Have you recently moved to Italy for work reasons?
Do you live abroad, but have received job offers and are you considering moving to Italy?
Have you been living in Italy for a few years following a work/study experience abroad?

In the following contribution I will try to answer these questions, as well as outlining the general features of the favourable regime for expatriate workers and of the related benefit.

Summary

• What is the favourable regime and what are its advantages?
• Who can apply the favourable regime?
• Evolution of the legislation and differences between the various favourable regimes
• Reduction of the taxable base
• Methods of application
• Duration and possible extension of the regime
• Forfeiture of the favourable regime, sanctions?
• Self-employed workers, or impatriated professionals
• Special cases: return from posting, professional sportsmen, smart working
• Request personalised support

• the worker has not been resident in Italy in the two tax periods preceding the transfer,
• the work activity is carried out mainly in the Italian territory,
• he undertakes to reside for tax purposes in Italy for at least two years.

Italian citizens who are not enrolled in the Registry of Italians Resident Abroad (AIRE) may also benefit from the special scheme provided that, in the two tax periods preceding the transfer, they have resided in another State under the terms of a double taxation convention on income.

For taxpayers who are in such conditions, in the tax period in which their residence is transferred and in the following four tax periods, the income from employment (or similar) and self-employment produced in Italy is included in the total income limited to 30% of the amount or 10% if the residence is taken in one of the regions Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia, Sicily.
Given the complexity of the subject, it is suggested to always be supported by a professional in the verification of the requirements and in the consequent implementation of the facilitation.

Who can apply the favourable regime?

The favourable regime for impatriated workers can be applied by different categories of persons, provided that the objective conditions with respect to the activity carried out are met.
The individuals potentially eligible for the scheme are the following:

• Employees;
• Self-employed workers (professionals, carrying out arts and professions);
• Entrepreneurs.

The preferential treatment is also available for business income produced by impatriated workers who start their activity in Italy starting from the tax period following the one in progress on 31 December 2019.
Given the complexity of the issue, it is advisable to always be supported by a professional in verifying the requirements and the subsequent implementation of the benefit.

Evolution of the legislation and differences between the various favourable “regimes

As mentioned above, the legislation relating to the discipline in question has been amended several times in recent years.
Following its introduction, Legislative Decree No. 147/2015 was initially amended by Article 5 of Legislative Decree No. 34/2019, which provided for the modification of the requirements as of 1 January 2020.
In addition, however, by virtue of Article 13-ter of DL 124/2019 as converted, the impatriate regime as amended by DL 34/2019 applies, starting from tax year 2019, to persons
who have transferred their tax residence to Italy as of 30.4.2019 (no longer, therefore, only to persons
to persons transferring their residence from 2020 as initially provided for).
This overlapping of the various amendments has resulted in the creation of two so-called “transitional” regimes, with different requirements and income exemption percentages, i.e. a pre-existing regime in force for transfers made until 30 April 2019, and another for subsequent transfers.

Rules for transfers in Italy until 29 April 2019

For transfers of tax residence carried out until 29 April 2019, in order to identify the requirements for access to the relief
In order to identify the requirements for access to the relief, reference must be made to the rule as it stood at the time.
The requirements for these types of transfers mean that the relief is aimed at selected categories of workers, such as:

• managers and workers with high qualifications and specialisation (Art. 16 para. 1);
• expatriates with a university degree (Art. 16(2));
• self-employed impatriates (Art. 16 para. 1-bis).

• holders of employment income: they may alternatively request the application of the regime in their payroll through their employer or through their income tax return for the year of their move to Italy.
  The employer applies the benefit from the pay period following the specific request, with the forms provided, by the employee;
• self-employed persons can access the benefit directly in their income tax return.
  In addition, it is also possible to take advantage of the benefit when the principal applies the withholding tax on the remuneration received. The principal, upon payment of the consideration, withholds 20% of the taxable amount reduced in accordance with the provisions of the scheme.

Duration and possible extension of the regime

In its original formulation, the favourable regime provided for a maximum overall duration of 5 years.
The more or less recent amendments, as we have tried to define in this contribution, have introduced the possibility to benefit from an extension of the duration of the regime for a further 5 years.
This means that it is possible to benefit from a facilitated period of exemption of the mentioned incomes, for a maximum of 10 years!
In order to benefit from the extension of the preferential tax regime, it is however necessary to verify the existence of additional requirements to those verified at the time of access to the regime itself.
In view of the complexity of the subject and the continuous updating of the rules and conditions, it is advisable to always be supported by a professional in verifying the requirements and in the consequent implementation of the benefit according to your specific case.

