Pre-Immigrational Tax Planning Under Italy’s HNWI’s Special Tax Regime

Italy operates the most competitive and attractive preferential tax regime for high-net-worth individuals in the world today. The Italian special tax regime is based on a lumpsum tax of 100,000 euro on all foreign source income, applying in lieu of the Italian regular income tax. Family members with their own independent sources of income can join the principal applicant and pay a 25,000-euro flat tax that would shelter their own foreign source income from Italian regular income tax. Unlike other similar tax regimes that put several constraints on taxpayers or limit their benefits in different ways, Italy’s tax regime allows taxpayers to repatriate all their foreign source income without suffering any additional tax, allows a taxpayer to engage in a trade or business or take on employment in Italy without losing the benefits of the special tax regime, allows the taxpayer to opt out of the special tax regime at any time during the 15 year eligibility period without losing any of the past benefits, allows a total exemption from Italy’s inheritance and gift tax on foreign estate or foreign assets, and grants complete privacy by exempting the taxpayer from the duty to report foreign investments on his or her Italian income tax return. In addition, taxpayers can receive a tax residence certificate from the Italian tax administration thereby preserving his or ability to claim the protection of Italy’s extensive network of tax treaties with foreign countries. Based on our extensive experience working with clients in this area, none of other similar tax regimes (the UK resident not domiciled, Portugal non habitual residents, Spanish new resident entrepreneurs, Swiss flat tax or the most recently enacted Greek special tax regimes for individuals relocating to Greece) can effectively compete with Italy’s special tax regime for HNWIs. With the proper pre-immigrational planning on Italy income sourcing rules, the befits of the regime can be further enhanced by extending the scope of thew regime to cover most of taxpayer’s income, including foreign earned executive compensation, bonuses, stock options, and similar benefits earned while working abroad but living in Italy. Taxpayers can apply for an advance tax ruling clearing the way to the access to the regime and defining its scope with specific reference to the taxpayer’s particular situation.

In this area, we assist clients with strategic pre-immigration planning specifically designed to gain access to and extend the scope of Italy’s special tax the regime, and advise clients with the studying, drafting, and presenting advance tax ruling applications aimed at securing the benefits of the tax regime.