What is the Italy impatriate tax break (in Italian “Lavoratori Impatriati”)
According to Italian authorities website, the Italy impatriates tax break can be summarised as follows:
It is a temporary subsidized taxation regime, recognized to workers who transfer their residence to Italy.
..in the tax period in which the residence is transferred and in the following 4, income from Italian-sourced employment (or similar) or self-employment contributes only to a limited extent to the total income subject to taxation.
More specifically, only 30% of the total amount earned in Italy is subject to Italian taxation or only 10% if the residence is taken up in one of the following regions: Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia, Sicily.
The special impatriates scheme may be extended for a further period of 5 years under certain conditions.
During the extended period, 50% of the subsidised income will be taxable (10% in the case of workers with at least three children under 18 or otherwise dependent).
The impatriates regime is also available to sportspeople who move to Italy with a flat exemption of 50% for 5 years.
Eligibility requirements for the Italy tax scheme for impatriates
There are three main conditions to fulfil:
- not to be resident in Italy for the 2 years prior to the move / repatriation; and
- carrying our work activities predominantly in Italy; and
- the worker needs to reside in Italy for at least 2 years
In addition to these main requirements, there must a direct connection between the transfer and the beginning of a work activity in Italy.
That is, the move to Italy should be the result of a job offer.
The tax relief is available to both Italians and foreigners (more specifically EU citizens or citizens of a country with which Italy has entered into a Double Tax Treaty or a Common Reporting Standards agreement).
For non-Italian citizens the additional conditions to fulfil are:
- having a degree or post-degree qualification; OR
- having worked for a continuous period as an employee, self-employed or entrepreneur in the last 24 months outside of Italy
The Italy tax break for impatriates is available for the following types of income:
- employment
- self-employment
- entrepreneurial
The Italian authorities have more recently also clarified that the special scheme for impatriates is also available to individuals on smart working arrangements with their employers.
With regard to sportspeople, the only 2 requirements to fulfil are:
– having been resident abroad for at least 2 years, and
– to become Italian resident for 2 years minimum
Applicability period of the impatriate tax relief in Italy
The Italy tax break for impatriates was originally meant to cover workers repatriating to Italy or foreigners moving their residency there from the 2020 Italian tax year.
However, subsesquent amendments have meant that the tax relief is now in fact available to workers from 30 April 2019 and therefore from the 2019 Italian tax year provided the eligibility requirements were met from such date.
In addition, the Italy tax break can be extended by an additional 5 years with an exemption of 50% under the following circumstances:
- the individual has at least 1 dependent below the age of 18, or
- they (either the individual themselves or their spouse / civil partner or their offspring) purchase a residential property in Italy (even jointly with the aforementioned people) EITHER after they move to Italy OR within the 12 months prior to moving there.
The process involved in claiming the Italy tax break for impatriates
Employees
In order to take advantage of the Italy tax break for impatriates, an employee needs to inform their employer through a self-declaration that he/she meets the conditions required for the tax relief.
The employer, from its side, calculates (and remits) the withholding taxes on the reduced taxable income through the payroll from the next available pay run.
Self-employed individuals (such as freelancers and contractors)
Self-employed workers can claim the impatriates relief via the Italian tax return by ticking the relevant box in section RE of the Italian tax return.
In addition, it is also possible to apply the Italy tax break exemption by way of lowering the retention tax (in Italian “ritenuta di acconto“) on the invoices issued to clients / customers.
Practical example illustrating how the Italian impatriates tax relief works
An individual transfers his / her residency to Italy from 1 January 2020 and starts working as a self-employed.
From March 2023, they also open a start-up company and/or become employed.
Assuming all the relevant conditions are met, they can claim the exemptions afforded by the impatriates scheme until 31 December 2024 on the total (i.e. from self-employment remuneration + from salary received from the start-up company / employment) taxable income.
If the individual also has a dependant below the age of 18, the Italy tax break for impatriates is extended for an additional 5 years (until 31 December 2029) provided that the child is born:
– EITHER within the initial eligibility period (that is, by 31 December 2024);
– OR before the individual transferred their residence to Italy
If the individual also purchases a residential property in Italy, the extension of the tax break remains valid only for the initial period of 5 years already granted as a result of having at least 1 dependant below the age of 18.
