THE ITALIAN RESIDENT NON DOMICILIATED (ITALY RES NON DOM) REGIME
The Italian Budget Law for year 2017 introduced the article 24 bis in the Italian income tax code. This article provides, starting from fiscal year 2017, a favorable tax regime for new residents in Italy (the Italian Res Non Dom Regime) and it is inspired by the British resident non domiciliated regime (UK RES NON DOM) and by other similar regimes of other EU countries such as Portugal and Malta. This measure is a part of a set of rules introduced by Italian government with the aim to attract investments from foreign taxpayers in Italy. On March 8, 2017 the Italian tax authorities issued a regulation dealing with the practical aspects concerning the option for the regime.
RES NON DOM ITALY. THE NEW TAX REGIME
The Non Dom Regime introduces for eligible new Italian tax residents a substitute flat tax on their foreign sourced income for individual tax purposes and hence it reduces the effect of the Italian worldwide tax principle. Eligible tax payers can choose country by country the foreign income to subject to the Italian Res Non Dom Regime; any other income generated by investments realized in countries excluded by the regime will be subjected to ordinary Italian tax income rules. In addition the new regime set out the exemption from certain report obligations (namely the RW section of the Italian tax return which lists assets held by Italian taxpayers abroad) and certain wealth taxes (in particular IVIE or IVAFE: yearly taxation on real estate properties or on financial assets located abroad).Eligible taxpayers who opt for the Non Dom Regime apply a substitute tax on foreign- sourced income amounting to a yearly lump sum payment of Euro 100.000 (with a additional Euro 25.000 for each family member to which the non dom regime may be extended). An exception driven by anti-avoidance purposes concerns the sale of qualified participations occurring within the period of five years starting from the option for Non- dom regime.
ITALIAN RES NON DOM REGIME: ELIGIBILITY CRITERIA
Eligiblity criteria: New tax residents can exercise the option for Non-Dom Regime if they:
- Transfer the tax residence to Italy and maintain this status for at least 15 years;
- Have not been resident for tax purposes in Italy for 9 of the 10 tax periods preceding that in which the option is exercised;
- Obtain the approval of the Italian tax authorities following an advanced ruling procedure.
How to opt for the regime: The eligible taxpayers may opt for the regime upon:
- Submission of the income tax return for the fiscal year in which the tax resident in Italy has been acquired (First Applicable Taxable year);
- Submission of the income tax return for the fiscal year subsequent to the Fist Applicable taxable year (Second Applicable Taxable Year)
Alternatively the eligible taxpayer may file a specific ruling request with the Italian tax Autorithies reporting a large number of information contained in a specific Check list attached to the regulation issued on 8th march 2017.
CARAVATI PAGANI – Dottori Commercialisti Associati
Dott.ssa Simona Zanet – senior tax consultant – domestic and international tax
