In this post we will analize what are the modifications that have been introducted for 2024 regarding the Tax Break Regime Impatriati.
It's important to understand that the new changes will apply only to those people who will register themselves into the Anagrafe Comunale since January 1, 2024, while the previous law will be applied to those who have already registered inside the Anagrafe until December 31, 2024.
It's important to understand that the new changes will apply only to those people who will register themselves into the Anagrafe Comunale since January 1, 2024, while the previous law will be applied to those who have already registered inside the Anagrafe until December 31, 2024.
Let's begin the discussion with
some preliminary clarifications.
First, let's remember that we have already analized this important Tax Break, the Regime Impatriati, in various articles. These articles remain
important because the regulations outlined therein are applicable to those who
have transferred their residence by December 31, 2023 (we will soon see some
clarifications on this point):
As a second preliminary
consideration, it's worth noting that in the coming weeks, there will be a "Circolare" from the Agenzia delle Entrate that will clarify several aspects not fully
defined by the new legislation. We will make a specific post upon the release of this
Circolare to update you on the latest interpretations.
Now let's look at the main new for 2024, posing a series of questions and comparing the new
regulations with those in force until 2023.
WHEN DOES THE NEW REGULATION
COME INTO EFFECT?
The 2024
regulation will apply to those who meet both of the following requirements:
- Become tax residents in Italy in the tax year 2024 or later.
- Get their registration to the Anagrafe Comunale of an Italian city starting from January 1, 2024.
EXAMPLES:
A) John Smith moves to Italy, registering in the Anagrafe of the Municipality of Florence on March 17, 2024.
He will be subject to the NEW Impatriati regulation since he is tax resident in Italy from the tax year 2024 and has transferred his anagraphic residence to Italy after January 1, 2024.
B) John Smith moves to Italy, registering in
the Anagrafe of the Municipality of Florence on August 17, 2023.
He will be subject to the PREVIOUS Impatriati regulation, since he is tax resident in Italy from the tax year 2024 but has transferred his anagraphic residence to Italy by December 31, 2023.
He will be subject to the PREVIOUS Impatriati regulation, since he is tax resident in Italy from the tax year 2024 but has transferred his anagraphic residence to Italy by December 31, 2023.
C) John Smith moves to Italy, registering in the Anagrafe of the Municipality of Florence on April 17, 2023.
He will be subject to the PREVIOUS Impatriati regulation since he is tax resident in Italy from the tax year 2023.
On this point, two important observations must be made:
Observation 1:
If a
person registers in the Italian Anagrafe on December 17, 2023, it is essential
to consider that this registration must be confirmed by the Municipal Police
authorities, who have 45 days to carry out the verification. If the
verification by these authorities has a NEGATIVE outcome, the registration is
annulled, and the person must redo it, leading to the mandatory application of
the new Impatriati regulation of 2024.
Observation 2: If the person in question is an Italian citizen who forgot to register with AIRE during the tax years preceding their return to Italy, the formal element of registration with the Municipality will not be present. In this regard, in the absence of further clarifications that may come with the Circolare, it's important to confirm the actual entry date into Italy with substantial documentation, such as the plane ticket and other evidence demonstrating arrival in Italy before December 31, 2023.
WHAT INCOMES ARE ELIGIBLE FOR THE REGIME IMPATRIATI?
GENERAL RULE:
Work incomes eligible under the Regime Impatriati are:
2024 Regulation: Employment and
self-employment income.
2023 Regulation: Employment, self-employment, and business income.
2023 Regulation: Employment, self-employment, and business income.
Note: in the Italian tax legislation, bujsiness income and self-employment income are different. Please contact us for more informatio on this topic.
Therefore, business income is NO
LONGER ELIGIBLE under the new 2024 Impatriati Regime.
WHAT IS REDUCTION OF THE TAXABLE INCOME WITH THE NEW LAW?
We must remember that Regime Impatriati Tax Break works with an important percentage reduction of the taxable income.
This percentage reduction of the taxable income has now decreased from 70% (2023 regulation) to 50% (2024 regulation).
GENERAL RULE:
Reduction of taxable income:
70% (2023 standard) to 50% (2024 standard).
However, there are special cases
that extend the reduction rate as follows:
SPECIAL CASE:
SPECIAL CASE:
YOU MOVE TO
ITALY WITH A MINOR CHILD
Reduction of taxable income:
from 70% (2023 regulation) to 60% (2024 regulation).
from 70% (2023 regulation) to 60% (2024 regulation).
Condition: when the US Citizen moves to Italy with at least a child under 18, or in case of the birth or adoption of a child during the benefit period.
