Moving to Italy? Don’t miss out on the Special Tax Regime

Italy has historically faced emigration phenomena towards wealthier countries, leading to a loss of wealth and skills. To reverse this trend and stimulate economic growth, measures have been introduced to encourage non-residents to transfer their residence to Italy.

Article 24-bis of the Italian Income Tax Code (TUIR) introduces an optional substitute tax regime for individuals (and, potentially, their family members) who transfer their tax residence to Italy. This regime applies to income produced abroad.

Individuals eligible for this regime must:

• Transfer their tax residence to Italy,
• Have not been tax residents in Italy, for at least nine out of the ten tax years preceding the period when the option becomes effective.

According to paragraph 2 of the TUIR, the substitute tax on foreign income is set at €100,000 per tax year, regardless of the income amount. This amount is reduced to €25,000 per tax year for each family member.

However, recent amendments introduced by Article 2 of the Law Decree of August 9, 2024, n. 113, also known as the ”Omnibus Decree,” have increased the substitute tax to €200,000 for individuals transferring their residence to Italy after August 10, 2024.

Income generated abroad, subject to this substitute tax, is identified according to the criteria established by Article 165, paragraph 2 of the TUIR.

The foreign-sourced income covered by this regime includes:

• Real estate income from foreign lands and buildings,
• Capital income from foreign states or non-resident entities,
• Employment income earned abroad,
• Self-employment income derived from activities performed abroad through a fixed base,
• Business income from activities conducted through permanent establishments abroad,
• Capital gains from the sale of shares in non-resident companies,
• Other miscellaneous income from foreign activities and assets.

The option remains valid for 15 years and cannot be renewed after its expiration. Income generated in Italy remains subject to regular taxation.

During the valid tax years, individuals are exempt from:

• Filling out the RW section of the tax return,
• Paying the IVIE (property tax on foreign real estate) and IVAFE (financial assets tax).

Forvis Mazars is a global network operating in more than 100 countries. We have a close collaboration with our colleagues worldwide, which gives us the opportunity to help our customers in the best possible way. If you currently live in Italy or are planning to move there and have questions about how these rules may affect you, please reach out to us and we can assist with analyzing your specific situation.