This article is dedicated to US University Professors and Researchers who want to come to work in Europe.
An interesting opportunity is moving to Italy, as there's an important Tax Break that grants an abatement of the taxable income by 90% for a maximum of 13 years.
Let's see how it works!
1. TAX BREAKS TO MOVE TO ITALY.
The Tax Breaks that are generally available for American Citizens for moving to Italy are the following four:
1. The Tax Break for Researchers and Professors: "Regime Ricercatori e Docenti".
See also these links:
2. The Tax Break for coming to work in Italy: "Regime Impatriati".
See also these articles:
3. The 7% Flat Tax for retirees moving to Southern Italy: "Regime Pensionati Esteri".
See also these articles:
4. The Tax Break for High Net Worth Individuals: "Regime Neo Residenti".
All four of these Tax Breaks offer tax incentives of varying amounts and nature, but they all share a common requirement: the transfer of the tax residence to Italy.
It is important to note that the fundamental difference between these four Tax Breaks lies in the fact that, in the first two Tax Breaks (Regime Ricercatori e Docenti e Regime Impatriati) the tax benefits apply to incomes earned in Italy as a result of a job, it doesn't matter if as an employee or as a self-employed person.
Instead, the other Tax Breaks provide tax benefits on foreign incomes earned abroad by US Citizens that have moved to Italy.
2. TAX BREAK FOR RESEARCHERS AND PROFESSORS: HOW IT WORKS.
Let’s begin now the analysis of the Tax Break for Researchers and porofessors.
First, let’s start with the legal provision: Article 44 of Decreto Legge 78/2010, that states the following:
"For income tax purposes, 90% of the remuneration received by professors and researchers, who hold a University degree or equivalent and have not been occasionally resident abroad, and who have carried out documented research or teaching activities abroad at public or private research centers or Universities for at least two consecutive years, is excluded from the formation of the income from employment or self-employment. These individuals come to carry out their activities in Italy, thereby acquiring tax residence in the territory of the State."
This means that the central point of this Italian tax benefit is that the income tax rates are applied to the Researchers and Professors only on 10% of their employment (or self-employment) taxable income, with the other 90% being excluded from taxation.
This is a very important tax incentive with an extremely attractive goal, as the total reduction of taxes is more than 90%: in fact, the abatement of 90% concerns the taxable income and tax rates are progressive.
EXAMPLE 1
Suppose a US Researcher moves to Italy and gets a job in which she/he has an yearly wages of 200.000 euro.
Taxable income after application ot the Tax Break Ricercatori e Docenti will be:
Taxable income after applying the Tax Break: 200.000 x 10% = 20.000 euro.
Italian Progressive income tax rates will apply to 20.000 euro.
This benefit applies to both employment income and self-employment income.
Citizens of all Countries, and not only Italian Citizens, can apply to this Tax Break: for non Italian or non EU Citizens, it's necessary to ask for a Research Visa for Professors.
3. TAX BREAK FOR RESEARCHERS AND PROFESSORS: REQUIREMENTS.
Now, let’s review the five requirements to apply to this tax break.
The US Researcher interested in applying must:
1) Hold a University Degree;
2) Have been non-occasionally resident abroad (in respect to Italy);
3) Have carried out documented research or teaching activities abroad for at least two consecutive years at public or private Research Centers or Universities;
4) Carry out research or teaching activities in Italy;
5) Become tax resident in Italy.
1) First requirement: University Degree.
There is not much to say about the educational qualification, except that a foreign University Degree must be recognized in Italy, by submitting the foreign degree for an official "declaration of value" at the Italian Embassies in the States.
2) Second requirement: non-occasionally resident abroad
This second requirement is not so important for US Professors and Researchers, as it's more focused on Italian Professors who have moved to the US in Italy and want to move back to Italy.
Basically the point here is that the person must have been US tax resident (or tax resident of another Country than Italy, in the EU or outside the EU) for at least the two years prior to moving to Italy.
Let's make an example to understand the point.
EXAMPLE 2
Suppose that a US Professor wants to move to an Italian University, and her/his job in the Italy will start on May 1st 2025.
Now, suppose the Professor would move to Italy on April 30, 2025 and would remain in Italy for the entire period 1 May 2025 - 31 December 2025 in Italy: she/he will acquire the Tax Resident in Italy in 2025, having spent more than 183 days on the Italian territory.
The important rule to understand here is that the Tax Break Ricercatori e Docenti can be applied starting from the first tax year in which the Professor or Researcher becomes tax resident in Italy.
Now, in our example, our Professor is getting Italian Tax Residency the first year, as it will acquire it in 2025.
This fact has 3 important consequences:
A) She/He will start applying the Tax Break Ricercatori e Docenti in 2025.
B) She/He have to be US tax resident for at least the two prior tax years, that means years 2023 and 2024: this is what the second requirement prescribes.
C) She/He will have to report in the Italian Tax return also the incomes gained in the US in the period 1 January 2025 - 30 April 2025. It's very important to note that the Tax Break cannot be applied to the incomes produced in the US: so to the US sourced incomes pertaining the period 1 January 2025 - 30 April 2025, there is no tax break in Italy.
