Italy offers expat tax relief of up to 90 per cent

Italy is offering as much as 90 per cent tax relief in order to encourage expat professionals to relocate.

Italy’s special tax regime for incoming expat professionals has now been given a welcome makeover including increasing tax exemptions from 50 per cent to either 70 per cent or as much as 90 per cent for the first five years. In addition, the new rules are also to apply to expat workers who’d not lived in the country during the past two years and open up tax and other advantages to all levels of workers.

Up until now, the original tax exemption for locally-sourced income was only granted to high-prestige entrepreneurs, executives, managers and qualified professionals. The change is a more than welcome break for less exalted expat workers who’ve been non-resident for the past two years but work mainly in Italy, irrespective of their roles or qualifications. The new deal is even more impressive when taking into account Italy’s already low tax rates of 23 per cent to a maximum of 43per cent for top earners.

As in all countries, there are rules as regards qualification for the new scheme, but it’s likely to spur a good number of professionals spoilt for choice as regards where to settle next. To qualify, expats need to be either employed professionals, employees or entrepreneurs able to meet the necessary requirements, starting with a commitment to tax residency for two years and having not been tax resident for the previous two years.

Applicants should work mostly within Italy for a business owned by either a foreigner or an Italian citizen, regardless of the role they hold within the company. Those meeting the criteria will only be charged individual income tax 30 per cent of their salaries, business income or self-employment earnings. For those willing to transfer to Italy’s southern region, their taxable income can be reduced further to just 10 per cent of earnings, and the new regime applies for five years and allows another five year extension under certain conditions including property purchase and having an under-age child.

In addition, workers who relocate to any of seven Italian so-called ‘deprived regions’, the income tax exemption will be further increased to 90 per cent.One of the main advantages of the new rules is that it includes both self-employed expat professionals and employees regardless of their job sectors or qualifications, making the new rules a major reason for expats to choose Italy rather than one of its competitors.