What is Regime Impatriati?
Regime impatriati is a special tax regime instituted by the Italian government since 2017 to encourage the movement of human capital to Italy. It applies to both Italian citizens who expatriated abroad and foreign citizens who impatriate to Italy for work.
The central aim of regime impatriati is to:
- Encourage Italian citizens who have been permanently living abroad to return home.
- Inspire foreign citizens to move to Italy for work. The main incentive is a reduced tax burden for a set period of time.
- Encourage the “repopulation” of Southern Italian Regions
- Counterbalance the so-called “brain drain” that has been taking place for the last two decades in Italy and that saw thousands of young talented Italians leaving the Country searching for a better future.
Why is it Important to understand the concept of Regime Impatriati?
The concept of regime impatriati is crucial to understand the tax benefits available when working from Italy. By doing so, you can ensure that you make the most of the tax incentives available while living and working in Italy. While conducting self-research through government websites, news articles, and reports can be helpful, engaging an employment partner like PeoItaly is a sure-shot way to maximize your understanding of this tax regime and avail it to your benefit.
What are the eligibility criteria for Regime Impatriati?
Who can apply for regime impatriati?
To apply for regime impatriati you must meet the following criteria:
You must have been a resident abroad for at least two years before moving to Italy. This means you must have been taxed in another country for two years before moving to Italy.
You must hold a degree or equivalent professional qualification that is deemed 'strategic' for the Italian economy. This could include expertise in technology, finance, research, and development.
You must have an employment contract with a company registered with the Italian tax authorities. Or you must be setting up a new business in Italy.
The exact amount of the minimum salary threshold hasn’t been explicitly shared on the government website. However, the amount may be lower or higher depending on the type of job, industry, and region where you’ll work in Italy. For instance, the minimum salary threshold is higher in the financial sector and high-cost regions such as Milan or Rome.
Length of stay
You must commit to staying in Italy for at least two years.
You must become a tax resident of Italy and pay taxes in Italy on your worldwide income.
What documentation is required for applying for regime impatriati?
To apply for regime impatriati, the following documentation is required:
- A written request, which must be submitted to the employer.
- Proof of residency, such as a rental agreement or utility bill.
- Proof of employment, such as a contract or letter of offer.
- Additional supporting documents vary depending on the specific circumstances of the applicant.
What is the duration of regime impatriati?
The regime applies for a maximum of five years and can be extended for five years under particular circumstances.
What are the Advantages of Regime Impatriati?
Regime impatriati offers the following advantages to its pursuants:
It offers a reduced tax burden
One of the main advantages of the regime impatriati is the reduced tax burden. Eligible individuals are subject to a flat tax rate of 30% or 10% in areas South of Italy on their Italian source income for a maximum period of five years, regardless of their actual income level. This means 70%-90% of income is exempt from tax! But one thing to note is that 100% of your income is liable for social security.
It encourages foreign investment
Since the regime impatriati offers a reduction in tax rates for individuals that relocate to Italy, it is a beneficial incentive for self-employed business owners looking to expand into the Italian market. Like this, it encourages foreign investment. This helps stimulate the local Italian economy and creates opportunities for jobs and growth. It increases cultural diversity.
Regime impatriati leads to the influx of foreign talent to Italy. This brings new ideas, experiences, and perspectives to the country, which in turn helps develop and foster a more diverse and inclusive local culture. Also, since this scheme is intended for employees and workers who transfer their place of residence to Italy, it can hence help promote cultural exchange and understanding between different countries and cultures.+
How to Apply for Regime Impatriati?
Learn how to apply for regime impatriati and avail the numerous benefits it has to offer to you:
A step-by-step guide to applying for the regime impatriati
Determining your eligibility
To be eligible for regime impatriati, you must meet the criteria discussed in the article above. If you do not meet the criteria and still apply, your application will not be processed.
You must provide various documentation supporting your application, such as proof of qualifications, work experience, and an offer letter. To avoid delays, make sure that your documentation is up-to-date and accurate.
Submitting your application
You must submit written requests to your employer for availing of this benefit.
The following information must be included in the request:
- General identifying information, including name and birthdate
- Identification number for taxes
- Indication of the first employment contract's start date in Italy
- Indication that the worker now resides in Italy, together with a statement attesting that they meet the requirements for the tax benefits they are looking for
- A promise to communicate any change of address as soon as possible before the end of the minimum term
- A statement attesting that the employee is not also receiving benefits from other tax breaks
The employer will apply for the benefit beginning with the pay period after the request and at the time of the hire date adjustment. If the employer cannot give you the benefit, you may still be eligible if you meet the legal conditions and claim it directly on your tax return.
Suppose you are a freelancer or self-employed person. In that case, you can submit your application for the regime impatriati online or in person at your local tax office when submitting your tax return. If you are submitting your application online follow the given instructions to complete the application. On the other hand, if you’re applying in person, you’ll need to make an appointment at your local tax office and bring your documentation with you.
