Prepared by Paolo Lucarini and Ciro Eligiato
In relation to the special tax regime for inbound workers, introduced in Italy by the Article 16 of the Law Decree 147/2015 “Internationalization Decree”, already subject to several modifications in the past few years, it has already been subject to an additional amendment by the article 1, paragraph 50 of the Law 178, 30 December 2020 (Italian budget law 2021), that for:
- Italian citizens who have been registered to the register of Italian Citizens living abroad (so called “AIRE”);
- European Citizens;
who moved to Italy becoming tax resident, before the year 2020 (except for Individuals who moved to Italy between April 30, 2019, and July 2, 2019), and who had the right to benefit by the special tax regime at December 31, 2019, the chance to extend the length of the benefit for additional 5 years.
The exercise of the option to extend the special tax regime is subject to the payment of:
1.An amount equal to 10% of the employment/self-employment income (gross income before the application of the special regime as clarified during “Telefisco” on January 28) produced in Italy and subject to the special tax regime in the tax year before the exercise of the option if:
- he/she has at least an underage child; OR
- he/she became owner of an apartment in Italy after his/her moving to Italy or during the 12 months preceding his moving to Italy or he/she will buy an apartment in Italy during the 18 months following the exercise of the option. In case he/she will not finalize the purchase of the apartment during the 18 months after the exercise of the option, he/she will be required to refund the tax authorities with the amount of benefit received (during the additional period) without any penalty.
2. An amount equal to 5% of the employment/self-employment income (gross income before the application of the special regime as clarified during “Telefisco” on January 28) produced in Italy and subject to the special tax regime in the tax year before the exercise of the option if:
- he/she has at least 3 underage children; AND
- he/she became owner of an apartment in Italy after his/her moving to Italy or during the 12 months preceding his moving to Italy or he/she will buy an apartment in Italy during the 18 months following the exercise of the option. In case he/she will not finalize the purchase of the apartment during the 18 months after the exercise of the option, he/she will be required to refund the tax authorities with the amount of benefit received (during the additional period) without any penalty.
The Italian tax authorities, on March 3 have released the practical guideline to proceed with the extension above. It has been clarified that:
- In order to apply for the extension, the employee must make the payment through the F24 tax payment form, in one solution without any possibility to offset any credit;
- The payment must be done within June 30 of the year following the end of first five year of application of the special tax regime. (for the employees who started to benefit by the Inbound tax regime in 2016 the deadline has been postponed to August 30, 2021);
- After the tax payment the employee must provide the Italian employer with a written self-declaration reporting:
- Employee’s personal data;
- Information abut of the conditions met by the employee in order to benefit by the extension;
- Commitment to provide the employer with any information that can cause the losing of the benefit (i.e. moving of the tax residency abroad)
- First year of application of the special tax regime;
- Amount of employment income on which has been calculated the special tax regime during the year before the extension (taxable base to calculate the amount of the contribute to be paid));
- Data related to the payment of the contribute.
- The self-declaration must be sent to the employer within June, 30 of the year following the end of first five year of application of the special tax regime. (for the employees who started to benefit by the Inbound tax regime in 2016 the deadline has been postponed to August 30, 2021);
It is quite clear that the exercise of the option to extend the benefit for additional 5 years is strictly connected to the payment of the contribute that at the moment cannot be effected yet due to the lack of the specific tax code to be included in the payment form. So, it will be necessary to wait the specific communication from the Italian tax authorities including the appropriate tax code.
Despite of the extension of the tax regime will be applicable only when the employee will pay the contribute and will submit the self-declaration to the employer, the employees maintain the right to benefit by the special tax regime for the whole tax year. It means that the amount of taxes paid in excess by the employee for the first part of the year will be refunded to the employee with annual final reconciliation (usually done through December’s payslip).
For the employees who are applying for the extension will applies the same rules applicable to thee employees who moved to Italy after April 30, 2019 as provided by the law 34/2019. In fact, for the additional 5 years, it will be applicable:
- a reduction of 50% on the Italian source employment income, for the employees who at the moment of the option have at least one underage children or became owner of an apartment in Italy after his/her moving to Italy or during the 12 months preceding his moving to Italy or he/she will buy an apartment in Italy during the 18 months following the exercise of the option
- a reduction of 90% on the Italian source employment income, for the employees who at the moment of the option have at least 3 underage children or dependent children and became owner of an apartment in Italy after his/her moving to Italy or during the 12 months preceding his moving to Italy or he/she will buy an apartment in Italy during the 18 months following the exercise of the option
It is still unclear the possibility to extend the period of benefit of additional 5 years for employee who came back to Italy opting for the previous special tax regime named “rientro dei cervelli” introduced in Italy by the law 238/2010 and that in 2016 switched to the Inbound tax regime introduced by d.lgs. 147/2015 through a specific option. The doubt is related to the fact that the employee already benefits by special tax regimes for more than 5 years.
The extension of additional 5 years of the benefit is not allowed to employees who qualify, according to the Italian law, as Professional Sportsman/Sportswoman and not EU-citizens.
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