The benefit can be applied to a greater extent of 60% from the
tax year of the child's birth or adoption for the remaining duration of the
benefit period, with the necessary condition that the minor child or adopted
minor must be tax resident in Italy.
EXAMPLE:
John Smith moves to Italy, tigether with his wife, both registering in the Anagrafe of the Municipality of Florence on March 17, 2024.
Along with him, his wife moves to Italy, both registered in the Anagrafe of Florence on the same day and both residing in Italy.
For this reason, the
benefit for John Smith is a reduction of the taxable base by 60% and not 50%,
applicable for all 5 years of the benefit period (2024-2028).
EXAMPLE:
John Smith moves to Italy, together with his wife, both registering in the Anagrafe of the Municipality of Florence on March 17, 2024.
On December 2026 they have their first son, whol ives with them in Florence.
On December 2026 they have their first son, whol ives with them in Florence.
This will be the tax reduction for them:
YEAR 2024: 50%.
YEAR 2025: 50%.
YEAR 2026: 60% (the year the child was born).
YEAR 2027: 60%.
YEAR 2028: 60%.
IS THERE A MAXIMUM INCOME LIMIT FOR THE TAX BREAK?
YEAR 2025: 50%.
YEAR 2026: 60% (the year the child was born).
YEAR 2027: 60%.
YEAR 2028: 60%.
IS THERE A MAXIMUM INCOME LIMIT FOR THE TAX BREAK?
GENERAL RULE:
The
maximum threshold eligible income is:
2024 Regulation: €600,000.
2023 Regulation: No limit was present.
While the 2023
regulation had no maximum limit, the 2024 regulation introduces a maximum limit
of €600,000 of eligible income.
The portion of annual income exceeding €600,000 will be taxed ordinarily for the entire amount.
EXAMPLE:
John Smith moves to Italy, registering in the Anagrafe of the Municipality of Florence on March 17, 2024. He has neither a spouse nor children. In the course of 2024, he has an employment income of €690,000.
How is the benefit calculated under the new Impatriati regulation?
The portion of annual income exceeding €600,000 will be taxed ordinarily for the entire amount.
EXAMPLE:
John Smith moves to Italy, registering in the Anagrafe of the Municipality of Florence on March 17, 2024. He has neither a spouse nor children. In the course of 2024, he has an employment income of €690,000.
How is the benefit calculated under the new Impatriati regulation?
For the first €600,000:
- Taxable base: €600,000 x 50% = €300,000
- Taxable base: €90,000
- Total Taxable Base: €300,000 + €90,000 = €390,000.
The duration of the Tax Break starts the tax year in which the move of tax residence to Italy happens and the four subsequent tax years, totaling 5 (five) years, without
further extensions
GENERAL RULE:
Duration of the Benefit:
From 5+5 years (2023 regulation) to 5 years (2024
regulation).
However, there is a special case
that extends the duration beyond 5 years:
SPECIAL CASE:
MOVE TO ITALY AND PURCHASE OF RESIDENTIAL PROPERTY BY DECEMBER 31, 2023
Duration of the
Benefit:
From 5+5 years (2023 regulation) to 5+3 years (2024 regulation).
This particular case specifically concerns individuals who, by December 31, 2023, and in any case, within the twelve months before the transfer to Italy, have become owners of a residential property in Italy, and this is their main residence.
The additional 3 years of benefit include, in any case, a 50% tax reduction of the income.
It is important to note that the
previous Impatriati Regime (2023) provided for a duration of 5 (five) years,
extendable for an additional 5 (five) years in the presence of a minor or
dependent child, or if the worker became the owner of a residential property in
Italy after the transfer to Italy or within twelve months before the transfer.
The property could be purchased directly by the worker or by the spouse,
cohabitant, or children, even in joint ownership. In both cases, the incomes,
for the additional 5 tax years, contributed to the formation of the total
income limited to 50% of their amount. For workers with at least three
dependent minor or child dependents, even in pre-adoptive custody, incomes, for
the additional five tax years, contributed to the formation of the total income
limited to 10% of their amount (90% tax reduction).
For all clarifications regarding the extensions in 2023, we invite you to read the following article:
For all clarifications regarding the extensions in 2023, we invite you to read the following article:
WHAT ARE THE NEW CONDITIONS TO APPLY THE REGIME IMPATRIATI?
The new 2024 regulation has introduced a series of changes regarding access requirements to the regime. The benefit is applicable to workers who meet all the following conditions:
CONDITION 1 - MINIMUM TIME TO STAY IN ITALY.
GENERAL
RULE:
Minimum time of staying in Italy:
From 2 tax years (2023 regulation) to 4 tax years (2024 regulation).
US citizens who move their tax residence in Italy and apply for the Regime Impatriati commit
to maintaining tax residence in Italy for 4 tax years.
