Want to live in Sardinia? Italy introduces Flat Tax to attract wealthy Foreigners

Want to live in Sardinia? Italy introduces a flat tax to attract wealthy foreigners: The Italian inland revenue service, called “Agenzia delle Entrate“, applied a new flat tax aimed at attracting wealthy foreigners to Italy, such us people working in sports, arts, fashion or other high income sectors. In particular the purpose seems to be to attract the London-based wealthy who are discouraged by Brexit.

How it works?

Italian flat tax for “newly resident” individuals is a tax incentive inspired by the British resident non domiciled regime and other similar regimes effective in other EU countries, such as Spain, Portugal and Malta. Basically, people who have resided abroad for a number of years and opt to move to Italy can activate a flat tax of 100,000 euros a year.

To be clearer, the substitute tax regime – also called “flat tax” – has been introduced for income produced abroad for those who have “fiscally” been outside Italy since at least 9 years and for those who were never fiscal residents in Italy (people who always spent less than half an year in Italy).

Those people can opt for a substitute tax regime on income produced abroad implying a one shot payment of €100,000 for each tax year, with the only exception of capital gains from disposal of qualifying shares. In fact to avoid potential abuses of the law, those incomes will have to respect a five-year holding period, during which any possible capital gain is subjected to the regular Italian tax regime.

How to apply?

To apply for the regime taxpayers have to file a specific ruling to the Italian tax authorities, which can include family members (who will be subjected to an additional substitute tax of €25,000 per person), and it will be possible to choose the country or the countries where the foreign income has been produced subjected to the substitute tax regime (according to the so-called “cherry picking” principle).

Once the Italian tax authorities issue a favourable ruling all foreign incomes will be admitted to the substitute tax regime for a period of 15 years long.

When an income is considered of foreign origin?

An income is considered of foreign origin according to italian fiscal law when one of listed cases occours:

  • the asset generating the income is situated abroad;
  • the business generating the income was conducted abroad;
  • the individual remitting the income is resident abroad for fiscal purposes.

The only exception might be provided for by international tax treaties.

What about assets held abroad?

The “newly resident” who opted to the new regime will also benefit from the exemption, as long as their option will last, from filling the RW section of the Italian tax return concerning assets held abroad, as well as the exemption from paying IVIE (tax on the value of real estate located abroad) and IVAFE (tax on the value of financial activities located abroad).

Exemption from donations and inheritance tax related to assets owned abroad:

It’s also important to underline that those subjected to the substitute tax regime will be exempted from donations and inheritance tax related to assets owned abroad.

Easier to get entry visas in Italy:

Last but not least, the “new  italian resident” will benefit from simplifications when asking entry visas in Italy.

Time to move to Sardinia, Italy:

If you were considering to move to Sardinia and enjoy the wellness of this beautiful land, then it’s the right moment to follow your dream, contact us for further details!

Source: Il Sole 24 ore and Agenzia delle Entrate. Cover image property of Nick Youngson (CC BY-SA 3.0).
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