The Italian non-domiciled tax regime

Italy is offering non-doms “la dolce vita” with a new tax reform.

With the approval of the 2017 Budget Law on 7 December 2016, Italy has introduced an attractive tax regime for high net worth individuals (“HNWIs”) moving to, and becoming tax resident in Italy.

Inspired by the British resident non-domiciled regime as well as regimes in other EU countries, such as Portugal and Malta, Article 24 bis of the Consolidated Income Tax Act (“Article 24”) was introduced by the 2017 Italian Budget Law to mark the beginning of a favourable tax regime for those relocating to Italy.

 

Summary of the new regime

Article 24 introduces a special tax status for foreign residents under which offshore income and gains can, for a fixed annual fee, be exempt from Italian tax unless it is remitted to Italy. Individuals opting for this new “territorial taxation” regime will still be subject to tax in Italy on any Italian source income or capital gains. However, any unremitted foreign income or gains will be sheltered from Italian tax provided the individual pays an annual fee of EUR100,000. This exemption/ territorial basis of taxation can be extended to family members for an additional fee of EUR25,000 per person.

The new proposals also extend to Italian wealth and inheritance taxes. Where an individual elects into the new regime, Italian inheritance tax will only be payable on assets located in Italy at the time of the individual’s death. There will also be no requirement for individuals to disclose details of the overseas assets and related income/ gains to the Italian tax authorities.

The new regime will be available to all individuals, irrespective of their nationality or domicile status, as long as they have not been tax resident in Italy at any time during the 9 years prior to settling in Italy. Each individual will be able to benefit from the new regime for up to 15 years, provided they pay the full annual charge.

 

Comparison to the UK model

The proposals contained within Article 24 are broadly similar to the UK’s long established non-dom regime. The UK system potentially allows a non-dom to shelter foreign income and gains from UK tax where a claim for the “remittance basis” is made by the taxpayer. A fee may be payable by the non-dom in order to access the remittance basis of taxation depending on how long they have been UK tax resident. However, the UK rules for non-doms will change from 6 April 2017, with new rules being introduced which effectively prevent non-doms from being taxed on the remittance basis if they are long-term UK residents.

The timing of Italy’s new proposals is interesting. It is possible the Italian Government are looking to attract certain HNWIs from the UK following the tightening of the UK non-dom rules.

 

Next steps

Any HNWIs seeking to take advantage of the new Italian regime should obtain tax advice on the new regime.

The new Italian regime is similar to the UK non-dom regime, with assets located outside of Italy potentially being exempt from Italian tax, including inheritance tax. Consequently, as with the UK non-dom regime, HNWIs may benefit from establishing an offshore structure to hold their foreign assets.

Establishing a trust under foreign law or registering a foundation could represent beneficial opportunities as both structures can be used for succession planning or wealth management and consolidation of assets.

Trusts and foundations can help to provide for your family in the future and reduce inheritance tax. The assets placed in trusts or foundations are retained in a manner which gives you protection and comfort.

 

How Abacus can help

As a leading fiduciary, funds and professional administration services specialist based in the Isle of Man and Malta with over 40 years of extensive offshore experience, Abacus has developed a reputation for offering market leading specialist solutions, tailored to meet the needs of each and every client.  Our highly qualified and experienced team offers information and advice on a diverse range of structures, along with providing administration services to families which enable them to manage multiple and complex cross-border assets, to navigate tax and regulatory issues and to plan for both their wealth and their future succession.

For further information please contact Kevin Loundes at kevin.loundes@abacusiom.com or call on +44 1624 689600. Abacus are working in partnership with Italian law firms and can assist with obtaining Italian tax advice where required.

 

No action should be taken on the basis of this article, nor should it be construed as amounting to tax, legal or VAT advice. Professional tax advice should always be obtained before proceeding further.

Written by Marta Bellamoli, Marketing Co-ordinator