New tax regime for inbound employees
| Insights
The Italian Law Decree (so-called “growth Decree”) approved on April 4th, has brought significant changes to the domestic regulations for the relocation to Italy of employees, researchers and professors. The changes made to inbound workers provisions enhance the existing regulatory scenario, introducing incentives and favorable measures in order to boost the attraction and settlement of human capital to Italy.
The existing regime – with respect to the employees who transfer their fiscal residence in Italy pursuant to art. 2 of the CITT (Italian Consolidated Income Tax Text) – was subject to several amendments, the last of which became effective starting from January 1st, 2017. The main differences between the previous regime and the one emplaced by the new Law Decree, are analyzed hereinafter.
Art. 16 Legislative Decree no. 147/2015 – 2017
Income
Employment and self-employment income.
50% taxable income reduction
Income arising in Italy by workers who transfer their fiscal residence in Italy is subject to a 50% reduction, if certain conditions are met.
Criteria
1) Workers’ residence was not located in Italy during the previous five fiscal years and they are committed to be resident in Italy for at least two years;
2) The employment activity is performed in a company based in Italy throughout a legal employment contract with such company or with a company which directly or indirectly control it or are controlled by it or are both controlled by a third company;
3) The activity is mainly performed in Italy;
4) Workers must perform director roles or hold high qualification and specialization skills.
Validity
The special tax regime is applicable starting from the fiscal year when the residence is re-located and onward for the following four years.
Art. 16 Legislative Decree no. 147/2015 – 2020
Income
Employment income, income assimilated to employment and self-employment income.
The regime is also outreached to workers who start a business activity starting from the ongoing tax period as at January 1st, 2020.
70% taxable income reduction
Income arising in Italy by workers who transfer their fiscal residence in Italy is subject to a 70% reduction, if certain conditions are met.
Criteria
1) Workers’ residence was not located in Italy during the previous two fiscal years and they are committed to be resident in Italy for at least two years;
2) The activity is mainly performed in Italy.
Validity
The special tax regime is applicable starting from the fiscal year when the residence is re-located and onward for the following four years. An extension of the scheme is envisaged for a further five tax periods:
– with a 50% taxable income reduction for employees with at least one underage child or when, after the residence transfer or in the twelve months before the transfer, the employee becomes the owner of at least one real estate residential unit in Italy;
– with a 10% taxable income reduction for employees with at least three underage children or for employees who transfer their residence in the south of Italy.
With respect to the fiscal benefits provided for professors and researchers, pursuant to art. 44 of the Legislative Decree no. 78/2010, the afore-mentioned “growth” Decree established that for those who move their residence in Italy starting from 2020 i) the regime validity is lengthen to six years and ii) if certain conditions are met, the validity period can be lengthen to eight, eleven and thirteen years.
Lastly, in relation to both the individuals who can access the inbound employees regime (according to the afore-mentioned article 16) and the ones who can opt for the professors/researchers regime (according to the afore-mentioned article 44), the new law provides that the regimes can be adopted also by non-AIRE members who have moved their fiscal residence to Italy starting from January 1st, 2020. The right of access to the favorable regimes is granted provided that – in the two tax periods prior to the transfer – the non-AIRE individuals were resident in another State pursuant to an agreement for the avoidance of double taxation. For non-AIRE members who have already moved their fiscal residence to Italy as at December 31st, 2019, the previous legal provisions (in force on December 31st, 2018) should be applied.