Italy is rolling out a welcome to wealthy individuals and families from abroad by establishing a new tax status, known as a “non-dom program”. Within the program, any income that private individuals earn outside Italy is taxed at a flat € 100,000 per year per person. Each additional family member participating in the program pays € 25,000. The non-dom program also includes attractive arrangements for gifts and inheritances.
To benefit from this new non-dom program, you will have to move your tax residence to Italy. This applies to Italian nationals and foreigners, though you can’t have been liable for tax in Italy for more than one year in the past ten. Criteria for tax liability are: entry in an Italian population register, Italy as main focus of personal and business interests, or habitual residence.
Several countries before Italy have offered non-dom programs to help create an attractive environment for incoming wealth. Central to all such programs is the requirement that participants move their tax residence to the new country. Different programs offer different arrangements, with rules on minimum stays, for example, or on the size and type of income covered.
It’s important to remember that the programs are from the outset only available for a fixed duration.
It should also be noted that the flat tax only applies to income earned abroad. Income from Italian sources is taxed at the regular rate of up to 45%. Neither does the flat tax apply to profits made from the sale of foreign investments within the first five years of relocating to Italy. These are taxed at 25%.
The law has been passed, and the concrete arrangements for its application are gradually being put into place by the Italian tax authorities. The program is valid for a maximum of 15 years, though participants can exit from it and leave the country at any point.
Freedom of movement rules make it relatively easy for EU citizens to relocate their tax residence to Italy. For non-EU citizens wishing to relocate from outside the EU and participate in the Italian non-dom program, there are two options. One is to acquire EU citizenship in a country with an appropriate scheme for doing so; this automatically gives them a right to live in Italy. The second option is one offered by Italy itself. Anyone who invests in the country – in government bonds, Italian companies or start-ups, for example – or who provides financial support for a public-interest project, is given a time-limited residence permit.
There are some big differences between these options, particularly with regard to financial implications and the duration of the arrangements. We would be happy to advise you which is best for you.
Decisions about tax and residence should not be taken lightly. According to our wealth management experts, it’s vital that you are clear on the following points before making the move. Successful participation in the Italian non-dom program depends on getting these things right:
You should structure your assets to make the best possible use of the non-dom program. Our experts will be happy to advise you.
You should talk in detail to a qualified tax advisor before deciding to take part in the non-dom program. We work closely with tax consultants all over the world.
The Italian tax authorities offer to provide a provisional tax assessment within three months – regardless of whether you’ve already decided to participate or not. We recommend this option to anyone interested in the program; it shows in advance how suitable this tax regime might be for you and the extent to which you might benefit from it.
Under the flat tax regime, the Italian tax authorities do not ask for any information about your foreign assets. However, the US Foreign Account Tax Compliance Act (FATCA), the OECD’s Automatic Exchange of Information (AIA) and other rules may apply. Our advisors will clarify your exposure.
Do you want to spend a lot of your time in Italy over the coming years (max. 15)? This is not just a financial question.
The concrete application of Italian tax laws is worked out in detail by the country’s tax authorities: the rules for implementing the non-dom program are being developed bit by bit, and published in official circulars.
Perhaps the most popular non-dom program so far is the one offered by the United Kingdom. Modified rules introduced in April 2017 have significantly reduced the benefits, however. A report on the changes to the UK non-dom program suggests that 15,000 individuals could be affected.
What are the practical benefits for me? What are the next steps?
If you’re considering the Italian non-dom program, our experts will be happy to help.
Living in a complex world or living in a world full of opportunities? This questions contains two sides of one and the same coin.
Please follow our regular updates and subscribe to regularly receive new „Perspectives“ of Kaiser Partner via email.
Thank you for subscribing to our Newsletter