The Lump Sum Flax Tax regime allows individuals who become Italian tax residents to opt for a flat yearly tax of € 100,000 on income from sources outside Italy, regardless of the amount of that income.
The option, which is selected through the annual tax return, is available for up to 15 years and can be waived at any time during that term.
Who can benefit from the new regime?
To qualify for the option, an individual must have been a tax resident of countries other than Italy for at least 9 of the 10 years preceding the year during which he or she becomes an Italian tax resident. If this condition is met, the option is available regardless of the taxpayer’s nationality, i.e. it is available for both non-Italian and Italian nationals.
The flat tax, if opted for, replaces any tax to which an Italian tax resident would otherwise be subject on income from sources outside Italy.
The only exception is that, during the first five years, the new resident will still be
taxed on capital gains from the sale of a “qualified participation” in a company.
A “qualified participation” means, in the case of a closely held company,
- an interest with more than 20% of the voting rights in the company, or an interest of more than 25% regardless of its voting rights.
A “qualified participation” means, in the case of a publicly-traded company,
- an interest with more than 2% of the voting rights in the company, or an interest of more than 5% regardless of its voting rights.
At the time of opting for the flat tax or at any time during the 15-year term, the new tax resident can indicate that he/she does not want the option to operate with respect to income generated in one or more nominated foreign country or countries.
In this case, the relevant item of income will be taxable in Italy in accordance with
Income from Italian sourceswill be taxed in accordance with the regime ordinarily applicable to Italian tax residents.
And if the the Applicant want to move with family?
An attractive feature of the new regime is that, if an individual moves to Italy together with
family members who also receive income from non-Italian sources, the election for the regime can be extended to those family members.
Each of them will be liable for an annual flat tax of € 25,000 instead of € 100,000.
The concept of “family members” is very flexible.
The family members who can benefit from the regime include spouses, sons and daughters (including sons-in-law and daughters-in-law), parents (including parents-in-law), and brothers and sisters.
If the tax resident does not have any sons or daughters, their direct closest descendants can benefit instead.