The benefits apply for another five tax periods to workers
with at least one minor or dependent child and to those who become owners of at least one residential property unit in Italy.
For the extended period, 50% of the subsidised income is included in the taxable income, or 10% in the case of workers with at least three underage or dependent children.

It is also established that, in addition to the verification of the benefits required for the extension, it is necessary to pay a contribution.
Therefore, for the purposes of applying the extension the requirements provided by the Budget Law 2021:
The measure of the Director of the Agenzia delle Entrate of 3 March 2021 established that the option to benefit from the extension of the facilitated regime is made by paying, without the possibility of compensation, with the F24 form the amount equal to 10% or 5% of the facilitated income related to the previous year.
Persons for whom the last year of use of the “expatriate workers” scheme was 2020 shall make the payment by 30 August 2021.
Other persons shall make the payment by 30 June of the year following the year in which the first period of use of the “expatriate workers” scheme ended.
Once the payment has been made, employees ask their employer to take advantage of the benefit by means of a written request.

• Employees must submit a written request to their employer, containing their name, surname and date of birth, their tax code, an indication that before 30 April 2019 their residence was transferred to Italy; an indication of the permanence of their residence in Italy on the date of submission of the request to their employer; a commitment to promptly notify the employer of any change in residence or domicile relevant to the application of the benefit by the employer; the identification data of the residential real estate unit purchased directly by the employee or by the spouse, cohabiting partner or children, even in co-ownership, and the relevant date of purchase, or the commitment to communicate such data within eighteen months from the date of exercising the option, if he/she becomes the owner within this last term; the number and date of birth of the minor children, even in pre-adoptive foster care, on the date on which the payment is made; the year of first use of the special scheme for impatriate workers; the amount of income from employment and self-employment produced in Italy which is subject to the relief provided for by Article 16 of Legislative Decree 147 of 14 September 2015, relating to the tax period preceding that in which the option is exercised; the details of the payment made
• holders of self-employed income can access the facilitated regime directly in their tax return. Alternatively, they may take advantage of the benefit when the client applies the withholding tax on the remuneration received; to this end, they must submit a written request containing the same information as for employees and a declaration that they do not simultaneously benefit from the tax incentives provided for in Article 44 of Decree-Law No. 78/2010 (‘regime facilitated for self-employed persons’). 78/2010 (“regime facilitated for teachers and researchers returned to Italy”), by Law n. 238/2010 (“tax incentives for the return of workers to Italy”) and by Article 24-bis of the Tuir (“optional regime for new residents”). Upon payment of the consideration, the client withholds 20% of the taxable amount reduced in accordance with the provisions of the favourable regime.

Forfeiture of the favourable regime, penalties?

But if I change residence before the two years provided for by the rule, what happens?
That is, if I do not change my tax residence in Italy for the first two tax periods, am I still entitled to the tax benefit?
Unfortunately, the answer is no. In fact, one of the conditions for requesting and taking advantage of the tax benefit is residing in Italy for at least two tax periods.
Please note that two tax periods does not necessarily mean two years.
Let me explain. Let us take the case of a French taxpayer who moves to Italy, following the acceptance of a job offer, but the following year receives a better offer that would require him to return to France. In this case we have two possibilities:

• If the taxpayer has benefited from the tax relief in his payroll, it will be necessary to report in his declaration the income not benefiting from the tax relief in order to discount the tax differential and effectively forfeit the scheme;
• Similarly, if the taxpayer should have benefited from the benefit in the declaration, the forfeiture will take place through the non-option.

In summary, in the writer’s opinion, the interval limited to only two tax periods makes it easy to manage, at least in terms of declaration, any possible disqualification from the regime.

Self-employed workers, i.e. impatriated professionals

The benefit for impatriated workers also applies to self-employed workers and sole proprietors who meet the requirements of the rule.
Therefore, the benefit for impatriated workers is available to those self-employed workers who have transferred their residence to Italy and who have not been resident in Italy for the two years preceding the aforementioned transfer and who, in addition, undertake to remain in Italy for at least two years.
The work activity must also be performed in Italy for a period of more than 183 days in each tax period in order for the income produced to be effectively eligible for tax relief.
With respect to this, of particular interest is the confirmation that, if after the re-entry, in the five-year period, other employment income is produced, such as, for example, employee income, the further income may enjoy the same relief.
For example, the case of a worker or entrepreneur who returned in 2020 and in 2022 produces income from employment in addition to business or professional income, but such an assessment should be made on a case-by-case basis.

