The Lavoratori Impatriati Regime: Tax Incentives for Relocating to Italy.
Italy's Lavoratori Impatriati regime offers attractive tax incentives to individuals who choose to relocate to the country. This special tax regime aims to encourage the influx of skilled professionals and entrepreneurs, providing them with substantial tax benefits for a specified period. By exempting a significant portion of their income from taxation, the regime serves as a powerful incentive for individuals considering a move to Italy.
To qualify for the Lavoratori Impatriati regime, you must meet certain criteria:
Non-Tax Residence: Applicants must not have been tax residents in Italy for the previous two years.
Residency Commitment: Individuals must commit to residing in Italy for a minimum of two years and be tax residents for the same duration. Failure to meet this requirement may result in the loss of tax relief and potential penalties.
Primary Work in Italy: Applicants should primarily engage in work activities within Italy, typically spending more time working there than in any other location. Strictly speaking, at least 85% of their work must be carried out in Italy.
University Degree or Specialized Qualification: Applicants must possess a university degree or a highly specialized qualification.
New Professional Activity: Relocation to Italy must be directly linked to the commencement of a new professional activity, such as a job offer, self-employment, or the establishment of a new company.
The Lavoratori Impatriati regime offers several significant tax benefits to eligible individuals:
Reduced Income Tax: Participants residing in northern Italy are subject to income tax on only 30% of their gross income, while those residing in southern provinces pay tax on just 10% of their income. The regular income tax rates are then applied to the reduced tax base. The initial validity of this special status is five years.
Additional Extension: Participants can extend their Lavoratori Impatriati status by an additional five years if they have at least one dependent under 18 years old or if their spouse purchases a residential property in Italy either after moving there or within 12 months before the move. For individuals meeting these criteria, a 90% exemption of taxable income can be claimed if they have at least three dependents under 18 years old.
Income Categories Eligible: The reduced taxation applies to income from professional activities, including employment, self-employment, and entrepreneurship. However, it does not extend to dividends, capital gains, or statutory social security contributions, which are calculated on 100% of the salary. Additionally, no wealth tax reduction or exemption from Italy's foreign reporting requirement is granted to tax residents during a given year.
To better understand the potential tax benefits under the Lavoratori Impatriati regime, consider the following examples:
For someone residing in northern Italy with a gross income of 100,000, their personal income tax would amount to 7,210 EUR, equivalent to what individuals earning a gross salary of 30,000 would pay under the regular Italian income tax rates.
For someone residing in southern Italy, the income tax due on a gross income of 100,000 would amount to 2,300 EUR, similar to what someone earning a gross income of 10,000 would pay under normal circumstances.
Italy's Lavoratori Impatriati regime offers an attractive opportunity for individuals seeking tax incentives and contemplating a relocation to Italy. By providing substantial tax benefits, including significant reductions in income tax, the regime encourages the transfer of human capital to Italy. However, it is essential for potential participants to meet the eligibility requirements and comply with the residency commitment to ensure they can fully enjoy the tax advantages provided by this special tax regime.
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