Major changes to the Italian Impatriate Tax Regime

by Francesco Nicolosi

As of 1 January 2024, major changes to the Italian Impatriate Regime will come into effect. 

The current regime provides for a 70% exemption for certain categories of Italian sourced income (basically employees and freelance workers who operate in Italy).  An enhanced 90% exemption is provided is if you take up residence in one of the regions of Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia, Sicily. 

In order to opt for such regime, the worker must have been resident for tax purposes outside Italy in the previous two years. 

The regime applies for five consecutive accounting periods, until revoked, or until the conditions for the relief cease to apply. The tax relief is applicable for a further 5 tax years, during which the following percentages of their income will be subject to income tax (IRPEF - Personal Income Tax):

  • 50%: if the employee has a minor or dependent child, including if in pre-adoptive care;
  • 50%: if the employee acquires full ownership of at least one residential real estate unit in Italy following their transfer to Italy or in the twelve months prior to the transfer. The real estate unit may be purchased directly by the interested party or by their spouse, partner of children, also in co-ownership;
  • 10%: if the employee has at three minor or dependent children, including if in pre-adoptive care.

According to the draft text released by the Italian Authorities, the new regime provides for a 50% tax base reduction in personal income tax, to a maximum income of  EUR 600,000.  Such regime would apply provided that the worker:  

  • is a highly skilled professionals (Legislative Decree 108/2012 and Legislative Decree 206/2007); 
  • was not resident for tax purposes in Italy in the three tax periods preceding the year of the transfer
  • commits to reside in Italy for at least five years (e.g., those transferring in 2024 must not have resided in Italy – as a minimum – from 2021 to 2023 and must remain there until the end of 2028)
  • carries out an activity in Italy, which is based on a new employment relationship with an entity other than the one on which the worker was employed abroad (or an entity of the same group); The work activity must be performed for most of the tax period in Italy. 

In order to benefit from the favourable regime, Italian workers moving back to Italy must be enrolled in the Register of Italians Resident Abroad (AIRE), or alternatively, must have been resident in another State under the double taxation convention, for the three years preceding the transfer.

A grandfathering rule will be implemented to protect those who moved to Italy by 31/12/2023 under the current rules.

In contrast, there are no changes to the very favourable flat tax regime for UHNWIs and the pensioner regime.