EXAMPLE 3
Same example, but now the US Professor will start her/his job in the Italian University on October 1st 2025.
She/He would move in Italy on September 15 2025: if she/he has not spent any days in Italy prior of that date, the Professor will acquire Italian Tax Reidency in 2026
These are the consequences:
A) She/He will start applying the Tax Break Ricercatori e Docenti in 2026. This means that for the period 1 October 2025 - 31 December 2025, the wages from the Italian University will be taxable income entirely, without any abatement: the abatement of 90% will start from 1 January 2026.
B) She/He have to be US tax resident for at least the two prior tax years, that means years 2023 and 2024: this is what the second requirement prescribes.
C) She/He will NOT have to report in the Italian Tax return the incomes gained in the US in the period 1 January 2025 - 30 September 2025.
3) Third requirement: Documented Research Activity abroad.
Regarding the third requirement, there are two aspects to consider:
• The temporal aspect.
• The objective aspect.
Regarding the temporal aspect, we have already addressed this in the previous point 2: the years are the same.
For the objective aspect, two elements must be considered:
• The Research Activity.
• The Research Organization.
The "Research Activity" can be defined as activity aimed at basic research, industrial research, experimental development, and feasibility studies, conducted at a research organization.
As for "Research Organizations", these include entities such as:
Universities;
Research institutes;
Technology Agencies;
Innovation Laboratories and entities focused on research.
It doesn't matter whether these entities are public or private: the key factor here is that the organization's main purpose is to independently carry out research activity.
Both elements (temporal and objective) must be documented with evidence provided by the "Research organization".
It has also been clarified that research or teaching activities do not need to have been conducted in the two years immediately preceding the move to Italy.
For example, an individual who worked as a researcher for a research organization abroad in 2020 and 2021 and then worked in other roles abroad would still meet the requirements for the Tax Break Ricercatori e Docenti.
4) Fourth requirement: Activity Performed in Italy.
This requirement simply refers to the "performance of research activity in Italy,".
It's important to note that there is no mention of the Italian employer, who does not necessarily need to be a "research organization": it is sufficient that the person's role is research or teaching-related.
It has been further clarified in a response to a tax ruling in August 2020 that, for private companies, the employer must have structures dedicated to research, depending on the specific sector of activity. Therefore, the mere indication of the job title may not be enough, and a more detailed analysis of the employer's operations is necessary.
The situation is somehow more complex for self-employed individuals, who must self-certify, through their business registration code when opening their VAT number ("Partita IVA" in Italian), that they are engaged in research activities.
One important thing to remember is that this Tax Breaks cannot be applied if the Researcher or Professor moves to Italy and work remotely from Italy for a US Employer or University: the job must be mainly (but not ecxclusively) with an Italian Employer.
5) Fifth requirement: Acquiring Italian Tax Residency
As for the last requirement, it is important that the person transfers her/his tax residency to Italy because of their research or teaching activity.
The timing does not matter as much: the person can transfer their residence before or after beginning the activity, but there must be a link between the two: it's not suggested to move to Italy and start searching for a University Job. It's better to get a job prior of moving to Italy.
You can find more on the Tax Residence in Italy here:
4. TAX BREAK FOR RESEARCHERS AND PROFESSORS: HOW LONG DOES IT LAST?
For persons moving to Italy starting from January 1, 2020, the Tax Break lasts for a standard period of 6 years: as we've already said, it applies starting from the tax period in which the researcher or teacher becomes tax resident in Italy, and continues for the next 5 tax years.
EXAMPLE 4
If an American researcher moves to Italy in September 2025 and is hired as an employee, the tax benefit will apply starting with the January 2026 paycheck and will last through 2026 and the following five years, until December 31, 2031.
EXTENSIONS OF DURATION OF THE TAX BREAK
It's very important to know that the duration of the Tax Break can be extended under the following circumstances:
1. The duration can be EXTENDED TO 8 TAX YEARS (the initial period + 7 more) if the researcher or professor:
o Has at least a minor child or a dependent child, including in pre-adoptive foster care;
2. The duration can be EXTENDED TO 11 TAX YEARS (the initial period + 10 more) if the researcher or professor:
o Has purchased a real estate property in Italy. The property can also be purchased by the spouse, partner, or jointly.
3. The duration can be EXTENDED TO 13 TAX YEARS (the initial period + 12 more) if the researcher or professor:
o Has three minor children or dependent children, including in pre-adoptive foster care.
In all these cases, the researcher or professor must remain tax resident in Italy for the entire duration of the Tax Break.
5. WHAT HAPPENS IF THE RESEARCHER ENDS HIS EMPLOYMENT WITH THE UNIVERSITY IN ITALY?
If the Researcher or Professor terminates their employment with the research organization or University before the end of the tax break, what happens?
It's confirmed that all tax benefits already accrued do not need to be refunded and that the benefit remains until the last year in which the researcher or teacher was tax resident in Italy.
However, if the person starts a new employment with another employer that does not meet the requirements of the Tax Break, the income from that employment will be fully taxed and there will be no abatement of the taxable income.
It should be noted that this Tax Break is compatible with income that the researcher or teacher may receive from abroad for research or teaching activities.
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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