Workers relocating to Italy after 29 April 2019.
Income from salaried or equivalent employment and from self-employment produced in Italy by workers who transfer their tax residence to Italy is deemed to contribute to up to 30% of their overall income, and therefore is subject to a 70% exemption (art. 16 paragraph 1 of Legislative Decree 147/2015).
Where employees of the University are under agreement with agencies of the regional health system (SSR), said relief is not applied to clinical emoluments.
For taxpayers who transfer their residence to one of the regions in the south: Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia and Sicily, the exemption rises to 90% and therefore the taxable base is 10% of the income produced.
The tax relief may be applied also in cases where the work is performed in a municipality other than that of residence, provided the criteria for establishing residency in a locality are satisfied. Residency in one of the aforementioned regions must be established from the tax period in which the employee transfers their residence from abroad and must be maintained for the entire period that the tax relief is claimed. It follows that, if on returning to Italy, the employee's residency is in a region other than those mentioned above and they subsequently transfer their residency to one of these regions, they will not be entitled to more favourable tax relief.
Tax relief is also applied to income from salaried and equivalent employment and from self-employment produced in Italy by citizens of the European Union or of a country outside of the EU with which a double tax treaty or an agreement on the exchange of tax information is in force, who transfer their tax residence to Italy (art. 16 paragraph 2 of Legislative Decree 147/2015).
Subjective requirements for obtaining the tax relief
In order to obtain the tax relief (pursuant to art. 16, paragraph 1 of Legislative Decree 147/2015), applicants must:
- have been working abroad;
- not have been resident in Italy in the two tax years preceding their transfer to Italy;
- become resident in Italy for tax purposes and undertake to remain so for at least two years, under penalty of having to pay back the tax relief claimed in addition to penalties and interest;
- carry out work activities mainly in Italy.
Subjective requirements for obtaining the tax relief for citizens of the European Union or of a country outside of the EU with which a double tax treaty or an agreement on the exchange of tax information is in force
In order to obtain the tax relief (pursuant to art. 16, paragraph 2 of Legislative Decree 147/2015), applicants must:
- not have been resident in Italy in the two tax years preceding their transfer to Italy;
- have a degree qualification and have been continuously employed, self-employed or running a business outside of Italy during the last 24 months or more or they must have been continuously studying outside of Italy during the last 24 months or more, resulting in the award of an undergraduate or postgraduate degree.
The two-year period during which applicants must remain in Italy runs from the moment they become resident for tax purposes.
Duration of the tax relief
The tax relief is applicable for 5 years which shall run from the year in which the worker becomes resident for tax purposes in Italy and for 4 years thereafter, provided that they remain resident for tax purposes in Italy.
Extension of the tax relief
If the applicant meets further requirements and provided that they remain resident for tax purposes in Italy for the entire period, 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):
- 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.
The Italian Revenue Agency's circular 33/E 2020 also specifies the following.
The extension is limited to 5 years regardless of whether one or more of the requirements are met. Therefore, the tax relief may be claimed, in any case, for up to a maximum of 10 tax years.
The extension of the tax relief period may be granted both if the child is born before or after the transfer to Italy and, in any case, within the first 5 years of claiming the tax relief.
If, following the applicant's return to Italy, their children reach the age of majority (or cease to be dependent), they will not lose the tax benefits referred to in article 16 relating to the further five-year period.
Workers relocating to Italy ("impatriati") are entitled to the tax relief also if their minor or dependent children are not resident in Italy upon their return, provided they transfer their tax residency to Italy in the first five-year period during which the parents are receiving the tax relief.
In the event that a real estate property is purchased, the extension of the benefit is applicable in all cases in which the worker relocating to Italy purchases a residential real estate property in Italy in the twelve months prior to returning. The property may also be purchased after their return to Italy but it must be within the first 5 tax years during which the tax relief is claimed.
Applicants must retain ownership of the property during the entire period that they are claiming the tax relief.
The purchase of a residential real estate property while already owning another residential property in Italy does not constitute grounds for exclusion from the tax relief.
The Italian Revenue Agency has specified that it is necessary to acquire full ownership of the property and, therefore, bare ownership or merely the right of usufruct is not sufficient. Likewise, the signing of a preliminary contract of sale is not sufficient to be entitled to an extension of the tax relief since said contract simply binds the parties to undertake certain obligations and does not necessarily result in ownership, which occurs only after signing the deed of sale.
Register of Italians Resident Abroad (A.I.R.E.)
Italian citizens who are not on the A.I.R.E. may be entitled to tax benefits provided they have been resident in another country subject to a double taxation agreement for the 2 tax years prior to the transfer of their tax residency to Italy.
