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Editor in chief: Angelo Scorza
02/08/18 17:56

CR7 and the others: the flat-tax optional regime for non-Italian residents

Studio TCL also explains the latest amendments to dividends tax rules

Latest summer transfer-market events put the flat-tax optional regime for non-Italian residents (introduced by Budget Law 2017 and ordered by art. 24-bis TUIR) into the limelight. The new regime, intended to make our Country more appealing to foreign investments, allows individuals transferring their tax residence to Italy to benefit from a substitute tax on foreign income: this option envisages introducing € 100,000 flat-rate tax on each period it is applied to, also expanding the regime to one or more family members. In this specific instance the cap would be € 25,000 per family-member interested in this option.

Individuals and family members shall meet two specific requirements:

  • tax residence transfer from a foreign Country to Italy;
  • the individual shall not have established tax residence in the Country for at least nine out of ten fiscal year before the enforcement of this option.

Only exception is envisaged on capital gains earned from selling qualifying participations in the first five years, which in turn are subject to ordinary taxation to prevent residence transfer to Italy for non-transparent purposes. 

Once the mandatory requirements have been verified and access to the regime granted, the option will be automatically renewed each year, unless a request for cancellation has been submitted or 15 years have passed since the first fiscal year.

Which are the benefits resulting from this regime?

The “new-residents” option regime results particularly convenient to so called “high net worth individuals”, namely all individuals with high foreign income (i.e. earned from football players' sponsorship contracts) transferring their residence to Italy, not only for being subject to a substitute tax which grants particular benefits on foreign income, but also because IVIE and IVAFE taxes shall not be paid and mandatory supervision on foreign businesses shall not be undertaken  (income tax declaration, RW chart).

We also wish to pinpoint he positive effects of this regime on the whole Italian economy: it is evident that by hosting high net worth individuals in Italy, the whole Country's growth will be enhanced, in terms of investments, jobs and collective well-being.

Barbara Pollicina
Chiara Vurruso

PKF - Studio TCL Tax Consulting Legal
Genoa – Milan

Dividends tax rules, the latest amendments enforced as from January 1st 2018

As from January 1st, 2018 tax rules on dividends have changed: in essence, pursuant to Budget law 2018, capital gains earned on qualifying participations has been equalized to ordinary participations, thus applying the same 26% tax.

During the transitional period, dividends from qualifying participations declared between 1.1.2018 to 31.12.2022, but accrued until December 2017, are subject to former tax regime (MD 26.5.2017) which envisaged that capital gains earned on qualifying participations realized by resident individuals are included in total income as far as:

  • 40% of the total amount à if related to profits accrued up to 31.12.2007;
  • 49.72% of the total amount à if related to profits accrued from January 1st 2008 to December 31st 2016;
  • 58.14% of the total amount à if related to profits accrued in the financial year following the one ending on 31st December 2016.

The new transitional period has been intended to continue applying former regime to all declarations until 31.12.2022, in order to protect all companies which, although having approved dividends before 1.1.2018, haven't allocated them before 31.12.2017.

The new rules introduced by Budget Law 2017 has also been extended to capital gains earned on participations in foreign companies run under ordinary tax regime, therefore, also in this specific instance, the ordinary-participations regime is extended to qualifying participations.

Consequently, profits earned on participations shall no longer be included in total income and will be subject to 26% substitute tax. Unfortunately, due to the existing tangled tax system, the aforementioned rules shall cancel tax credit related to tax deductions paid abroad on the same dividend (taxes will be essentially paid twice).

We confide this crazy system can be shortly amended.

Fabrizio Moscatelli

PKF - Studio TCL Tax Consulting Legal

Genoa – Milan





TAG : Tax corner