A taxpayer who has worked for an employer in the two tax periods prior to the intended start of the flat tax regime (regime forfettario agevolato) cannot apply for the regime if he or she will be mainly working for the ex-employer once self-employed. The reason for this rule is to reduce the possibility that individuals currently on the payroll of an employer are tempted – or forced – to become self-employed, in order simply to access the new beneficial tax regime. For start ups the regime sees an individual paying a little under 4% of gross income in tax and a little over 20% of gross income in social security contributions. Employees (at least those earning more than 8,000 per annum) are looking at a minium of an extra ten percentage points on their gross income. Employees also present a significant extra on-cost for the employer.
In resolution No 173 of 30 May 2019, – in response to an interpello (official tax ruling) request – the Italian Tax Agency hold that a taxpayer returning to Italy and starting a new job as self-employed, may benefit from the flat-rate regime even though he had previously worked as an employee of his prospective client. The reason for the ruling is that in this case there is no intent to tax avoid requiring suppression by the anti-avoidance rule mentioned above. Although each resolution is a response to a specific taxpayer query, it seems reasonable to extrapolate a general principal that anti-avoidance rules in legislation should only be brought to bear to combat tax avoidance. Anti-avoidance rules should not apply automatically to natural behavior leading coincidentally to a advantageous tax position.
Where you think you may fall foul of anti-avoidance rule it is much better to consider making a request for an interpello rather than just proceeding anyhow. Indeed the ruling request may well be part of a favorable solution, in that it demonstrates the good faith of the taxpayer.
The full text of the ruling can be read here (in Italian).
If you would like to learn more about relocating to Italy and accessing the flat regime please contact us here
Link to Italian tax agency site (in Italian)