Italy Flat Tax for High Net Worth Individual

Italy updates special tax regime for HNWIs and inbound individuals

I have tried to understand how an HNWI could benefit from this, especially considering there are a lot of Australians willing to spend a bit of time in Italy / Europe.

- Let`s say you run a digital agency in Australia and have a gross income of $2M/year (as employee -> managing director)
- You move to Italy for 2/3 years and become an Australian non-resident for tax purposes (or maybe resident not a big deal). You`ll still get taxed heaps in Australia, you are left with $1,119,800
- You`ll be taxed in Italy too but capped at Euro 100k

Maybe I have got something wrong however how is this supposed to attract HNWIs? Maybe people coming from other countries with different legislation (e.g. people whose place of business is a fiscal heaven).

 

Any source tax paid in Australian could be partially creditable if the Italian tax is only partly applied. it would be wise to seek both AU and Italian tax advice. How double tax agreements work is that BOTH nations may each have a right to tax but one may allow a credit. The credit is often limited and not complete. Hence double taxation does still occurs and the value of the credit allowed. Its just not both being full and final. So the tax paid in Australia may be final but little of any credit may be applied. It may be wise to change the income to non-salary income eg Dividends perhaps (?) to limit the withholding basis. But franking and AU tax being paid may accumulate and become ineffective if return to AU doesnt occur.

My limited understanding for the $100kEUR basis is it has a long term residency requirement without citizenship for property owners. During the first XX years the exemption phases in and so for years 5+ and 11-15 the increased generous concession can apply. It seems a motivation to stay more than an inducement to arrive.

European nations often have these rules.

 

The law was in theory was introduced to attract HNWI but I really struggle to understand how, maybe as you said people coming from the European Community with different tax agreements, definitely it doesn`t look like working well for AU and US.

 

Any reason to think this article is aimed at people from Australia or the US?

 

Not really, just examples, by the way if you target HNWI you should target US first of all (and Russia)

 

I can see how it might work but the payoff isnt immediate. I guess they hope you will employ others and spend money. Its not like its a tax haven invitation. - And italy collects a lot of tax indirectly with a 22% VAT on goods and services although some is a lesser rate. Thats why the Fiscale Polizia are so prevalent. And "social security" is a added charge that adds a bit to "tax" that isnt covered. 30% paid by employer and 10% by employee. Buying property comes with hefty charges akin to duty across europe. Its like those stories about $1EUR homes. Its much more than $1EUR in reality. The heart of the scheme also considers family incomes etc and is often focussed on self employed or those who will plant roots and grow a business to assist their economy. Italian income is not concessionally taxed and municipal and regional taxes of up to 5% apply. . The "cost" to Italy is opposite to what many may think. They collect $100KEUR of tax +25KEUR for each family member and give you a visa conditional residency hoping you put down roots and spend that foreign wealth in italy...and perhaps bring it onshore at some point. Also dont ignore inheritance / gift taxes.

There is also a retiree scheme that has a low 7% rate tax rate on ITALIAN income only but it requires residing in small towns in SOUTHERN italy. Alongside a cheap or $1EUR home it could be a retirement option for up to 10 years. Again they seem focussed on filling small villages and people who will spend. Min $40KEUR for couples. The double tax credit is NOT available but foreign income or wealth taxes and CGT arent imposed on foreign income or assets in that period.

• To become tax resident of Italy in one of the Southern Regions (Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise and Apulia) and into a Municipality with less than 20.000 inhabitants. basically some of the red bits of the flag. Rome is in the Lazio region and Naples is in Campania etc. So Assisi is a possible but not coastal Messina or naples due to city size. Ditto Pomeii which has a population of 25000+

 

Southern Italy has been an economic wasteland for decades with population, RE, work etc all decling, and covid killed the tourism money flowing in.

They're now trying to compete with places like Georgia, Serbia, Montenegro for the digital nomad dollars.
Serbia which is not EU has seen a huge influx of DMs, and yet for many young Serbians Italy is the cool plce to be.
Nice in the summer, problem is staying there for winter, snow is nice on postcards.