Details of the regime
The Italian Government has in place a special tax regime designed to encourage the movement of “human capital” to Italy (lavoratori impatriati”).
- The current regime provides that 70% of qualifying income from employment carried out in Italy is exempt from income tax. So only 30% of gross salary/net profit is liable to income tax. 100% of salary continues to be liable to social security under normal rules.
- The exempt portion is 90% (so 10% taxable) if you take up residence in one of the regions of Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia, Sicily
- The regime applies for five consecutive accounting periods, until revoked, or until the conditions for the relief cease to apply, and can be extended for a further five years if certain conditions are met.
Conditions for the relief
- A University decree/highly specialized qualification. This condition does not apply for Italian citizens. If you have a degree from outside Italy you should request a Dichiarazione di Valore from the Italian consulate for the jurisdiction in which the institution awarding your degree is situated. This a certification that the degree is bona fide;
- The work is performed prevalently in Italy. This is generally interpreted as requiring that you spend more time, in any tax year, working in Italy than anywhere else;
- You must have been tax resident outside Italy in for two full tax periods preceding the year in which you transfer to Italy.
- Non Italian citizens who are citizens of a country with which Italy has a double tax treaty need to be in a position to prove that they were working outside Italy for two full tax years, or studying full time abroad for the same period. People studying at Italian institutions prior to starting work in Italy do not appear to qualify for the relief.
- You must commit to reside in Italy for at least two years – this means you must be tax resident in italy for two full tax years or risk losing the relief and paying the extra due plus normal penalties;
- You need to be tax resident in Italy for the whole of the first tax year in which you start work, otherwise the relief will not take effect until the start of the next calendar year. If you move in the latter half of any year, you will pay tax in full on any earnings for the year you move and the relief will not be available until the start of the following year (and that will be the first of the five for which the relief applies);
- Moving your residence to Italy must be made in connection with the new job.
Social Security and Wealth Tax
The exemption applies only to income taxes. It does not apply to statutory social security contributions (pension and healthcare) which will be calculated on 100% of salary.
Nor does the special regime provide any exemption from Italy’s foreign asset reporting requirements or reduction of wealth tax generally applicable to people who are tax resident in Italy for any year.
Extension for a further five years
The income tax exemption applies for a further five tax periods following the end of the first five year period to an individual worker:
- with at least one minor (under 18) or dependent (over 18 but earning less that the relevant annual financial thresholds for children; and
- who becomes the owner of at least one residential property in Italy after moving (or in the 12 month period prior to becoming tax resident);
- during the extension period, the tax exemption drops to 50%, but can increase to 90% for impatriates who purchase real estate in Italy in the first five year period and who at the end of that period have at least three dependent children under the age of 18.
The possibility of extension for pre 2020 arrivers is limited in the legislation to Italian citizens registered in the AIRE prior to the move at the outset of the first five year term and other EU citizens only. Non EU citizens may anyway have the right to extension dependent on non discrimination provisions of Italy’s treaties with certain other countries.
How to claim the relief
If you are an employee you should make a written letter of request (self certifying that you meet all the requisites) to your employer, ideally before receipt of your first instalment of annual salary in the first tax year that the relief applies – although adjustment via a future payslip for the same year may be possible. For the self-employed (and those employees who have not presented the letter of request in time) the benefit can be claimed in the relevant annual tax return which will generate the refund either via a payslip, a payment from the authorities or credit to offset future tax liabilities. We can assist with the refund claim.
If you would like advice on whether you qualify for the relief and/or a pre-compiled copy of the letter you need to send your employer please get in touch.
Legislation and guidance (mainly in Italian)
Tax Agency Guidelines and Further Reading
Tax Agency Circular no 17 /E of 23 May 2017 – Regimi agevolativi per persone fisiche che trasferiscono la residenza fiscale in Italia
Interpello (Replies to Requests for Official Ruling)
Resolution no. 72, 26 September 2018 – Work activity performed in Italy and abroad for companies belonging to a multinational group;
Risposta no. 272 -114/2018 Impatriates Regime not available where no “connection” between transfer of residence and new job in Italy. Taxpayer coming to Italy in search of new employment.
Resolution no. 51, 6 July 2018 – Tax residence abroad before impatriation – 2 complete tax years required;
Risposta no. 492/2019 – assignment to France – importance of lack of continuity;
Risposta no. 495/2019 – taxpayer coming from Ireland – taxed in full on first year (as non resident), commencement of special regime starting from first year of tax residence and following four years;
Risposta no. 497/2019 – taxpayer working abroad, not registered with the AIRE;
Risposta no. 59/2020 – Timing of the benefit – interaction between time of starting work and first year of tax residence – importance of claiming relief either by request to the employer or in tax return for first period of residence or lose – possibility of claiming relief for remaining years;
Risposta no. 533/2020 – Two years residence abroad for study purposes (Master’s Degree) not sufficient;
Risposta no. 42/2021 – Employee assigned abroad, returning to Italy – importance of non continuity;
Risposta no. 596/2021 – Impatriate’s regime available for employees working remotely for non Italian companies.
Risposta n. 703/2021 – requirements, exclusions and timings for taxpayers interested in the 5 year extension
Risposta n. 854/2021 Application of Impatriates Regime to Stock Option plans
Risposta n. 159/2022 – Return of employee from assignment abroad, continuing on same terms of employment, regime not applicable – useful discussion of the “continuity” principal.
Risposta n. 172/2022 – UK citizen arriving pre-2020 admitted possibility of five year extension due to non discrimination provisions of EU/Italy withdrawal agreement.
Risposta n. 321/2022 Dual Italian/non EU citizen, a pre-2020 arriver, denied 5 year extension due to not having been registered in the AIRE prior to transfer to Italy.