Italy’s new foreign talent attraction tax incentives

The Italian government introduced a set of tax incentives for foreign talent moving to Italy. Find out if you qualify and how to apply.

Yordan

4 minute read

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Updated on 17 Nov 2022

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Working

As of January 2021, the Italian government introduced a series of incentives, in the form of special tax regimes (STRs), to attract new tax residents to the territory of the country.

The STRs were introduced through Law n. 178/2020, art. 1 para 50. They are applicable to certain individuals who have transferred their tax residency to Italy after the 19th of May 2020 and consist of substantial income tax cuts.

In this article we’ll give an answer to the following questions related to the latest update:

• How much are the tax breaks in Italy?
• Who can take advantage of the tax incentives?
• What are the eligibility criteria for the tax incentives?
• How to apply for the tax breaks?
• How long are the tax breaks valid for?
• Can the tax breaks be extended?

Let’s dive into it!

First things first, how much are the tax incentives?

The tax breaks for individuals vary depending on the part of Italy, the talent relocates to. The majority of the regions in the country offer a 70% tax cut to the newly registered tax residents.

However, some regions offer a staggering 90% tax cut to the individuals who meet the criteria. You’ll be fortunate to be able to make use of that hefty tax cut in the following regions:

• Abruzzo
• Basilicata
• Calabria
• Campania
• Molise
• Puglia
• Sardinia
• Sicily

The 70% and 90% tax cuts imply that you’ll only have to pay 30% and 10% tax on your income respectively.

What type of income do the new foreign talent attraction incentives apply to?

An important note is that the special tax regime only applies to income from salary or bonuses that are the result of your activities after the formal approval of the status of your Italian tax resident status.

In other words, you only receive the tax break on the income you get as a result of your business activities after you receive your Italian tax resident status.

As with every enticing offer, there are strict rules that you must comply with in order to be eligible to take advantage of the incentives.

You must meet all of the following conditions in order to be qualified to benefit from the STR:

• You must be an employee, self-employed or a business owner
• You must become a tax resident of Italy
• You must commit to remaining a tax resident of Italy for at least the two following years
• You weren’t a tax resident of Italy in the two preceding years
• You must spend at least 50% of the year (183 days) on the territory of Italy

Following the latest update of the legislation behind the special tax regimes, the tax cuts don’t have any limitations when it comes to an individual’s country of origin. This means that you can take advantage of them regardless of whether you’re an EU or a Non-EU citizen.

The benefits now also apply to all workers, instead of to only to the ones who are in managerial roles or have particular specialist qualifications or degrees.

Does the special tax regime apply to foreigners who have lived in Italy before?

Foreigners who have previously lived in Italy can apply for the tax incentives. This is possible under the condition that they have previously been registered in the Anagrafe registry and have not removed themselves from it following their departure from Italy.

Does the special tax regime apply to seconded workers?

Seconded workers are a special category of individuals who are employed in another company (aborad) without ending their contract with their existing employer in Italy. Such work assignments can last anywhere between 3 and 12 months.

If you’re a seconded worker, we have some good news for you: you can take advantage of the special tax regime. However, you have to satisfy the following conditions:

• Your secondment is not in the continuation of your previous employment
• The new employment contract should presuppose a new working relationship, a significant change in the work you’re doing, a pay raise and a position promotion

There are also some exceptions to the above conditions. This means that you can take advantage of the special tax regime in Italy if:

• Your secondment has been extended for long enough that your ties to Italy are diminished
• Your return is accompanied by a new position that is not in the continuation of your previous employment agreement

The procedure for applying for the special tax regime is fairly simple.

Applying for the tax incentive as an employee of a company

Employees of companies must request their employers to file the application for tax reduction via a written declaration.

Applying for the special tax regime as a self-employed worker

Since self-employed individuals work for themselves, they can apply for the tax break independently. The process entails that this is done in the yearly tax returns and by requesting reduced rates from clients.

Special tax regime application timeline

As specified by the Italian Tax Authorities, the applications for enrolling in the special tax regime must be filed before the end of the “late tax returns” period. This means that you can apply within 90 days after the formal first deadline has passed.

Anyone who gets their application approved is entitled to the tax breaks for a period of five years.

If that isn’t enough of a good deal for you, the period can be extended if certain conditions are met.

The special tax regime can be extended for a maximum of five additional years only once.

In order for an extension to be possible, there has to be a purchase of a home in Italy or the presence of a minor child.

In the case of purchasing a property, extension applicants must file their claim before the 31st of December of the last year of the initial tax break period.

Now that you know about the most important aspects of the new foreign talent attraction incentives in Italy, you should familiarize yourself with how to become a tax resident in the country.

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