This allows Italian citizens not on the A.I.R.E. or who have been registered for less than two years to prove their residency abroad based on double taxation treaties, thereby preventing their exclusion from the tax benefit even though they transferred their residency abroad but did not cancel their registration with the resident population register or they cancelled it late and therefore failed to accrue the required two years.
Foreign citizens who, having lived and been resident in Italy for tax purposes, move abroad again without cancelling their registration in the national register and then subsequently return to Italy, cannot obtain residency since it is assumed to already exist. However, given the rationale behind the tax relief law, the Italian Revenue Agency, with circular 33/2020, deems the tax relief to be applicable in cases in which foreign citizens are also able to prove that, in the two tax years prior to their return to Italy, when they were formally resident in Italy, they were effectively resident abroad on the basis of the provisions of the double taxation treaty.
How to apply for the tax relief
Employees who believe they are entitled to this tax relief must submit the relative application form which is available on the intranet portal to which they will have access once they are hired.
The University, in its capacity as a tax withholding agent, at the documented request of the employee, applies the tax relief from the first effective pay packet, following assessment and, on determining the final balance, from the date on which the right accrues, by applying withholding tax to the employee's taxable income, reduced as provided for by the relief tax regime, with the relative deductions commensurate with this reduced sum. If the employer is unable to apply the tax relief, the taxpayer may, if the legal requirements are met, claim it directly through their tax return. In this case, the reduced amount of the income from employment must be indicated.
The application for tax relief must be submitted to the employer also in the event that the worker is hired again for a job other than that for which they initially returned.
How to apply for an extension of the period of access to tax relief
If, following submission of the application for tax relief, the applicant meets the requirements for extension of the same, the worker in question must submit the relative application form which is available on the intranet portal to which they will have access once they are hired.
For further information on the tax relief, please consult the Italian Revenue Agency circulars no. 17/E of 23/05/2017 and no. 33/E 2020.
Workers who relocated to Italy before 29 April 2019
Requirements for an extension of the tax relief
Workers who relocated to Italy before 29 April 2019 may extend the relief for a further 5 tax years provided that they meet the following requirements:
- they are registered on the A.I.R.E. or, alternatively, they are citizens of a Member State of the European Union;
- they transferred their tax residency to Italy before 30 April 2019;
- they are, as at 31 December 2019, eligible under the regime of workers and of workers relocating to Italy ("impatriati").
The applicable provision is art. 1 paragraph 50 of Law 178/2020 ("Budget Law" 2021) which introduced paragraph 2-bis into art. 5 of Decree Law 34/2019.
How to extend the tax relief
To extend the tax relief, applicants must opt in by filling in form F24 and making a one-off payment, which may not be offset, of an amount equal to a percentage calculated on the total income, not just the taxable base, produced in Italy from employment and self-employment that is eligible for tax relief, for the tax year preceding that in which the option is exercised.
- If, at the time of exercising the option, the person in question has at least one minor child (including in pre-adoptive care) or they have or will become the owner of at least one residential real estate property in Italy, they must pay 10% of the total income eligible for tax relief.
- If, at the time of exercising the option, the person in question has at least three minor children (including in pre-adoptive care) and they have or will become the owner of at least one residential real estate property in Italy, they must pay 5% of the total income eligible for tax relief.
In both cases, the requirement of being or becoming the owner of at least one residential real estate property in Italy is satisfied if the purchase:
- was made within the 12 months prior to the applicant's transfer to Italy;
- was made subsequent to the applicant's transfer to Italy;
- will be made within 18 months of the date on which the option is exercised (under penalty of having to pay back the benefit received without the application of penalties).
The real estate property may be purchased directly by the worker or by their spouse, partner or children, also in co-ownership.
Deadline for exercising the option
By 30 June of the year following the end of the first period of receiving the tax relief.
How to apply for an extension of the period of access to tax relief
If, following submission of the application for tax relief, the worker opts, by paying the relative amount, to extend the period of access to the tax relief, they must submit the relative application form which is available on the intranet portal to which they will have access once they are hired.
Responsibility vis-a-vis the Italian Revenue Agency
The employee is directly responsible vis-a-vis the Italian Revenue Agency with regard to the tax relief obtained from their employer. The Italian Revenue Agency may perform audits in subsequent years requesting the employee directly to produce the documentation submitted to the employer in order to obtain the tax relief, focusing in particular on their previous residence abroad. Employees are therefore reminded of the importance of keeping all the original documents attesting to their entitlement in accordance with the law.