The extension of the Italian “newly resident” regime to the applicant's family members

This article aims to examine the Italian "newly resident" regime with particular reference to its possible extension to the applicant's family members.

Under Article 24-bis of the Italian Decree 917/1986 (“ITC”), there is the possibility of applying a substitute tax of 100 thousand euros on income produced abroad by individuals who transfer their tax residence to Italy. The neo-resident individual may opt for the application of this regime provided that he or she has not been resident in Italy, pursuant to Art. 2 of the ITC, for at least nine of the 10 tax periods preceding the exercise of the option.

The regime is valid for 15 years from the time the option is exercised.

Still with regard to the subjective scope of application of Article 24-bis of the ITC, Paragraph 6 of the rule allows, during the period of validity of the option, to extend its effectiveness also in favor of one or more of its family members. In this way, the Italian Legislator wanted to facilitate the transfer of entire households, in order to allow a more widespread and easier use of the regime, enhancing the attractive scope of the rule.

In case of extension of the newly resident scheme to family members, the substitute tax payable by each family member is equal to 25 thousand euros for all income generated abroad. The duration of the extension is equal to the remaining validity periods in the head of the petitioner as principal.

The focus of this contribution is precisely on the individuals to whom the new resident regime can be extended.

In detail, Paragraph 6 of Article 24-bis of the ITC states that the extension can be applied to family members referred to in Article 433 of the Italian Civil Code, while Tax Authority circular letter No. 17 of 2017 in this regard also adds persons "with whom a civil union has been entered into, pursuant to Law No. 76 of May 20, 2016" (so-called Cirinnà Law).

In order to correctly identify the persons to whom the regime under consideration is extensible, it is therefore necessary to examine Article 433 of the Italian Civil Code also with reference to the additions made by the above mentioned Cirinná Law.

Specifically, Article 433 of the Italina Civil Code provides a peremptory and progressive list of classes of persons obligated to provide maintenance according to a hierarchical order that places the spouse first. If the latter is absent or unable to bear the burden, the next-ranking obligors will be called, such as in order the children (and if absent, the next descendants), the parents (and if absent, the grandparents or other ascendants up to the sixth degree of kinship), some relatives-in-law (son-in-law, daughter-in-law, in-laws) and, residually, the brothers and sisters in concurrence.

The catalog of obligated parties was expanded with the enactment of the Cirinnà Law, which under Article 1 paragraphs 19, 20 and 65 provides for a maintenance obligation also on the part of the party to the civil union as well as, under certain conditions, on the part of the de facto cohabitee.

By virtue of the above, the party to the civil union ranks, vis-à-vis the other party to the civil union, on a par with the spouse and thus at the top of the list of obligated parties.

The de facto cohabitee, on the other hand, in the event of termination of cohabitation, is obligated to provide alimony to the former de facto cohabitee on a residual basis - only after descendants and ascendants, but with precedence over the category of siblings - and for a limited time, equal to the duration of cohabitation.

In order for the aforementioned alimony obligation of the former de facto cohabitee to be effective, it is required that the de facto cohabitation, even if not formalized, has complied with specific requirements indicated by the Cirinnà Law and better detailed by case law: persons of age, permanently united by affective ties as a couple and by mutual moral and material assistance, without ties of kinship, affinity, adoption, marriage or civil union (see Court of Palermo ruling, 14.4.2020 no. 1271).

From the framework outlined so far, it can be seen that the Cirinnà Law has made a significant, albeit limited, innovation in the field of cohabitation, prescribing the legal maintenance obligation in favor of the former cohabitee who comes to find himself or herself in need. As a result, the more uxorio cohabitee must be counted among the subjects of Article 433 of the Italian Civil Code under the conditions established by law.

In light of all that has been said so far, Tax Authority circular letter No. 17 of 2017 runs the risk of creating confusion on the issue of extension, since in identifying family members who are beneficiaries of the tax regime, it refers to the subjects of Article 433 of the Italian Civil Code and only those united civilly under the Cirinnà Law. In other words, from the letter of the circular, it would seem to exclude the possibility for the petitioner to extend the new resident regime to his or her de facto cohabitant.

After all, however, Art. 1, Paragraph 65 of Law 76/2016 prescribes that "for the purposes of determining the order of obligors under Article 433 of the Civil Code, the maintenance obligation of the cohabitant [...] is fulfilled with precedence over siblings," thus enucleating de facto cohabitants in the list of those obligated to maintenance under Article 433 of the Italian Civil Code.

Considering, therefore, the revisitation of Article 433 of the Italian Civil Code by the Cirinnà Law, the reference to the civil law rule should already in itself include both civilly united and de facto cohabitants; to lean toward a different solution would lead to unduly restricting the scope of application of the above Article 433 as established by the Legislator.

From the normative substratum, however, it is clear that the petitioner can only extend the scheme for new residents to those from whom he himself could claim alimony under Article 433 of the Italian Civil Code, therefore, under this approach, the scheme would be extendable to his own de facto cohabitant but not to the de facto cohabitant of his relatives, with respect to whom he would have no alimony rights.