For agents

Italy is adopting a substitute tax to the foreign income

The State Tax Service. Public Relations Department.

For the attention of new residents! Italy is adopting a substitute tax to the foreign income. The State Tax Service has prepared instructions for persons wishing to transfer their tax residency to Italy.

The State Tax Service has prepared instructions for foreign citizens wishing to become Italy’s tax residents having used their right to pay a substitute tax to the foreign income. The new tax treatment, which is introduced by the Budget Law adopted in 2017, provides a one-time payment of a tax of €100,000 for each tax period during which the above-mentioned treatment operates. The new preferential tax treatment is intended to encourage the transfer of tax residency of the so-called High net worth individuals to our country, namely, those with the high income. The head of the State Tax Service has approved a sample of questionnaire that is to be attached to the application for the preliminary review of documents and that will allow the Financial Department to perform a preliminary audit and deliver a verdict on the possibility of granting preferential tax treatment.

How to use this offer?

Taxpayers possessing the required requisites can join the new tax treatment while submitting a tax declaration for the tax period during which the tax residency is transferred to Italy or for the following period.

Besides, the taxpayer can apply for the preliminary review of documents to the Main Control Office of the State Tax Administration. The application can be submitted personally, sent by registered mail or electronically, via certified e-mail.

The application shall contain the following information:

  • Personal data, including the fiscal code (if any) and the residence address in Italy (for residents only);
  • The status of the tax non-resident in Italy within the period of at least nine out of ten tax periods preceding the beginning of the validity of the selected tax treatment;
  • Jurisdiction or jurisdictions of applicant’s last tax residence before the validity of the selected tax treatment;
  • Foreign states or territories to which the applicant intends to use the right not to apply a substitute tax.
  • The taxpayer will also have to provide the data necessary to receive the access to the preferential treatment by filling out a questionnaire attached to the order of the head of the tax service and to provide the relevant documentation.

The tax treatment is available for the family members as well. The treatment of a one-time payment can also be extended to one or several family members who possess the required details by specifying it in the income declaration referred to the tax period during which a family member transfers his/her tax residence to Italy or to the period immediately following it. In this case, the amount of a substitute tax is €25,000 for each family member to whom the selected tax treatment applies.

When to apply? The request for transfer to a special tax treatment is to be submitted before the end of the term of the submission of the income declaration even in the case if the State tax administration has not respond to the application for the preliminary review of the documents yet. The request can be submitted before the conditions of the tax residence transfer to Italy come to force. Operation of the selected tax treatment is automatically extended to the next year. Otherwise, it automatically expires in 15 years counting from the first day of the selected tax treatment operation.

One-time tax payment. A substitute tax of €100,000 is paid as a one-time payment for each tax period during the selected tax treatment operation and within the terms provided for the income tax payment.

Rome, March 8, 2017