Italian tax reduction for retired foreign individuals

The new article 24-ter of the Italian Tax Code (TUIR) offers a new optional tax regime for retired foreign individuals interested in moving their tax residence to Italy.

Personnel income tax (IRPEF) reduction to 7% is granted to foreign individuals (provided they have lived outside Italy for the previous five years) who receive retirement income from foreign sources and have lived in jurisdictions with extant co-operation agreements.

In order to take advantage of that option, retired foreign individuals have to transfer their residence to one of southern Italy’s regions (i.e. Sicily, Calabria, Sardinia, Campania, Abruzzo, Molise and Puglia) and live in municipalities with a population not exceeding twenty thousand.

Are you looking forward to retiring in Italy?

ECOVIS STLex Studio Legale Tributario can help you assess the conditions, requirements and favourable terms of the Italian tax regime, to calculate the savings you can make and advise you of conditions you would be required to fulfil. www.ecovis.com/italy/

Taxpayers may opt for this regime not only for income received from retirement funds but also for worldwide income of any kind: in this case a flat rate of 7% will be levied, instead of ordinary progressive taxation (up to 43% in further additional taxes) on the taxpayer’s income. The brand-new optional income tax regime is applicable for a maximum of five financial years only.

Taxpayers who opt for ordinary taxation levied on overseas income can obtain a tax credit for the taxes paid abroad. In addition, thanks to this regime, the individuals are exempt from wealth tax on foreign financial assets (IVAFE) and foreign real estate tax properties (IVIE).

For this reason, it is not mandatory to report those assets in their tax returns, explain the Ecovis experts. Further clarification will be released by the Italian revenue tax agency in the next months. Italy has recently introduced several proposals to attract foreign individuals and investors.