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The new Article 24 bis of TUIR (consolidated law on income tax) introduced a favorable tax regime for “newly resident” individuals in Italy.

It’s a flat tax for wealthy foreigners in a bid to compete with similar incentives offered in Britain, Spain, Portugal and Malta which have successfully attracted rich people working in sports, arts, fashion or other high income sectors and possibly aims to attract the London-based wealthy who are put off by Brexit.

The new flat rate tax of €100,000 a year will apply to all worldwide income for foreigners who declare Italy to be their residency for tax purposes.

Those who would want to take advantage of the tax rate would have to have resided abroad for nine of the last ten years, and have sufficient income to make the 100,000 euro price tag an attractive deal.

To apply for the regime taxpayers have to file a specific ruling to the Italian tax authorities, which can include family members (who will be subjected to an additional substitute tax of €25,000 per person), and it will be possible to choose the country or the countries where the foreign income has been produced subjected to the substitute tax regime (“cherry picking” principle).

A person is considered an Italian resident for tax purposes if they are in the country for more than 183 days, or six months.

Those intending to opt for this regime should pay attention to domestic and overarching conventional norms on residence, partly because the Italian Revenue Agency can exchange information with countries where the neo-Italians were formerly resident.

The countries and the related income produced there not included in the ruling request will be subjected to the regular Italian tax rules, allowing the taxpayer to benefit from credit for taxes levied abroad (conversely this benefit is denied for the income subjected to the substitute tax regime).

Once the Italian tax authorities issue a favourable ruling (after having prepared not easy measures of preventive assessment and information exchange), all foreign incomes will be admitted to the substitute tax regime for a 15 years period.

Income is considered of foreign origin, with a “mirror reading” of Article 23 TUIR (consolidated law on income tax) and with the exception of what is possibly provided for by international tax treaties, when:

the asset generating the income is situated abroad
the business generating the income was conducted abroad or
the individual remitting the income is resident abroad for fiscal purposes.

Those subjected to the new regime will benefit also from the exemption, as long as their option will last, from filling the RW section of the Italian tax return concerning assets held abroad, as well as the exemption from paying IVIE (tax on the value of real estate located abroad) and IVAFE (tax on the value of financial activities located abroad).

Finally, those opting for the substitute tax regime will be exempted from donations and inheritance tax related to assets owned abroad, and will benefit from simplifications when asking entry visas in Italy.

During the days of Coronavirus, I thought about writing this text because I had some requests from foreign people who have a bank account in Italy and are in need of transferring funds to their country’s bank account or to make payments to third parties, not being able to travel.

In fact, some have not been able to request a money transfer to their Italian bank due to simple linguistic reasons. Others, however, have Italian current accounts that do not allow International money transfers with home banking accounts.

The solution to these problems is to give a special special Power of Attorney to a trusted person in Italy. For those who do not have a
trusted person to whom to entrust such a delicate task, I would recommend giving the power of attorney to an Italian lawyer; this will
allow you to be sure of the correct execution of the mandate and various other guarantees.

The power of attorney must be signed before a notary or in front of the Italian embassy in your country. In some countries, it is possible
to have the subscription authenticated by other entities; for example in England the is the Commissioner of Oaths.

Once the Power of Attorney has been signed, it will be necessary to obtain the Apostille (depending on whether you are in one of the countries signatories to the Hague Convention).

The Apostille a specialized certificate, issued in UK by the Foreign Office. The Apostille is attached to your original document to verify
it is legitimate and authentic so it will be accepted in one of the other countries who are members of the Hauge Apostille Convention.

In some cases, the Apostille is not necessary (as in the case of PoAs signed in Belgium or Germany).

I always recommend, before visiting a notary in your country, to agree on the text of the Power of Attorney with your Italian bank, so that you don’t undertake the risk that, after having done the PoA, the Italian bank can dispute that the power of attorney does not contain all the necessary wordings.

I also recommend wording the text in two languages (Italian and English) so that on the one hand, the notary abroad understands the
text he is authenticating the subscription for and on the other,.the italian bank can use it as is. Instead, in the event that the power of
attorney is drawn up only in a foreign language, the Italian bank, in order to be able to use the PoA, it will be necessary to have a sworn
translation before an Italian Court. This last procedure is, therefore, more complicated and expensive and, this is why I always
advise to do the power of attorney in double language from the beginning.

Finally, in the event that the current account in Italy is no longer needed, I recommend you to include in the PoA also the power to close the account, so that this does not generate other costs, unnecessarily.

I hope this text has been clear and useful to you, in case you need further information, do not hesitate to contact me through my e-mail.

Arrivederci a tutti

The new Article 24 bis of TUIR introduced a FLAT TAX for “newly resident” individuals in Italy

Power of Attorney. Foreign people who have a bank account in Italy and are in need of transferring funds to their country’s bank account

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