Income tax relief from 70 % to 90% for residents with permanent residence in Italy

The italian government passed a new bill that affects new employees with a permanent residency in Italy - the so called “Lavoratori impatriati”.

This bill in effect since 1st May 2019 and affects residents from 2020 - individuals who became residents in the year 2019 do not have access to these benefits. This bill allows individuals that move to Italy because of work and have a permanent residency here to gain certain tax benefits. In order to qualify an income from employment in Italy is also required.

A significant increase in tax relief

Tax relief for individuals that are residents of Italy has increased from 50% to 70%. This change affects new tax residents who will now pay a progressive income tax on 30% of their income (the brackets range from 23% to 43%).

If the resident moves because of work into one of the southern regions of Italy (Abruzzo, Molise, Campania, Apulia, Basilicata, Calabria, Sardinia, Sicily) the tax exemption increases up to 90%. This means that the income of the new resident will be taxed on only 10% of his income.

Valid for up to 5 years

This special tax status will last 5 years according to the bill. The year during which the taxpayer moved will count towards this. New residents can benefit from these changes for 4 more years after moving.

Bonus

New residents can benefit from these changes after the 5 years are over if:

  1. they have an under-aged child (if they have 3 children younger than 24 years they can benefit from a 90% exemption for 5 years )
  2. they have bought property anywhere in italy 1 year before or after moving to Italy

Requirements

The bill has simplified the requirements for these tax benefits. In order to gain access to these benefits an individual has to fulfil these requirements:

  • Being employed, self-employed or an enterpreneur
  • Having a permanent residency outside of Italy during the previous 2 years
  • Staying in Italy for at least 2 years
  • Working or doing business on Italian soil

These exemptions also apply to italian citizens that have permanent residency in italy but were tax residents of other countries in the previous 2 years.

Other tax benefits

  • Professors / scientists: 90% individual tax exemption for 5 years
  • Pensioners: a special 7% flat foreign income tax for 5 years
  • High-net-worth individuals: a special one time amount of 100 000 € and a substitute foreign tax for 15 years

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