Introduction
Italy offers a unique tax regime aimed at wealthy individuals who relocate to Italy. This flat tax regime, introduced by the 2017 Budget Law, is designed to attract high-net-worth individuals (HNWI) by offering a substitute tax on foreign income. Here’s a comprehensive guide to understanding this tax regime.
Key Points
Eligibility Requirements
Substitute Tax on Foreign Income
Application Process
Option to Join the Flat Tax Regime
Duration and Termination
Fixed Substitute Tax
Reporting and Exemptions
Inheritance and Gift Tax
Cryptocurrencies
International Tax Consultation
Eligibility Requirements
To qualify for the €100,000 flat tax regime, individuals must meet the following criteria:
Transfer their tax residence to Italy as per Article 2, paragraph 2, of the TUIR.
Not have been tax residents in Italy for at least 9 out of the 10 years preceding the effective date of the regime.
Substitute Tax on Foreign Income
The flat tax regime allows individuals to replace regular taxation with a fixed €100,000 tax on foreign income, irrespective of the actual amount earned. This option does not apply to Italian-sourced income, which remains subject to normal tax rules.
Application Process
Pre-Move Consultation: Before moving to Italy, individuals can submit a ruling request to the Italian Revenue Agency for approval.
Documentation: If opting without a ruling, they must include the option in their tax return and maintain sufficient documentation to prove eligibility.
Option to Join the Flat Tax Regime
Initial Declaration: The option can be declared in the tax return for the year of moving to Italy or the following year.
Exclusions: Taxpayers can exclude income from specific countries or territories from the flat tax regime, adjusting this choice annually to exclude more territories.
Duration and Termination
Duration: The regime is valid for up to 15 years.
Termination: The regime can end due to:
Voluntary revocation.
Non-payment of the substitute tax.
Moving tax residence outside Italy.
If terminated, the individual reverts to the standard tax regime and cannot re-opt into the flat tax regime.
Fixed Substitute Tax
Main Taxpayer: €100,000 annually on foreign income.
Family Members: €25,000 per family member, if included in the regime.
Inheritance and Gift Tax
Applicability: Inheritance and gift taxes are applicable only to assets located within Italy. No tax is due on foreign assets.
Cryptocurrencies
Inclusion: Income from cryptocurrencies can be included under the flat tax regime.
Tax Treatment: Gains from crypto held outside business activities are taxed at a 26% substitute rate if included in the flat tax regime.
International Tax Consultation
Understanding and navigating international tax laws requires meticulous attention to detail. Professional consultation is crucial to ensure compliance and avoid costly mistakes.
For this reason, Sardiamo partners with reputable tax experts who provide advice and assistance following thorough assessment of each individual situation.
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