Italy Special Tax Regime

Italy introduced a special tax regime in April 2019 which allows remote working personnel who move their tax residence to Italy and become ‘inpatriates’ to a 70% tax exemption from employment income for five years providing they undertake to maintain their tax residence in Italy for at least two years.  It is possible to extend this extension to ten years, if they buy an Italian dwelling or have children/dependants, but in most cases this would then be reduced to a 50% exemption.

These exemptions are specifically designed to benefit tax payers that take up residence in regions classed as economically deprived, typically in the South and persons residing in certain areas can benefit even more with only ten percentage of income being taxable.

Although the allowance was initially only intended for persons working for Italian resident companies, this has been expanded to include other remote foreign workers.

The foreign workers nationality is not a factor in this exemption, both EU citizens and non-EU are treated equally.

Whereas employed remote workers must write to their employers to have the exemption applied self-employed are also entitled to the exemption and will be able to apply this when filing their tax return.

Italy are making a clear attempt to encourage skilled workers to deprived areas and whilst the individual can profit from the exemption, Italy is likely to gain from foreign companies that inadvertently qualify for permanent Italian establishment via the employee base of activities.