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WHAT IS FLAT TAX

To pay 100,000 euro a year as a flat tax in order to comply with the Italian tax authorities. This is what the Revenue Agency has to offer foreigners who intend to transfer their tax residence in our country by leveraging a flat tax - a substitute tax - on incomes produced abroad.

 

This option, introduced in the 2017 Budget Act, aims to attract and encourage high net worth individuals to transfer their residence to Italy, in other words, people with high assets. With the order of the Director of the Revenue Agency, a checklist template that needs to be attached to the application form has also been approved, this will allow the financial administration to evaluate admissibility to the aid scheme. The benefit of this flat tax - to be paid in one rate - can also be extended to family members. Their flat rate is 25,000 euro .

HOW THE OPTION CAN BE EXERCISED.

The Revenue Agency explains that taxpayers who meet the requirements may join the new scheme upon submission of their tax return. It must refer to the tax period in which the tax residence has been transferred to Italy or to the following year. It is also possible to submit a specific prior request to the Revenue Agency Directorate. The request can be delivered by hand, registered letter with acknowledgement of receipt or by certified e-mail.


In the application, the taxpayer must indicate:

  • personal details and tax code (if already registered) in addition to the relevant residence address in Italy (if already domiciled);
  • Individuals who have not been residents in Italy for Italian tax purposes for at least nine of the previous ten years, at the time they establish their tax residency in Italy, will qualify for the flat tax: in order to avoid people taking advantage of "expenses and returns" for convenience.
  • the jurisdiction or jurisdictions in which the person had their last tax residence before exercising the option;
  • the States or foreign territories for which they intend to exercise the right not to use the substitution tax application.
  • the "checklist" is also needed, which, among other things, serves to verify that they were not resident at least nine of the previous ten years, before adhering to the flat tax.

FLAT TAX ALSO FOR FAMILY MEMBERS

The flat-rate scheme may also be extended to one or more family members who meet the requirements. It needs to be indicated in the tax return relating to the tax year (or the following year) in which the family member transfers their tax residence to Italy. In this case, the substitute tax is 25 thousand euro for each family member that can benefit from the same option.

TERMS FOR APPLYING

The option must be exercised within the deadlines of submitting income statements, even if the Revenue Agency's response to the request has not yet been received. The application can also be filed even if the terms for tax residence in Italy have not yet elapsed. Upon receival by the Revenue Agency (also by silence/assent), the new foreign resident will be eligible for the scheme for the next fifteen years. The payment of the € 100,000 substitute tax must be paid in a lump sum, for each period of the effectiveness of the tax scheme, payable by the due date for of the annual income tax.