Blog
Italy’s New Tax Regime for Non-Doms
In an effort to attract high net worth individuals (HNWIs) following the culmination of Brexit, the Italian government has implemented a new tax regime aimed at wealthy people who have not lived in Italy during the past nine years.
The Financial Times reported that this new regulation, contained in the Finance Bill for 2017 passed on December 6, 2016, “[exempts] foreign income from Italian tax in exchange for the payment of [a fixed fee of] €100,000 a year,” and is expected to draw interest from hundreds of foreign nationals and wealthy Italians living abroad.
As explained by Antonio Tomassini, a partner at DLA Piper, this tax-free package can be used for a period of up to fifteen years and asks for only a limited amount of information to be disclosed by the wealth individual signing onto it.
Furthermore, the HNWI must purchase a home in the country and live there for at least six months out of the year.
Finally, as reported by Francesco Florenzano and Giulio Allevato for WealthManagement.com, “an additional and ancillary consequence of the new Italian regime consists of the exemption from gift and inheritance tax on the transfer by the applicant of assets and rights located outside of Italy.”
How to Become Eligible for Italy’s New Non-Dom Tax Regime
According to Florenzano and Allevato, individuals interested in this regime must apply “by the deadline for the submission of the tax return related to the fiscal year from which the qualifying individuals intend to adhere to the special regime (for example, by September 30, 2018 for fiscal year 2017).”
However, they must receive special approval from the Italian Tax Authority, hence it is recommended that they apply four months prior to the deadline.
If they are keen on extending this status to a family member or relative, the applicant must pay an additional 25 thousand Euros per member.
Foreign nationals looking into this regime can apply for an investor visa as long as they fulfill one of the following investment obligations, as pointed out by DLA Piper LLP on Lexology:
- Government bonds worth 2 million Euros and stashed away for a minimum of two years;
- A contribution of 1 million Euros in “the share capital of a company residing and operating in Italy;”
- A contribution of 500 thousand Euros in “the share capital of a company that is an innovative startup registered in a special section of the business register,” or;
- Donations adding up to 1 million Euros for any of the following sectors: “culture, education, immigration management, scientific research or cultural heritage restoration.”
A Good Alternative to UK’s Res Non Dom Regime?
Speaking about this new tax break and its release, Withers Law Firm said, “This timing, which coincides with the changes to the UK's “res-non-dom” regime, suggests that Italy might be seeking to woo HNWIs looking for a new home following Brexit or deterred by the tightening of rules in the UK.”
Likewise, Philip Marcovici, a wealth management expert in Hong Kong, believes this initiative is “smart” considering that “there will be a lot of people who rather than being in the cold in London would rather be in the sun in Italy.”
One of the main benefits awarded to applicants is being exempt from gift and inheritance taxes.
Withers said this is “good news for potential candidates, as there are persistent rumours that Italy might overhaul its current gift and succession tax regime in the near future (currently, gift and succession taxes are levied at very low rates of 4%-8% with exemptions for certain business assets).”
QUESTION: How does this non-dom regime compare to that in your jurisdiction? Has your jurisdiction thought of setting up a non-dom regime?
Your thoughts are always welcome!