Special cases: return from posting, professional athletes

As defined so far, the favourable regime for expatriate workers allows the possibility to benefit from a reduction of the taxable base depending on the subjective characteristics of the recipient.
In the following contribution we have tried to clarify that despite the apparently simple requirements, the scheme has been modified over time, implying that the practice in the circular must be assessed on the basis of the regulatory framework in force at the time.
In addition, over time the various particular cases in which there was initially an absolute preclusion of access to the favourable regime, have gradually found a detailed definition with respect to their characteristics.
I refer specifically to cases of taxpayers who are not registered with the AIRE, or workers who have returned from a period of secondment, or even professional sportsmen, for whom numerous appeals have been published.

Workers not registered with AIRE

In the first practice made available by the Revenue Agency, it seemed that the benefit for impatriated workers was precluded to those Italian citizens who were not registered with Aire.
Following the debate that arose from these first interpretations and from the objections that such a rule could lead to discrimination between those registered and those not registered with Aire, the legislator has remedied with Art. 16, paragraph 5-ter of Legislative Decree 147/2015.
As a matter of fact, Italian citizens not registered with AIRE who returned to Italy after 1.1.2020 are also eligible for the tax relief, provided that they had their residence in another State under a double taxation convention on income in the two tax periods preceding the transfer.
Therefore, pursuant to the introduced paragraph, with respect to impatriated workers not registered with AIRE and already returned to Italy by 31.12.2019, the provisions of Article 16 of Legislative Decree No. 147/2015 in relation to tax periods in which tax acts that can still be challenged or that are the subject of pending litigation have been notified, as well as with respect to tax periods that can still be assessed, are applicable. 16 of Legislative Decree 147/2015 in the text in force as at 31.12.2018, provided that they were resident in another State within the meaning of an income tax treaty during the period provided for in paragraph 1(a) of said Article 16.
The rule also provides that:
“there shall be no refund of taxes paid by taxpayers by virtue of spontaneous compliance”.

Return from an assignment

In relation to the regulatory changes that have redesigned the scope of application of the aforementioned regime from the tax year 2019, with particular reference to the subjective and objective requirements to access the facility, with the subsequent practice the Revenue Agency has provided clarifications in relation to the cases of return from posting, going to open more openings in the possibility of application in these cases.

With reference, in particular, to taxpayers returning from a posting abroad, the recent Circular No. 33/E clarified in general terms that the tax benefit in question is not available in case of posting abroad with subsequent return, under the same contract and with the same employer.
On the other hand, if the work carried out by the expatriate constitutes a ‘new’ work activity, by virtue of the signing of a new employment contract, which is different from the contract in place in Italy before the secondment, and therefore the expatriate assumes a different corporate role than the original one, he will be eligible for the benefit starting from the tax period in which he transferred his tax residence in Italy.
In this regard, it should be noted that the benefit is not applicable in cases where the person, although in the presence of a “new” contract for the assumption of a “new” business role at the time of impatriation, falls in a situation of “continuity” with the previous work position held in the State before the expatriation.
This happens, for example, when the terms and conditions of the contract, regardless of the “new” company role and the relevant remuneration, remain in fact unchanged upon return to the employer by virtue of agreements of various kinds, such as the signing of clauses included in the letters of secondment or in the agreements whereby a new company role is conferred, from which it is clear that, from a substantive point of view, the original contractual conditions in force before the expatriation continue to apply. By way of example only, the following constitute an indication of a situation of substantial continuity

• recognition of leave accrued prior to the new contractual agreement
• the recognition of seniority from the date of first employment
• the absence of a probationary period;
• clauses not to pay thirteenth (and possibly fourteenth) salary instalments accrued
  (and possibly fourteenth) accrued and severance pay at the time of signing the new agreement.
  the signing of the new agreement;
• clauses providing that, at the end of the secondment, the seconded person shall be reintegrated into the the organisation of the seconding company and that the terms and conditions of employment of the seconding company will continue to apply.
  

Professional sportsmen and women

With regard to professional sportsmen and women, such as football players or other categories of sportsmen and women who can be classified as professionals.
It should be clarified that for these categories of persons it is possible to take advantage of the favourable regime, if, of course, all the requirements of the rule are met.
However, specific exceptions are foreseen for them, such as the taxable percentage, since the income is always detaxed to the maximum extent of 50%.
In order to benefit from the tax relief, unlike the other categories of workers, they have to pay a contribution equal to 0.5% of the taxable income in a specific way.
The contribution is intended for specific regulatory requirement to strengthen the youth sectors.

Ask for personalised support

If you find yourself dealing with international taxation issues, such as a move from abroad to Italy, and you have to manage the assessment and obligations related to being considered an impatriate worker, you will certainly need the support of a professional, who can help you make the best decisions and help you operate correctly.

If you have these characteristics, and you need support, feel free to contact me or directly arrange a brief preliminary call, in which we will define the characteristics of your specific case and the possible support needed.

In any case, if you are curious to check whether you qualify for the scheme, we have prepared a test, which can help you with this.