The tax reform introduces a new “inbound workers regime”: tightening of access requirements and scope of application of the tax benefit

Edited by Pasquale Salvatore, Gianluigi Bizioli, Marco Ruzza and Alessandro Arace

The inbound workers regime was introduced by the article 16 of Legislative Decree 147/2015 (Internationalization Decree) with the aim of fostering, through the exclusion from the tax base of a part of the income produced in Italy, the return of taxpayers residing abroad who have acquired a high qualification of their professional skills.

Compared to its original formulation, the changes that have occurred to date in the original legislative provision, in addition to broadening the range of potential beneficiaries by effectively extending the subjective requirements, have simplified access, by extending the duration of application – preventing the possibility, upon satisfaction of specific requirements, to exercise the option to extend the special tax regime for a further five years – and by introducing higher income reduction percentages upon the occurrence of certain conditions provided by law.

In its current formulation, the special tax regime is open to employees, regardless of their level of qualification and/or specialization, entrepreneurs and professionals who transfer their tax residence to Italy pursuant to article 2 of Presidential Decree no. 22 December 1986. 917, who have not been resident in Italy in the two tax years preceding the aforementioned transfer and undertake to reside in Italy for at least two years. It is also required that the working activity is carried out mainly in the Italian territory.

The employment income, income assimilated to employment, self-employment income and business income produced in Italy by subjects who comply with the above requirements, does not contribute to the formation of the taxable base to the extent of 70%, or 90% in specific cases.

The duration of application of the special tax regime is five years starting from the tax period in which the subject transfers the tax residence to Italy with the possibility of extension for a further five years whereas certain requirements are met.

The draft legislative decree implementing the tax reform on international taxation, currently under discussion in the Council of Ministers, provides, among other things, for an important revision, in a restrictive sense, of the rules governing access and use of the “inbound workers regime”.

In essence, the aim is to remodulate the subjective requirements and application methods by providing for:

  • the application of a limit to the eligible income of the natural person equal to six hundred thousand euros;
  • the reduction of the percentage reduction of the income produced in Italy to the extent of 50% instead of the current 70% or 90%;
  • the increase in the time requirement for foreign residence before moving to Italy from the current two tax periods to three;
  • the change to the period for which the worker undertakes to reside for tax purposes in Italy, from the current two tax periods to five, under penalty of forfeiture of the benefit and the obligation to repay unpaid taxes, increased of penalties and interest;
  • access to the tax benefit only to more qualified personnel with higher qualifications, rather than to all categories of workers as previously envisaged and,
  • the introduction of the requirement to carry out the work activity in Italy by virtue of a new employment relationship with an employer which is different from the one where the worker was employed abroad before the transfer as well as different from those belonging to the same corporate group.

The new provisions will apply to subjects who transfer their tax residence to Italy starting from the 2024 tax period. Subjects who can be considered tax resident in Italy in the 2023 tax period continue to apply the inbound workers regime based on the previous rules.

The duration of application of the benefit is limited to the tax period in which the tax residence is transferred to Italy and in the four subsequent tax periods, effectively repealing the possibility of extension for a further five years.

Pending the opinion of Parliament and the subsequent publication in the Italian Official Journal, it has not been made known whether a transitional regulation will be provided for subjects already transferred to Italy in the second part of the 2023 tax period, before the entry into force of the new rules, who will acquire tax residence only from 1 January 2024.

However, according to a statement by Deputy Finance Minister Maurizio Leo on Friday, 20 October, the change in the rule should not affect those who have been enrolled in the register of the resident population in Italy by 31 December 2023.

Pending an amendment to the wording of the rule, which at the moment instead makes explicit reference to tax residence requirement, it would therefore keep safe the position of those who transferred their residence to Italy in the second part of the year, without however being able to meet the requirements to be considered tax resident in Italy in 2023.

The decree on international taxation also intervenes on the criteria for determining tax residence. For natural persons, the concept of “center of vital interests” is specified, defined as the place where personal and family relationships mainly develop.

The new provisions lead to considering personal and family relationships as prevalent for the purposes of determining tax residence, effectively relegating the sphere linked to economic and employment interests to the background (despite this being the criterion favored by the Italian legitimacy jurisprudence).

For a deeper discussion, please contact:

Pasquale Salvatore

PwC TLS Avvocati e Commercialisti


Gianluigi Bizioli

PwC TLS Avvocati e Commercialisti

Of Counsel

Marco Ruzza

PwC TLS Avvocati e Commercialisti