and to pay the taxes on foreign properties and investments in Italy.

5 – Fiscal benefits for non-EU pensioners

This is an important fiscal measure for non-EU pensioners who want to stay and live in Italy. The total taxation of the foreign income is only 7 % for a maximum of 10 years, and not only on pensions, but also for other incomes as equity profits, real estate income, etc.

The pensioner that wants to apply for this benefit must meet the following requirements:

• Hold a pension paid by a foreign state.

• Have the last fiscal residence in a state which has a taxation agreement with Italy.

• Not have had a tax residence in Italy in the previous 5 years.

• Obtain an entry visa, as investors visa, elective residence visa, etc.

• Declare the fiscal residency to a municipality with a population of less than 20,000 in one of the southern regions (Abruzzo, Molise, Campania, Puglia, Calabria, Basilicata, Sardinia, Sicily).

• Reside in Italy more than 183 days per year.

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