What is Regime Impatriati?
Regime impatriati is a special tax regime instituted by the Italian government since 2017 to encourage the movement of human capital to Italy. It applies to both Italian citizens who expatriated abroad and foreign citizens who move to Italy for work.
The central aim of regime impatriati is to:
- Encourage Italian citizens who have been permanently living abroad to return home.
- Inspire foreign citizens to move to Italy for work. The main incentive is a reduced tax burden for a set period of time.
- Encourage the “repopulation” of certain Italian Regions
- Counterbalance the so-called “brain drain” that has been taking place for the last two decades in Italy and that saw thousands of young talented Italians leaving the Country searching for a better future.
Why is it Important to understand the concept of Regime Impatriati?
The concept of regime impatriati is crucial to understand the tax benefits available when working from Italy. By doing so, you can ensure that you make the most of the tax incentives available while living and working in Italy. While conducting self-research through government websites, news articles, and reports can be helpful, engaging an employment partner like PeoItaly is a sure-shot way to maximize your understanding of this tax regime and avail it to your benefit.
Who can apply for regime impatriati?
The 2024 Budget Law made changes to requirements, timelines, and incentives. Compared to the previous version introduced with the 2020 Budget Law, the deductions will be less advantageous, and the potential number of beneficiaries will decrease.
Let's delve into all the new regulations effective from January 1, 2024, and identify who will be eligible for the new expatriate regime.
Starting from January 1, 2024, employed or self-employed individuals relocating their tax residence to Italy will be eligible for a new preferential regime. The maximum duration granted is 5 years, during which they can benefit from a 50% tax reduction, with a cap on eligible income set at 600,000 euros.
To qualify for the regime, individuals must meet high qualification or specialization requirements and must not have been tax residents in Italy in the three tax periods preceding the transfer of residence.
In the event that expatriate workers do not maintain their tax residence for the subsequent five years, they will be required to repay the incentives along with interest. The provisions for researchers, university professors, and sports professionals, which have already been established, remain unchanged.
Several changes have been made compared to the previous formulation, which included a 70% reduction in the taxable income for personal income tax (increased to 90% for those relocating their residence to the Southern regions) for five tax periods. Additionally, there were another five years of benefits at 50%, provided that within the first five years of the transfer, the individual purchased a primary residence or became parents with a dependent child.
When will the new regime take effect?
The Anticipi decree, linked to the 2024 Budget Law, establishes that the new expatriate regime will be operational from January 1, 2024. However, it is crucial to note that since at least 183 days of presence are required to obtain tax residency in Italy in 2023, those who can benefit from the old expatriate regime are practically only those who returned before July 2, 2023.
Who can benefit from the expatriate regime in 2024?
Starting from January 1, 2024, individuals eligible for the 2024 expatriate regime are those who will relocate their tax residence to Italy and have been tax residents abroad in the last three income tax declarations.
The incentives apply within the limit of 600,000 euros. In detail:
- Not having been tax residents in Italy in the three previous tax periods before transferring residence to Italy and committing to maintain tax residence in the country for at least five years
- It is possible to benefit from tax exemption even if the worker transferred to Italy performs their work activities for the same employer (or the same group) with whom they were employed abroad. However, in this case, the minimum requirement for the duration of stay abroad becomes:
1 - Six tax periods if the worker, before the overseas transfer, was not employed in Italy by the same employer (or the same group);
2 - Seven tax periods if the worker, before the overseas transfer, was employed in Italy by the same employer (or the same group). - Performing the majority of work in the Italian territory during the tax period.
- Meet the requirements of high qualification or specialization. Reference can be made to Circular 17/E/2017 (§ 3.2) of the Revenue Agency, which incorporates the provisions of Legislative Decree June 28, 2012, No. 108, and Legislative Decree November 9, 2007, No. 206, as detailed below
The requirement of high specialization or qualification.
Regarding the concept of workers with high qualification or specialization, reference can be made to the provisions outlined in Legislative Decree June 28, 2012, No. 108. This decree, transposing European Directive No. 2009/50/EC, specifies that this requirement is met in the following cases:
- Attainment of a higher education qualification issued by competent authorities in the country where it was obtained, certifying the completion of a higher education program of at least three years and the corresponding higher professional qualification falling within Levels 1 (legislators, entrepreneurs, and senior management), 2 (intellectual, scientific, and highly specialized professions), and 3 (technical professions) of the ISTAT classification of professions CP 2011, confirmed by the country of origin and recognized in Italy.
- Fulfillment of the requirements established by Legislative Decree November 9, 2007, No. 206, limited to the exercise of professions regulated by this decree.
Further benefits in case of dependent child
Finally, the new provision includes an enhanced benefit with a 60% tax reduction if the worker transferred to Italy has minor children.
Specifically, the percentage of income contributing to the formation of the overall income decreases to 40% in the following cases:
- The worker relocates to Italy with a minor child;
- In the event of the birth or adoption of a child during the period of enjoying the regime outlined in this article. In this case, the increased benefit is applicable from the ongoing tax period at the time of birth or adoption and for the remaining duration of the incentive.
The increased benefit applies on the condition that, during the worker's period of benefiting from the regime, the minor child or the adopted minor is a resident within the territory of the State.
What changes in 2024 compared to 2023
The new rules for workers transferring in 2024, compared to those applicable in 2023, make the regime less appealing through:
- Reducing the tax benefit, decreasing the tax exemption from 70% to 50% (increased to 60% in the case of a minor child).
- Limiting the benefit to only income from dependent and similar work, as well as self-employment, excluding business income.
- Introducing an annual income limit of 600,000 euros to qualify for the benefits.
- Imposing more stringent conditions for accessing the incentive, including the high qualification of workers and a longer period of foreign tax residency (3 years compared to the current 2) as well as residence in Italy after returning (5 years compared to the current 2).
- Excluding the safeguard clause applicable to those who purchased a house in 2023, there is no extension of the incentive, and the duration will be limited to 5 years (compared to 10 in the case of an extension).
- Not reintroducing the bonus incentive (90% income tax exemption) for expatriate workers moving to the Southern regions.
- Imposing limitations, in terms of a longer stay abroad, for the access of workers employed in Italy by the same employer or the same group of companies
The new rules aim to limit behaviors not in line with the spirit of the legislation, such as the temporary transfer of workers abroad within the group to create conditions for accessing the regime upon return to Italy. Similarly, the rules aim to prevent them from becoming an incentive for workers leaving Italy, as they knew that with two years of foreign residency, they could return and benefit from the regime.
However, the effect is to make a regime that aims to bring a much-needed working population to Italy less attractive, considering the demographic decline and the constant emigration of young people finding work abroad, as evidenced by the presence of 6 million Italians residing abroad.