Article 5 of Legislative Decree 209/2023 has modified the regime for impatriates provided for in Article 16 of Legislative Decree 147/2015.
The new regime takes effect from January 1, 2024, in favor of individuals who transfer their tax residence from 2024, and the new features are:
• Tax exemption on 50% of income, compared to the previous percentage of 70%
• The maximum amount of eligible income is set at EUR 600,000 per year
• The benefit applies only to workers who possess high qualifications and specializations as provided for by Legislative Decree 108/2012 and Legislative Decree 206/2007
Types of eligible income
The tax benefit applies only to income generated in Italy by individuals who transfer their tax residence to the State. The categories of eligible income are: employment income, income assimilated to employment income, and self-employment income derived from the practice of arts and professions. The new legislation excludes business income.
Territoriality of income
As mentioned, the benefit refers only to income generated in Italy, excluding income from work performed abroad. However, employment income and self-employment income earned in Italy are considered as generated in Italy even if paid by a foreign entity, except for compensation for directors which, if classified as quasi-subordinate, are considered Italian-sourced if paid by companies resident in Italy.
Income from work performed abroad before the transfer to Italy, during the tax period in which tax residence in Italy is acquired, as well as income from any work performed while on assignment abroad, is not considered as generated in Italy. Income from business trips can be included in eligible income if the travel days are fewer than 183 days.
Bonuses and other variable components of remuneration received during tax periods when the individual is tax resident in Italy, but related to work performed before the return, are also excluded.
Lastly, employment income, income assimilated to employment, and self-employment income accrued for services rendered during tax periods when the benefit is enjoyed but received in subsequent periods will form part of the income in the period of receipt without being eligible for the benefit.
Incompatibility with the flat-rate regime
The Revenue Agency Circular 28/12/2020 No. 33 has declared that the option granted to individual VAT-registered persons to determine income on a flat-rate basis with consequent taxation through substitute tax is incompatible with the impatriate workers' benefit.
Taxpayers have the option to exit the flat-rate regime and apply the impatriate workers' benefit.
Conditions for accessing the favorable regime
To benefit from this regime, workers transferring their residence to Italy must meet all the following requirements:
• Commit to being tax resident in Italy for a period not less than four years
• Not have been tax resident in Italy for a minimum number of tax periods prior to their transfer, which is set at 3 but can be 6 or 7 if the worker works in Italy for the same employer they worked for abroad or for an entity belonging to the same group.
• Perform the work activity for most of the tax period in Italy
• Possess high qualifications or specializations
These requirements must be met by both impatriate employees and self-employed workers, whether they are Italian citizens or foreign, EU, or non-EU nationals.
Commitment to reside in Italy for at least four years
As mentioned, one of the requirements to benefit from this regime is the commitment of workers to reside in Italy for a period not less than four years. If this condition is not maintained, "the worker loses the benefits, and the benefits already enjoyed will be recovered, with the application of the relevant interest" but not of penalties.
4.2. Minimum period of prior residence abroad
Another requirement is that the worker must not have been tax resident in Italy in the 3 tax periods preceding the transfer of their tax residence to the State.
If the worker was not previously employed in Italy but continues to work for the same entity they were employed with before transferring residence, the requirement of residence abroad is 6 tax periods. The years of prior residence abroad rise to 7 if the worker was employed in Italy before moving abroad in favor of the same entity or an entity of the same group.
Conducting the work activity in Italy
It is required that the work activity be "performed for most of the tax period in the State," meaning for a period exceeding 183 days a year. "Holidays, public holidays, weekly rest, and other non-working days" are counted, but business trips exceeding 183 days or assignments abroad are not included as in such cases the work activity is performed solely abroad and not in Italy.
If the requirement of prevalence is not met, the regime does not lapse but only ceases for the tax period in which the prevalence requirement is not met.
