24 Jan Tax benefits of moving to Italy today (for working people)
Did you realise that Italy is offering significant tax savings for working people, entrepreneurs, and education and research professionals to come and work in Italy?
In Article 5 of Italian Law Decree 30 April 2019, no. 34, which together with amendments was passed into Law on 28 June 2019 n. 58, Italy passed laws to cut drastically the taxes that you would pay if you move to work and live in Italy from 2020.
What are the changes and why are they significant ?
The changes provide tax concessions to all working people becoming tax resident in Italy who have not been tax-resident in Italy in any time within the past 2 years and who transfer in 2020. The worker must have worked in a country that holds a double-tax agreement with Italy. The tax exemption is granted for 5 years, and there are different exemption rates for lecturers or professors, research workers, and sportspeople.
For all workers apart from lecturers, researchers and sportspeople, and including individual entrepreneurs who run their own business, the new law makes 70% of the gross income (lordo) exempt from tax. This means that only 30% of your income, is taxable, for 5 years.
Note also the Exemption is increased to 90% if the workers move their residency to one of the Southern Italian regions (Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia, Sicily).
For Professors and researchers the concession available is 90% (rather than 70%) so that such working people in these categories are only taxed upon 10% of their income, for a period of 6 years.
This concessional period of 5 years can also be extended beyond 5 years and a 50% tax exemption applies in the future years, as follows :
- for non-professors and researchers: if the working person has one child under 18 yrs of age or buys an Italian property within 12 months of becoming tax-resident; an extension of 5 more years
- for professors and researchers the extension is for 8 years if they have one child under 18 years or buy property;
- for professors and researchers the extension is for 11 years if they have two child under 18 years or 13 years extension if they have 3 or more children.
Case Study – John
John is an engineer living in the UK since 2016. He has enjoyed all the opportunities that the UK has provided him, and he feels that his career possibilities are strong. John has seen an opportunity to take a new role in Torino to use his developed technical skills and build a new team.
John has been offered €4,100 per month as a net salary after taxes, by the Torino company (before any tax concessions)
Now without any concessions John thinks that’s not a bad salary, but he was hoping for more, to encourage him to come to Italy for at least 2 years.
With the 2019 tax incentives for working people, John will only be taxed on 30% of his gross income (lordo) and therefore when the tax adjustment is made for the concession, John’s after tax income becomes €6,095 per month.
Case Study – Angela
Angela is a scientific researcher within the biotech sector, and moved to the UK from Italy 4 years ago.
However Angela’s mother is getting older, and needs more support at home. Since Angela is the only child in her family she wants to be able to care for her mother whilst still building her career.
Angela sees an opportunity in Milan, and a research role offering to pay her €3,200 per month after taxes. However, since she has not been tax-resident in Italy for 4 years, Angela can take advantage of the tax concessions for new Italian tax residents – and researchers especially are entitled to a tax exemption of 90% of her income. This essentially means Angela is taxed on only 10% of her income.
Angela, together with her tax adviser or commercialista, calculates that the salary she keeps, after reduced taxes is approximately €5,000 per month.
If Angela had one child under 18 years of age when she moves back to Italy, her tax benefits will be able to continue after 5 years, for another 8 years (using the lower tax concession of 50% for those 8 years, so that Angela is taxed on 50% of her income for the years 6 to 13)
Foreign workers returning
Foreign workers, entrepreneurs and sportspeople who were previously not tax-resident in Italy are looking carefully at work opportunities in Italy.
Whether it’s to build a career, adopt a new lifestyle, or return to be within the family environment, these Italian tax concessions make working in Italy a more attractive proposition today.
Advice
Please note this is not specialist taxation or financial advice. It does not take into consideration Italy’s social security contributions regime, and any amounts required to be contributed by new workers in Italy.
This is general guidance and information about the Italian working environment today and the recent policies and incentives announced by the Italian government. If you want more specific information about your own situation, then professional advice is highly recommended. Such advice could also assist you to consider other aspects of moving to Italy, such as pensions and investments (and their appropriate structure), your property and insurance needs, and relocation assistance. Our network of professionals work together in an efficient way to help relocating families.
Feel free to comment or contact Daniel for more information.