Nowadays, anyone that works hard and makes a high income wants to look for ways to further enhance their luxury lifestyle. Whether it be through lifestyle changes, travel experiences of what have you, if you’re lucky enough to be in the elite circle of high net worth individuals, the joy of having that lifestyle, means wanting to ensure your life stay that way. So, if that sounds like you, have you considered working and living in Italy?
My specialty as a commercialista (the Italian equivalent of an accountant) is helping foreigners who choose to make Italy their new home. I help with the transition of becoming a legal tax paying citizen in Italy. Lately, as an incentive to get more foreigners in general to make Italy their home, there are more advantages to working and paying taxes in Italy. Here, I will discuss the benefits available to those who are high net worth individuals.
What tax benefits are available to high net worth individuals?
According to investopedia a high net worth individual is a person with liquid assets in excess of one million dollars. Having consistent wealth is likely to create tax issues, both on the income tax angle as well as the wealth tax depending on where the individual has his residency.
In 2016, Italy has introduced a new tax regime aimed to attract HNWI individuals as an extra push essentially to get them to move to Italy. After all, it’s not just about the beauty of living in Italy, but how it can benefit both the country and the individual itself. The Italian tax system is based on progressive brackets, therefore higher incomes are taxed at progressively higher rates. Long story short, the more you earn, the more you pay.
This is the opposite in a flat tax system, where you pay a fixed amount regardless of the income earned.
Is there a flat tax advantage available?
The flat tax in Italy allows an Individual to pay € 100,000 p.a. This is based on every foreign income earned, regardless of the source of income and the amount. The good news is, it is also possible to extend the flat tax to any family member paying an extra € 25,000 per head. Therefore, you can apply to this regime with your spouse and pay € 125,000 against all your foreign income sources.
Furthermore, there are no CFC rules in effect. Therefore, if your income sources are from an offshore jurisdiction, there is no need to disclose it separately in your tax return.
In addition, there is no remittance tax in Italy. You can therefore use the foreign earned funds in Italy without any restriction, since there is no remittance tax.
Finally, this flat tax applies against any wealth tax, waiving foreign assets disclosure as well.
This regime lasts up to 15 years, and you can hop off at any time.
How can high-earners further take advantage of paying taxes in Italy?
Italy is becoming an increasingly popular destination for HNWI as they can obtain an interesting taxation on their income streams. Italy can become your tax center of interest, because it is easy to declare tax residency and you can combine it with various double tax treaties allowing the reduction of any withholding tax paid overseas. This allows any HNWI to minimize their taxes to just € 100,000 on their worldwide income—regardless of how high an income they earned that year.
Article by Nicolo Bolla
