This GMS Flash Alert reports on welcome new changes to Italy’s Inbound Expatriate Regime.
The Italian government has expanded its favorable tax regime for highly-skilled employees coming to Italy to work. In addition to increasing the amount of tax abatement it offers, Italy is broadening the class of those eligible for the special tax incentive known as the “Inbound Expatriate Regime.”
Not only is Italy now offering a more favorable preferential expatriate tax regime – a 50-percent tax break to inbound individuals coming to Italy to work who are Italian residents for at least two fiscal years – but it is also now applying equivalent eligibility rules for this regime both to European Union (EU) citizens and to citizens from countries with which Italy has a tax treaty or an exchange of information agreement.
This could help lower employers’ costs related to assignees working in Italy, and provide more flexibility when choosing employees to send to Italy to work.
Italy’s 2017 budget law1 modifies last year’s special tax regime2, known as the Inbound Expatriate Regime (see GMS Flash Alert 2016-017, 28 January 2016), which had reduced to 70 percent the taxable base of skilled individuals who have not resided in Italy during the past five years (two years for EU citizens), and who intend to remain resident in Italy for at least two fiscal years. The new law further reduces the taxable base to 50 percent for eligible inbound employees. The benefit lasts for five fiscal years starting with the year in which the individual becomes an Italian tax resident.
Originally applicable only to EU citizens, the new law makes the Inbound Expatriate Regime available to citizens from countries with which Italy has a double taxation treaty or an information exchange agreement.
Eligibility for the 2016 regime was applicable to individuals who:
The new law:
We at Studio Associato Consulenza legale e tributaria await important clarifications about how both the 2016 and the 2017 rules are to be applied. Indeed, there are doubts about many aspects of the Regime’s practical implementation. For example, still unclear are the consequences of business trips abroad during the Italian work period, the qualifications of skilled employees, and the types of employment activities.
1 Law n. 232 – 11 December 2016. Bilancio di previsione dello Stato per l'anno finanziario 2017 e bilancio pluriennale per il triennio 2017-2019. (Gazzetta Ufficiale Serie Generale n.297 del 21-12-2016 - Suppl. Ordinario n. 57.)
2 Legislative Decree n. 147 – 14 September 2015. Decreto Legislativo 14 settembre 2015, n. 147, “Disposizioni recanti misure per la crescita e l'internazionalizzazione delle imprese,” (Gazzetta Ufficiale Serie Generale n.220 del 22-9-2015).
The information contained in this newsletter was submitted by the KPMG International member firm in Italy.
© 2020 KPMG S.p.A., KPMG Advisory S.p.A., KPMG Fides Servizi di Amministrazione S.p.A. and KPMG Audit S.p.A., Italian limited liability share capital companies, KPMG Business Services S.r.l., Italian limited liability company, and Studio Associato - Consulenza legale e tributaria, Italian professional partnership, are member firms of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance.
Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.