Relocate to Italy for Increased Tax Exemption

The Italian government has extended and increased its special tax exemption regime for newly resident workers who commit to living and working in Italy for at least two years.

Until now, the tax exemption for Italy-sourced income was restricted to qualified professionals, managers, executives or high-prestige entrepreneurs. With the new rules, this regime is available to any workers who were non-resident during the two previous years, who commit to residing in Italy for at least two years and who perform their work mainly in Italy, irrespective of their qualifications or role.

Tax exemption has also been increased from 50 to 70 per cent, in a country where the progressive rates of income tax vary from 23 to 43 per cent.

The new tax exemption regime is open to an employee, a self-employed professional, or an entrepreneur who:

Becomes Italian tax resident (regardless of his/her foreign State residence);

commits to remain an Italian tax resident for the following two years;

has not been Italian tax resident in Italy for the last two years (the Regime also applies to Italian returnees); and

mainly works within the Italian territory for either an Italian or a non-Italian enterprise, regardless of his/her role or qualification.

Individuals who meet these criteria are subject to Italian individual income tax only on 30 per cent of their employment / self-employment / business income (individual income tax can be reduced to 13 per cent approximately).

Said taxable income is further reduced to only 10 per cent for those who transfer their residence to the southern regions of Italy (individual income tax can be reduced to 4.3 per cent approximately). The southern regions that qualify for creased exemption are Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia, or Sicily.

The regime applies for 5 years and can be extended for another 5 years for overseas property investors who purchase a residential property in Italy.

New residents who are Italian citizens also now qualify for the special regime if they have been tax resident of a foreign country with a double taxation treaty for the prior two years, and if they have not removed their name from the official Italian resident population list.