Italian tax incentives for inbound workers | Extension of regime confirmed
Published on 4th May 2022
The Italian tax authorities have issued rulings that clarify the extension of the tax incentives regime to inbound workers (available for those who come to work in Italy after 24 months abroad).
From the financial year 2020, an employee (or self-employed professional or entrepreneur) is subject to Italian personal income tax on 30% of the income (getting a 70% exemption) deriving from the Italian activity.
This benefit is granted provided that the individual:
- becomes an Italian tax resident for fiscal purposes;
- has not been tax resident in Italy for the previous two years before transferring the tax residence to Italy;
- endeavours to remain in Italy as a tax resident for the following two years; and
- mainly works or performs the activity in Italy, irrespective of the employer (which could be either Italian or foreign).
The exemption is increased to 90% if inbound workers move their residency to one of the southern Italian regions (Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia or Sicily).
The new incentives apply for five years and can be extended for a further five years – with a 50% income exemption in the extended period - subject to some additional conditions:
- a residential property is purchased in Italy in the previous 12 months since the acquisition of the Italian residence or in the following 12 months;
- there is a dependent child.
Italian tax authorities have recently provided several rulings to clarify the extension of the regime.
On 8 April 2022, the authority issued a ruling (no. 186) in which the tax administration confirmed the applicability of the expatriate workers regime to a person working in a "senior role" for a foreign multinational company based in New York and carrying out tasks defined as "coordinating projects on a global scale". The case involved a manager who moved to Italy to work in "remote working" mode - working for the same multinational group and carrying out the same task of coordinating the "global operations" of the company.
Accordingly, the Italian tax authorities confirmed that the inbound workers regime extends to employees coming to Italy to work (or continue working) for a foreign employer. It is an instrument for multinational tax incentive plans as it represents a benefit also for the workers employed by foreign companies. Multinational managers, working remotely in Italy, could benefit from this regime.
Please get in touch with your usual Osborne Clarke contact or the expert below if you have any queries or would like to discuss further.