In other words, it is not possible to extend the Italy tax break for impatriates for 5 years twice (once as a result of having a dependant under the age of 18 and the other as a result of purchasing a residential property).
However, already owning a residential property in Italy, does not invalidate the ability to claim the 5 years extension if an additional residential property is purchased within the relevant eligibility period (i.e. 12 months before moving to Italy or within the first 5 years of the move).
FAQ Italy Tax Break For Impatriates
Is it possible to ask the Italian Revenue (Agenzia Delle Entrate) for a preliminary assessment to confirm my eligibility?
Unfortunately, the Italian authorities have clarified that it is not possible to request their view on individual cases (also known in Italy as “interpello”) to confirm eligibility for the impatriates tax break.
The onus is therefore on the individual to ensure they fulfil the relevant criteria when evaluating their personal circumstances and that they can therefore rightfully claim the exemption.
Although, we have listed the main eligibility criteria in this article, it is worth mentioning that this is nonetheless a complex area for which professional advice should be sought.
A professional assessment would in fact typically involve not only checking the individual meets the main criteria.
It would in fact also extend to a review of the secondment letter / employment contract, intercompany agreement, work permit obtained, tax and social security aspects in order to ensure full compliance whilst minimising risks for both the individual and their employer.
Does the Italian tax break for impatriates also include an exemption from social security contributions?
No. The exemptions afforded by the Italian tax scheme for impatriates covers only income tax (also known in Italy as IRPEF)
Are there any risk in connection with the special impatriates tax scheme in Italy?
As mentioned in the article, the onus is on the tax payer to self-assess that they are indeed eligible for the reliefs available.
The Italian tax authorities will likely run checks on individuals who claim the exemption once the tax break is claimed.
Therefore, there is a risk that if it turns out the individual claimed the exemption even though technically, they were not entitled to it, not only they would have to pay to the Italian authorities the taxes they claimed an exemption on but also, they will likely incur penalties and interest charges.
As an Italian living and working abroad, is it possible to take advantage of the tax scheme for impatriates even though if I’m not registered with the AIRE?
Yes, it is. Being in the official Register of Italians Residing Abroad is not a mandatory requirement to be eligible for the Italy tax break for impatriates.
However, in circumstances where the individual is not registered with the AIRE, the tax scheme for impatriates is only available from 1 January 2020.
It is also worth highlighting that the AIRE concession mentioned above is:
– not available to foreigners as being an Italian citizen is a prerequisite of the concession itself
– only available to Italian citizens who repatriate from countries with which Italy has entered into a Double Tax Treaty.
What about the impatriates tax break for foreigners who already lived in Italy before?
Foreign nationals who have previously moved their residency to Italy and signed up on the official Register of the Resident Population (“Anagrafe“) at the local townhall can still be eligible if they de-registered before the left in Italy AND if they meet the usual eligibility requirements.
However, if they have failed to de-register before leaving Italy, then the impatriate tax break becomes inaccessible to them.
Is it possible to still claim the exemption afforded by the Italy impatriates tax break if I change job?
Yes, the Italy tax scheme for impatriates is still available when changing jobs.
What happens if my plans change and I end up being resident in Italy for less than 2 years?
Any entitlement to the Italian impatriates tax break is forfeited and any tax exemptions obtained will need to be paid to the Italian authorities.
In addition, penalties are likely to apply (ranging from 90% to 180% of the taxes not initially paid) for each year in which the tax relief for impatriates was claimed.
Is the Italy impatriates tax scheme also available if the foreign employer does not have an entity in Italy?
Yes, the Italian authorities have confirmed the impatriates regime does not require the work is performed for an entity based in Italy.
I am an Italian expat sent on assignment abroad, is the impatriate tax relief also available to me if I have been outside of Italy for at least 2 years?
For the Italy tax break for impatriates to be available these 2 conditions need to be met:
1) the original assignment period was extended (i.e. it was initially for 2 years but the individual was asked to stay for an additional year)
2) the individual is offered a different role (within the same company) when returning to Italy (a promotion from Manager to Director for example).
I have repatriated to Italy and I’m now working as self-employed, with “regime forfettario”, is the impatriates scheme still available to me?
Unfortunately, the Italian authorities have clarified that the regime forfetario is incompatible with the impatriates tax scheme.
Contact us should you require further clarifications on the impatriate tax relief in Italy (Lavoratori Impatriati) and/or have a look at some of the other insights we have published.
