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Italy's growth decree converted into law

Monday, 8 July, 2019

The 2019 Italian growth decree was enacted with amendments as Law 58 on 28 June, introducing new incentives to encourage 'human capital' to relocate to Italy.

The key developments, already in force as of 1 May, are a special tax regime for impatriate workers, and incentives for the return to Italy of researchers and other persons resident abroad.

In an important late amendment, the Lavoratori Impatriati regime was extended to all categories of workers, including those who do not hold managerial or directorship roles, and who are not highly qualified, or do not have specialised skills.

Those opting-in to this regime will benefit from a reduced income tax, payable only on the first 30 per cent of their employment income for the first five years. For the first five years, impatriates who transfer their residency from abroad to the south of Italy or the islands will pay income tax only on the first 10 per cent of their employment income.

Moreover, regardless of the region of residency, if a house is purchased or there is one dependent child, the benefit can be extended for a further five years, during which time the impatriate will pay income tax only on the first 50 per cent of his or her employment income. Where there are three dependent children,  the impatriate is eligible to a further reduction in tax payable to 10 per cent of employment income.

For Italian nationals intending to return to Italy after 2020, inclusion on the register of citizens living abroad (Anagrafe Italiani residenti all’estero, AIRE) is no longer required in order to benefit from the regime. It is enough to have been physically resident in countries where a double taxation treaty is in place.

Individuals who impatriate to Italy before the end of 2019, and who have been assessed for Italian tax because they forgot to register on AIRE, can still benefit from the favourable tax regime under the regime in force on 31 December 2018, meaning that tax residency status in the periods preceding the transfer to Italy will no longer be assessed only by reference to domestic law.

A statement from the Italian revenue agency, Agenzia delle Entrate, notes that 'in view of the rationale behind the new policy, which has essentially increased the possibility of proving the period of residency abroad, for the persons who were not registered with AIRE, based on the provisions imposed by the double taxation treaty, it is understood that the same can also be applied to taxpayers who transfer tax residency in Italy as early as 2019'.