The previous regulation (2023) required maintaining tax residence for 2 tax years. It is important to note that if a person does not stay in Italy for all 4 tax years, they will lose the tax break from the beginning and for the entire period.
It is also emphasized that the rule requires 4 tax years of Tax Residence, which is a different concept from 4 years of actual residence in Italy.
The previous regulation (2023) required maintaining tax residence for 2 tax years. It is important to note that if a person does not stay in Italy for all 4 tax years, they will lose the tax break from the beginning and for the entire period.
It is also emphasized that the rule requires 4 tax years of Tax Residence, which is a different concept from 4 years of actual residence in Italy.
For more clarifications on the concept of Tax Residence, we recommend the following links:
CONDITION 2 - MINIMUM TIME OF FOREIGN TAX RESIDENCE BEFORE MOVING TO ITALY
GENERAL RULE:
Minimum time of foreign tax residence before moving to Italy:
From 2 tax
years (2023 regulation) to 3 (2024 regulation).
US Citizens transferring their tax residence to Italy and applying the Impatriati Regime
must not have been tax resident of Italy for the 3 tax years before the
transfer.
The previous regulation (2023) required that the person not have had tax residence in Italy for the 2 tax years before the transfer. However, there are special cases to this general rule:
The previous regulation (2023) required that the person not have had tax residence in Italy for the 2 tax years before the transfer. However, there are special cases to this general rule:
SPECIAL CASE:
THE INDIVIDUAL WORKS FOR THE SAME EMPLOYER FOR WHOM THEY WORKED ABROAD -
AN EMPLOYER WHO NEVER WORKED IN ITALY.
Minimum time
of foreign residence before transfer:
From 2 tax
years (2023 regulation) to 6 (2024 regulation).
If the US Citizen works in
Italy for the same Employer for whom he worked abroad before the transfer (or
for a company belonging to the same group), the minimum period of foreign tax residence
before the transfer is extended to 6 tax years if the worker was not previously
employed in Italy.
SPECIAL CASE:
THE
INDIVIDUAL WORKS FOR THE SAME EMPLOYER FOR WHOM THEY WORKED ABROAD - EMPLOYER
WHO HAS ALREADY WORKED IN ITALY.
Minimum time of foreign residence before transfer:
Minimum time of foreign residence before transfer:
From 2 tax years (2023 regulation) to 7 (2024 regulation).
The minimum
period is extended to 7 tax years if the worker had previously been employed in
Italy (even by a company belonging to the same group).
It is specified that, for the purpose of verifying this condition concerning the tax years before returning to Italy, Italian citizens are considered residents abroad if they have been registered with AIRE, or if they have had tax residence in another State under Article 4 of the Convention against double taxation between Italy and the US.
It is specified that, for the purpose of verifying this condition concerning the tax years before returning to Italy, Italian citizens are considered residents abroad if they have been registered with AIRE, or if they have had tax residence in another State under Article 4 of the Convention against double taxation between Italy and the US.
Therefore, the 2024 regulation confirms the
possibility of applying the substantial criterion of tax residence over the
formalistic criterion, simply connected to registration with AIRE.
CONDITION 3 - COUNTRY WHERE THE WORK MUST BE PERFORMED
GENERAL
RULE:
The individual must perform the job:
2024 Regulation: In Italy, for the majority of the tax year.
2023 Regulation: Predominantly in Italy.
The previous regulation generally stated that work should be "predominantly" performed in Italy. Therefore, the requirement of predominance, which was previously generic and could be understood as predominance in terms of income, is now connected to a temporal criterion to be verified for each tax year.
CONDITION 4 - EDUCATIONAL AND SKILL REQUIREMENTS
GENERAL
RULE:
The eligible person must possess the following requirements:
2024 Regulation: Qualification or
specialization requirements, practically identified by the presence of at least
a three-year University degree.
2023 Regulation: No requirements were
requested.
This condition is an absolute
novelty and is undoubtedly an element that will raise many doubts.
For all US citizens, it is to be assumed that those with a
BACHELOR'S DEGREE can join the Regime Impatriati.
Understanding the clarifications
indicated by the next Circolare will
be crucial.
We will inform you promptly, dedicating specific articles to all the news and developments of the new regulation.
YOU COULD BE ALSO INTERESTED IN:
1) Our selection of posts related to "MOVING TO ITALY":
2) The following posts:
CONTACT US FOR MORE INFORMATION
If you need more information on the Italian Fiscal Code or the opening of a Partita IVA, you can send an email to:
enrico.povolo@dottcomm.net
or make a phone call to the following number:
+39 0444 322987
Enrico Povolo