Finally, it is not required that the employer be necessarily resident in Italy. Workers who perform the activity in the State but have employers/clients resident abroad can also benefit from this regime. Workers accessing this regime can also be employed by entities that are not companies.
Smart working
The regime is also accessible to workers who move to Italy but continue to work remotely for a non-resident employer.
The new regulation, as mentioned, requires a previous foreign residence period of 6/7 years if the employer does not change.
Workers who move to Italy and then relocate abroad while continuing to work for the same Italian employer are not eligible for the benefit; in such cases, the income is considered as generated outside the State.
Qualification and specialization
Individuals adhering to this regime must, according to Article 5, Paragraph 1 of Legislative Decree 209/2023, possess "high qualification or specialization as defined by Legislative Decree 28 June 2012, No. 108 and Legislative Decree 9 November 2007, No. 206."
Additionally, Revenue Agency Circular 23.5.2017 No. 17 has clarified that "this requirement is met in the following cases:
• Having obtained a higher education qualification issued by the competent authorities in the country where it was obtained, certifying the completion of a higher education program lasting at least three years and the related higher professional qualification, falling within levels 1 (legislators, entrepreneurs, and senior management), 2 (intellectual, scientific, and highly specialized professions), and 3 (technical professions) of the ISTAT CP 2011 classification of professions, certified by the country of origin and recognized in Italy."
• Having the requirements provided for by Legislative Decree 6 November 2007, No. 206, limited to the exercise of the regulated professions therein.
Regarding the second point, the possession of the requirements is easily identifiable as it refers to what is required for registration in Orders, Colleges, or professional registers. The first point is more difficult to identify, but considering that Legislative Decree 108/2012 was issued following the implementation of the European Directive 25.9.2009 No. 2009/50/EC, which indicates "higher education qualifications" as those corresponding to ISCED levels five and six, it is possible to consider that reference should be made to three-year degree courses or equivalent but also to non-university qualifications providing specialized professional knowledge, skills, and competences with a strong labor market orientation.
Measure of the benefit
The tax exemption percentage corresponds to 50% and is applicable to a maximum amount of income of EUR 600,000 per year.
The percentage can be increased to 60% if the individual:
• Moves to Italy with a minor child
• Becomes a parent (by birth or adoption of a minor) during the period of benefit enjoyment. In this case, the benefit starts from the tax period in which the event occurred.
However, the higher benefit is only valid if the minor child resides in Italy during the benefit period.
Duration of the benefit
The favorable regime is applied, according to Article 5 of Legislative Decree 209/2023, "from the tax period in which the transfer of tax residence to Italy occurred and in the four subsequent tax periods."
It is possible to extend the benefit for another 3 tax periods if:
• The worker transfers their registry residence to Italy in 2024
• The individual has purchased "a residential property used as the main residence" in Italy by 31.12.2023.
Those who have only signed a preliminary purchase agreement by 31.12.2023 are excluded from the extension. Additionally, no protection is provided for those who transfer their registry residence in 2024 and purchase the property in the same year.
Method of enjoying the benefit
No special formalities are required; continuity with the previous regulation is provided. An employee wishing to benefit from the regime must send a written request to their employer, who will apply the benefit from the next pay period.
If the employer "could not grant the benefit" due to lack of guaranteed data provided by the employee, the taxpayer, if eligible, can benefit from it directly in their tax return.
For self-employed workers, the benefit is directly enjoyed in the tax return.
Exclusion of supplementary returns
The Revenue Agency, in ruling No. 59 of 13.02.2020, denied the possibility of benefiting from the favorable regime through supplementary returns.
Circular No. 33/2020 confirmed that if the individual did not adhere to the favorable regime by choice or mistake when filing the tax return, they can make use of a "corrective within terms" or file it within 90 days of the deadline, indicating the income in a reduced amount; the possibility of filing a "supplementary return in favor" is not allowed; if the deadlines have expired, the taxpayer can still benefit from the regime for the remaining tax periods of the five-year benefit period.
