New opportunities thanks to the tax incentives for new resident workers
Italy, in the last five years has become, year after year, a better place to work. As a matter of fact, during the last governments, some new fiscal incentives were introduced in order to make Italy an attractive working place not only for workers, Academics and researcher, but for every kind of worker.
Let’s see, at a glance, how does it work the Italian fiscal law, what it is necessary to do in
order to work in Italy and what opportunities Italy is offering to the international workers.
As specified in others contribution the first condition to satisfy is, can I go to work in Italy? If the worker is an EU citizen, the answer is yes (the Italian municipalities, with minimum variations ask an health insurance valid in Italy and to declare to have sufficient economic resources). Instead, if the worker is an extra EU citizen, it depends and the answer needs a case by case analysis (necessary visa, residence permit,…).
From a fiscal point of view a first key point is to determine when a worker is an Italian tax resident individual. Indeed, an Italian tax resident individual is subject to the Italian income tax on his worldwide income, meanwhile a non Italian tax resident, only on his Italian Income (as defined by the article 23 of the D.P.R. No.917/1986, hereinafter also “TUIR”).
An Individual is considered Italian tax resident if for the greater part of the calendar year (the so called “183 rule”):
- Is registered in the registry office of the municipality where the individual lives; or
- has the residence or domicile in Italy, as defined in the Civil Code (domicile is the place where an Individual has the centre of vital and business interests and residence means the location where an individual has his habitual abode)work as employee or self-employed worker in Italy for the greater part of the calendar year;
The Italian legislation on tax residence must be coordinated with the Double tax treaty signed by Italy with several countries.Broadly speaking, the incomes deriving by working activities is taxed by the Italian income tax named IRPEF. IRPEF has progressive rates from 23% to 43%, depending from tax brackets. The above mentioned tax rates may also be increased by local and regional surcharge. The taxable base is the 100% of the working income with several deductions and allowances.
Italian tax resident individuals and also the non residents (only for Italian incomes) must yearly file the Tax return and pay the due taxes.
Italy, as anticipated, has two special fiscal regimes for new Italian resident individuals, the first one, also known as “Regime Impatriati” is dedicated to every kind of worker (Article 16 of Legislative Decree 14 September 2015, no. 147), instead the second one is only for academics and researchers (Article 44 of Law Decree 31 May 2010, no. 78).
The Regime Impatriati, after several legislative amendments, has a few requirements to satisfy in order to apply:
- be not Italian tax resident in the two calendar years previous to the transfer;
- make a commitment to be Italian tax resident for at least two fiscal years.
Thanks to the clarifications given by the Italian Financial Administration in the circular newsletter no. 33/2020, the citizenship is not an issue in order to apply to the fiscal regime of the article 16, paragraph 1, D.Lgs. no. 147/2015.
The Regime Impatriati grants to the applicants, for five years, a tax exemption of 70% on the domestic income deriving from working activities. The exemption is equal to 90% if the individual is resident in the South of Italy (Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia, Sicily).
If the worker, has an underage child or buy a residential property can extend the regime for other five years (with an exemption of 50% no matter where is resident). If the worker has three children, the exemption, during the second five years amounted to 90%. There is also a special regime, with different conditions, for professional sportsmen.
The second special tax regime is dedicated to Academics and researchers that:
- have performed their activities outside of Italy at public or private universities or research
centres for at least two consecutive years;
- transfer the fiscal residence in Italy in order to perform the above mentioned activities in Italy.
This special fiscal regime lasts for six years and grants an exemption of 90% on the domestic income derived by those activities.
If the applicant purchases a residential property or has children the regime can lasts 8 years, 11 or 13.
The two special regimes are really complex and the application need, especially for remote workers, a case by case analysis. In some situation is necessary to send a proper ruling to the Italian Financial Administration in order to obtain the green light. As specified above, must be analysed the situation before/after the change of the fiscal residence in order to understand the consequences in Italy and also in the previous country of fiscal residence. If it is possible, the best way is to plan the change of residence with fiscal advisors in both the countries.
It needs to be underlined that the worker must comply also with the social security contribution laws and with all the specific laws dedicated to every kind of activities.