Italy to target non-doms with new tax regime

Italy is to introduce a remittance-style tax regime aimed at attracting non-domiciled high net worth residents, just as the UK makes its rules in this area less attractive post the Brexit vote.

The new measure in Italy’s Finance Bill for 2017 was approved by parliament last week, before its prime minister Matteo Renzi resigned on 7 December.

Foreign residents will be given a status which will enable them to have exemption from Italian tax on any offshore income and gains, for a set annual charge of €100,000 (£84,000, $104,600).

This charge can also be extended to family members, at a cost of €25,000 per person.

One of the conditions is that the individual must reveal their tax residency location to the Italian authorities.

The regime is available for up to 15 years, unless the individual fails to pay the charges.

International law firm Withers said in a note that it had lobbied the Italian government to introduce this special tax status.

“This timing, which coincides with the changes to the UK’s ‘res-non-dom’ regime, suggests that Italy might be seeking to woo high net worth individuals looking for a new home following Brexit or deterred by the tightening of rules in the UK. The approved rules contain recommendations to simplify Italy’s immigration law in connection with the new tax system.”

Non-tax residents in Italy

The new system is available to all persons, regardless of their nationality or domicile, who have been non-tax resident in Italy at any time during the nine years preceding their relocation to Italy.

The rules identify individuals as tax resident if they are a registered Italian citizen or reside in Italy for more than half the year (183 days).

All applicants for non-domiciled status will have to request a preliminary ruling from the tax authorities, with the request filed along with their annual income tax return for their first tax year as an Italian tax resident.

The tax authorities will have 120 days to approve or deny the request and, if the tax authorities do not reply within this period, the request is deemed to have been approved.

The UK’s non-dom tax system also levies a remittance basis charge on non-domiciles, but this will be made significantly less attractive from April 2017, with a new ‘deemed domicile’ rule that will force long-term residents to become UK-domiciled.

The UK government has also recently published plans to tighten the rules around UK residential properties held via an offshore corporate structure by non-domiciled investors.