Waiting for the final decision
After you’ve submitted your application, it will be reviewed by the employer in case you are an employee and the relevant tax authorities in case you are self-employed.
Enjoy a reduced tax burden
You will enjoy the benefit of a reduced income tax rate for up to five years and other tax advantages such as special tax exemptions for relocation purposes.
What are some common mistakes to avoid while applying for Regime Impatriati?
To avoid delaying the processing of your application or rejection, you must avoid the following:
Submitting incomplete or inaccurate documentation
Fill in the application form as advised in the instructions. Do not leave any slots unfilled unless otherwise stated so. Also, make sure that the attached documentation is credible and accurate.
Failing to meet the eligibility criteria
Carefully check the eligibility criteria before applying for regime impatriati. Ensure you meet the eligibility criteria and only proceed to apply.
Applying too late
Since the application for regime impatriati can take some time, it is better to apply well in advance. If you apply too late, you risk missing the application deadline.
Not seeking professional advice
Regime impatriati can be complex to understand, and the application process can be time-consuming. It is better to seek professional advice to save yourself the hassle of misunderstanding important concepts and submitting incomplete application forms. For that, consult employment partner firms in Italy like Peoitaly and discover what’s in store for you with regime impatriati.
What is the Processing time for Regime Impatriati?
Processing time can vary due to the workload of relevant authorities, incomplete filling of forms, unattested documentation, etc. Hence, planning accordingly and allowing sufficient time to process the application is essential.
What Challenges and Criticisms are Subjected to Regime Impatriati?
While regime impatriati has been commended for its potential to attract talent and investment to Italy, it has also faced criticism from numerous quarters.
Some critiques of the regime include:
Criticisms of Regime Impatriati
- The biggest criticism is towards workers who pretend to move their residency to Italy to obtain tax exemption but keep working abroad. Such behavior is seen as exploiting Italy’s tax system with no intention of genuinely investing in the country.
- According to some critics, the regime lacks transparency and is not always clear on how tax breaks are calculated or how they benefit the Italian economy.
- The tax regime has also been under fire for creating a two-tier system where highly skilled foreign workers and entrepreneurs are given preferential treatment over local Italians who have to pay higher tax rates.
Challenges Faced by Workers
- The language barrier is perhaps the main challenge faced by regime impatriati workers. If the workers aren’t fluent in Italian, it will be difficult for them to communicate with colleagues, clients, and customers. Filing in paperwork will be hard as well.
- Also, cultural differences may make it tough for workers to acclimatize and adapt to the Italian environment.
- Being unfamiliar with the local housing market may make finding affordable and suitable housing challenging.
- Since legislation is not always easy to understand, obtaining a work permit and other documents can be time-consuming, which may delay the start of the worker’s employment.
Possible Solutions to Challenges
Prospective regime impatriati applicants and workers can consult a competent and exclusively local HR service provider like Peoitaly better to understand this tax regime's ins and outs. This would help ensure the best possible outcomes for the applicant or the worker.
What is the Future of Regime Impatriati?
The future of regime impatriati in Italy looks promising and positive. This is because:
- There is a growing demand for skilled workers in the health, technology, and finance sectors. This means foreign workers can take advantage of the growing job market in Italy.
- The recent approval and signature of the ‘digital nomad visa’ will make it easier for foreigners to live and work in Italy when implemented. Regime impatriati with tax incentives can encourage foreign workers to make Italy their home.
- Thousands of tourists throng Italy for recreation due to its scenic beauty. With tax incentives of the regime impatriati, joining an organization or establishing a business base there will surely draw people.
PeoItaly: Your one-stop shop for availing and maximizing the benefits of Regime Impatriate
As an Italian HR partner and PEO company, we assist people like you in understanding, weighing, and applying for regime impatriati. Our clients hail us as the best HR firm in Italy.
Thorough local expertise:
As an HR service provider with an exclusively local presence we have a thorough understanding of the Italian tax system and the Impatriate Regime as well as the local laws and regulations governing foreign workers. In addition to helping you navigate the complex bureaucracy, we ensure strict compliance with applicable laws and regulations.
Strong cultural sensitivity:
We are well-familiar with Italian cultural norms and practices, which can be paramount when working with Italian authorities and local businesses. Peoitaly helps guide navigating cultural differences and avoiding misunderstandings.
Skillful language proficiency:
It goes without saying that the HR experts at PeoItaly are thoroughly fluent in Italian and hence can provide translation services and other language support as needed. This is super useful when dealing with Italian authorities or communicating with local businesses or clients.
A diverse network of contacts:
When collaborating with PeoItaly, you’ll have access to a diverse network of contacts in Italy, including lawyers, accountants, and other professionals. This helps avoid unnecessary delays in starting your employment under regime impatriati.
We strive to empower our clients to pursue a thriving workplace in Italy by offering our expertise in Italian taxation regulations. Let's connect to see how we can make a difference!