Italy tax changes: rolling out the red carpet for impatriates

January 7, 2017

Italy is rolling out the red carpet for international workers who acquire Italian tax residency, in a series of generous tax reforms.  Employers of individuals incoming to Italy should familiarise themselves with the new rules, in case they impact upon the value of their incentive packages.

The Impatriate regime: 50% exemption from income tax

A partial exemption was already in place for Italian-source income for employees transferring their tax residence to Italy in certain circumstances (the so-called “Impatriate regime”). 

Now the new Budget Law 2017 broadens the Impatriate regime to provide for a 50% exemption from income tax for Italian-source income from employment for the first year of Italian tax residence and the subsequent four tax years.

The conditions                                        

This valuable exemption is subject to a number of conditions including that the employee:

  1. must not have been resident in Italy under Italian domestic tax law in the previous five tax years, must acquire Italian tax residence under Italian tax law and then reside in Italy for at least two tax years;
  1. will work for an Italy-resident company, whether via another group company or directly, working in Italy for more than 183 days in each tax year; and
  1. will work at managerial level (or have certain minimum qualifications).

The tax regime is also available (subject to the 2-year minimum period of Italian tax residence) to EU citizens and citizens of third countries that have an effective tax treaty or exchange of information agreement with Italy provided that the employee:

  1. has a university degree and continuously worked in a country other than Italy in the previous 24 months; or
  1. continuously studied in a country other than Italy in the previous 24 months and obtained a specified level of qualification.

Optional flat rate tax on foreign source income and gains

The Budget Law 2017 introduced a further option for individuals acquiring Italian tax residency: optional flat substitute tax on foreign-source income and gains. This cannot be used cumulatively with the Impatriate Regime.

The conditions

Conditions for the tax regime include:

i.The individual must have been non-resident in Italy for Italian tax purposes in at least 9 of the 10 years prior to the first year of effect of the option.

ii.The individual must select this option via their annual tax return.

What should employers do now?

Employers of individuals who could benefit from these new rules should take note as they could significantly increase the value of packages for employees incoming to Italy.  For more information please contact Nicola Saccardo, Maisto e Associati, on +44 (0) 207 374 0299 or at


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