The Italian HNWI Special Tax Regime for New Residents

Italy's Special Tax Regime is designed to attract HNWIs by offering substantial tax incentives, making it an ideal destination for those leaving the UK's non-dom system. Here's a comprehensive overview of what the regime entails:

Worldwide Income Exemption

Under Italy's standard tax rules, residents are taxed on their global income. However, the Special Tax Regime provides a full exemption for foreign-sourced income in exchange for an annual lump sum payment of €100,000. This means that any income generated outside of Italy is not subject to Italian taxation.

Additional Exemptions

In addition to the exemption from foreign income tax, the regime includes several other benefits:

  • Wealth Tax Exemption: No wealth tax on financial assets and real estate held outside Italy.
  • Inheritance and Gift Tax Exemption: Assets located outside Italy are exempt from inheritance and gift taxes.
  • Reporting Exemption: No obligation to report foreign assets on the RW Form.

Double Tax Treaty Consideration

Individuals benefiting from the Special Tax Regime are generally considered residents of Italy for double tax treaty purposes, unless otherwise specified in the treaty. This helps prevent double taxation on the same income.

Eligibility Criteria

To qualify for the Special Tax Regime, individuals must not have been tax residents in Italy for 9 out of the last 10 years before relocating their tax residence to Italy. This criterion ensures that the regime attracts new residents rather than benefiting long-term residents.

Duration and Flexibility of the Regime

The Special Tax Regime is valid for 15 years. However, individuals can choose to discontinue its application at any time without the possibility of reapplying. This flexibility allows individuals to adapt their tax planning as their circumstances change.

Application Process

New residents interested in this regime can submit an advanced tax ruling to the Italian tax authorities to seek approval. This ruling can be filed prior to relocation and does not trigger immediate tax liabilities, providing a clear and secure pathway for prospective residents.

Exclusions from the Regime

While the Special Tax Regime offers extensive benefits, certain exclusions apply:

  • Italian-Sourced Income: Regular Italian tax rates apply to income sourced within Italy.
  • Cherry-Picking Option: Income sourced in selected countries can be taxed at regular rates if chosen by the taxpayer.
  • Capital Gains: Capital gains from the sale of foreign "qualified" shareholdings are subject to Italian tax during the first 5 years of residency, under specific conditions.

Family Members

Family members can also benefit from the Special Tax Regime with a reduced lump sum payment of €25,000. They enjoy the same tax exemptions and requirements as the primary taxpayer, making it a family-friendly option.

Move To Dolce Vita: Your Reliable Companion in the Italian Tax Journey

Navigating Italy's tax regulations can be complex, but Move To Dolce Vita (MTDV) provides expert guidance to ensure a smooth transition for international families, affluent individuals, and global entrepreneurs. We specialize in crafting personalized solutions tailored to the unique needs of each client. Trust MTDV to make your relocation to Italy not only seamless but also uniquely delightful.

Conclusion

With the UK's abolition of the non-dom tax regime, Italy's HNWI Special Tax Regime offers a compelling alternative for wealthy individuals seeking tax efficiency and favorable treatment of foreign income. By understanding the benefits and requirements of this regime, former UK non-doms can make informed decisions and optimize their financial strategies in Italy.

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