From 1 January 2019, any retired immigrants who are not resident in Italy and are in receipt of a pension could be eligible for a 7% flat-rate tax on all their foreign income.
The regime in not just limited to pensions, plus there is an additional exemption from wealth taxes on foreign assets.
The eligibility criteria are as follows:
- The person must not have been resident in Italy in the previous five tax years;
- They must have a pension paid by a foreign entity;
- The country paying the pension must have an administrative cooperation agreement with Italy; and,
- The retiree must be resident in a town with a maximum of 20,000 residents in the regions of Sicily, Sardinia, Campania, Basilicata, Abruzzo, Molise or Puglia (central and southern Italy).
Not a burden on the state
International Adviser spoke to Italian law firm Maisto & Associati, which specialises in tax law, to get more details about the scheme.
Partner Nicola Saccardo and associate Gabriele Colombaioni explained: “The new measure introduced by the 2019 budget aims at attracting people who have economic resources so as not to become a burden for the Italian government, but who can positively affect the Italian economy.
“The new tax regime applies both to Italian citizens and to foreigners as long as the inclusion criteria are met. The criteria for the 7% flat-tax rate is applicable on any income sourced abroad, not just on pensions.”
Foreign pensioners can benefit from the flat-rate for up to six years from their first tax year of residency, during which they will have to pay ordinary income tax on any Italian income and gains.
People who will take advantage of the scheme will also be exempt from reporting obligations on any foreign assets.
However, after six years at the 7% flat-rate tax, all pensioners will revert back to standard Italian income tax – ranging from 23% on income up to €15,000 (£13,500 $17,300) to 43% on income over €75,000.
Incentives for Brexit Britons
The tax advantages seem to come at a very convenient time, especially with the Brexit deadline getting closer.
In fact, as Saccardo and Colombaioni noted, “in the event of a ‘hard’ Brexit, British citizens could still be able to apply for a residency visa to move to Italy”.
The regime follows two other initiatives introduced by the Italian government in March 2018, namely the €100,000 substitute tax regime and the ‘impatriate’ tax regime.
The former allows those who have not been an Italian tax resident for at least nine of the past 10 years to apply to pay an annual €100,000 substitute tax on their foreign-sourced income.
The latter is aimed at skilled workers and consists of a 50% exemption for Italian-source employment and self-employment income.
However, “the three different tax regimes are alternatives that cannot be applied all at once. It’s up to the person to choose which one of the three is the best suitable for their situation”, Saccardi and Colombaioni said.