Italy extends special tax regime for those relocating for work

Italy’s special tax regime for newly resident workers (lavoratori impatriati) has been extended by decree this month, significantly broadening its size and scope.

The tax exemption for Italy-sourced income is no longer restricted to qualified professionals, managers, executives or high-prestige entrepreneurs. It is now open to any workers who were non-resident during the two previous years, who commit to residing in Italy for at least two years and who perform their work mainly in Italy, irrespective of their qualifications or role.

The value of the exemption has also been increased, from 50 to 70 per cent for the first five years after relocation: an important saving on the usual Italian progressive rates of income tax, which vary from 23 to 43 per cent.

In an additional benefit, a worker can still claim a 50 per cent exemption for a further five years if they have bought a house in Italy within a year before or after relocating there.

The 50 per cent exemption also applies if the immigrant worker has at least one minor child, and increases to 90 per cent if there are at least three minor children.

The income tax exemption is also increased to 90 per cent where the new resident worker relocates to one of southern Italy’s ‘deprived’ regions (Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia, or Sicily).

New residents who are Italian citizens also now qualify for the special regime if they have been tax resident of a foreign country with a double taxation treaty for the prior two years, and if they have not removed their name from the official Italian resident population list.

The new regime is applicable immediately under the Decree for Growth (Decreto Crescita) published on 1 May, although further amendments may yet be made during its conversion into statute. However, the previous regime still applies to individuals who become tax residents of Italy before 2020.

‘All the above amendments make the relocation of workers to Italy even more appealing than before’, commented law firm Baker McKenzie.

Withers Worldwide has highlighted the appeal of these new measures to sports stars, and footballers in particular: ‘The regime could apply to both players and coaches relocating to Italy as employees of Italian clubs, making the clubs more competitive at an international level to engage sport stars with international connections and investments’, it said.

There is an additional regime for high net worth immigrants, who can pay a special EUR100,000 yearly lump sum tax on their foreign-sourced income for the first 15 years of residence.