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Tax regimes of attraction for foreign residents

Following the abolition of tax benefits in other countries (notably Portugal and the United Kingdom), Italy is emerging as an increasingly attractive destination for high-income individuals.

Since 2017, several measures have been introduced aimed at attracting individuals with high spending potential from around the world, making the Bel Paese a preferred choice for those seeking a more favorable tax environment.

The most notable initiative is represented by the highly incentivized optional tax regime for high-net-worth individuals, allowing them to pay an annual substitute tax of €100,000 for all foreign source income. Additionally, it is possible to extend the regime to family members with the payment of an additional fixed tax of €25,000 for each family member.

The measure, like analogous taxation regimes reserved in other states for so-called resident-non-domiciled subjects, aims to attract foreign residents with high financial and asset availability to revitalize the economy through investments, consumption, and injection of new capital. However, it remains singular that the lump-sum taxation, concerning incomes produced abroad, requires that the related sources (the assets) must remain with foreign intermediaries. Moreover, without burdens of reporting to Italian authorities or payment of wealth taxes.

Particularly interesting, from the perspective of generational transition management and succession planning, is the provision exempting from gift and inheritance tax all transfers mortis causa or by way of gift of assets held outside of Italy by the new resident.

Concurrently, in the Consolidated Immigration Act, the “Investor Visa for Italy” program has been introduced, allowing foreigners (non-EU) to obtain an investor visa and a residence permit for periods longer than three months. This program offers several investment options, including the purchase of securities issued by the Italian government, investment in Italian companies, and donations to projects of public interest.

This combination of tax benefits and investment opportunities has made Italy a highly competitive option for high-income individuals. The simplification of entry visas and residence permits has further strengthened the country’s attractiveness for international investors.

Conversely, some countries have become particularly risky both economically and financially (especially after the escalation of inflation on weaker currencies) as well as in terms of personal security (think of countries in South America).

However, the choice regarding the exercise of the option cannot ignore a thorough screening of the overall position and the nature and composition of the assets held abroad and possibly a reorganization to maximize the benefits of the regime under international conventions and domestic tax regimes in force in Italy and in the country of origin.

But there are also other favorable rules that can be considered in the planning of arrival or return to Italy, and which likewise require the same careful evaluation.

For example, Legislative Decree no. 209 of December 27, 2023, amended the scope of application of the so-called “Regime Impatriati” compared to the original provision.

The purpose of the regulation is still to facilitate the return or arrival in Italy of workers, employees, or self-employed individuals who carry out their activity for most of the tax period in Italy and, from 2024, who possess the qualifications and specialization requirements.

Or the Flat Tax at 7% reserved for holders of pension income from foreign sources, which allows the application of a substitute tax at 7%, instead of the ordinary personal income tax rate, to any category of income produced abroad, for each of the ten tax periods of validity of the option. The essential condition is represented by the transfer of residence to one of the municipalities in southern Italy with a population not exceeding 20,000 inhabitants.

Our firm, thanks to a series of procedures already established and concluded for subjects coming from both European and non-European countries, and therefore experienced in providing advice on the matter, is available to assist those who wish to benefit from these tax regimes and investment programs in Italy, preserving the confidentiality of data- if necessary – at our Lugano office.

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