29 Mar Retire to a village in Italy and pay only 7% income tax
The retired migrant’s tax concessions program, Italy 2019
Italy has introduced in 2019 favourable tax policies for those who want to retire in Italy, or move their tax residency to certain parts of Italy.
The exceptional news about the tax regulation is that it applies to all foreign source income.
So that is, if you receive any foreign income at all while tax-resident in Italy, such as foreign pension income, company dividends income or royalties or interest income etc, it is subject only to a fixed and maximum rate of 7%.
In addition there is an exemption from wealth taxes (or taxes on foreign-held assets) at the same time, and no requirement to disclose the wealth that is held outside of Italy. Aside from the tax savings created by this law, there is also a great saving in time and money associated with a local accountant’s (commercialista’s) fees and reporting requirements usually required for the administration and reporting of foreign assets by Italian residents.
Transferring money or income to Italy will not trigger any tax charges or consequences (referred sometimes to the remittance rule in other countries when income is transferred in from abroad).
Already taxed in a foreign land on your pension or foreign income ?
Not a problem in this case. It is also possible to ‘carve out’ or exclude certain incomes from the program, in order to achieve a credit for the foreign taxes already paid. (This applies where Italy has a double-tax agreement with that country). Note that Italy does have a tax treaty with 70 countries.
Applicants who are entitled to any pension income from a foreign country, and who move to one of Italy’s smaller municipalities can potentially qualify. Other requirements are as follows;
- The person applying (foreigner or Italian citizen) must not have been tax resident in Italy during the previous five tax years preceding the one in which residence is established;
- The person must be entitled to a foreign pension from a private or public entity;
- The foreign country for a new tax resident must have an administrative cooperation agreement (exchange of information) with Italy; and,
- The retiree must move their tax residence to a municipality with a maximum of 20,000 residents in the regions of Sicily, Calabria, Sardinia, Campania, Basilicata, Puglia, Abruzzo, and Molise.
This concessional tax program continues to apply for a maximum of 9 years following the one in which the residence is established in Italy.
The election to use this program is to be selected in the tax return to be filed for the first year in which the residence is established in Italy.
If you like the idea of renovations, you ought to consider there are several additional tax concessions now available for improving purchased property in Italy. These schemes could result in 90-110% of the cost of improvements being refunded in some cases.
D&G Property can help you explore these programs and help you to buy eligible property in Southern Italy, working closely with our tax and legal partners and commercialiste. It’s strongly recommended that you seek an initial assessment of your situation to ensure you qualify before you consider relocation.