The Italian flat-rate tax system ("Imposta Forfettaria") is comparable to the non-dom regime in Great Britain , with the difference that remittances to Italy are not taxed. It exempts individuals of all nationalities (except US citizens) who have not been resident in Italy for the last nine out of ten years from declaring their foreign income to the Italian tax authorities and, more generally, from taxation of their foreign income (including gift and inheritance tax , rental and savings tax, and capital gains tax) in return for an annual flat tax of €100,000 for a period of 15 years.

The Italian flat-rate tax system thus offers a full exemption from Italian tax on foreign income from

• (self-employed) acquisition;

• Business activities;

• Rent;

• Interest charges;

• Capital gains.

 

The Italian flat-rate tax also provides full exemption from Italian gift and inheritance tax (for non-Italian assets), even if the previous owner was a tax resident in Italy.

The Italian tax relief for foreign nationals can also be combined with Italian employment (which is, however, subject to normal tax).

This makes the Italian flat-rate tax system even cheaper than the Swiss one, which requires annual tax payments of between approximately CHF 250,000 and CHF 600,000, depending on the canton.

Important: Taxpayers have the opportunity to obtain advance certainty about the application of specific Italian tax provisions through a binding tax ruling (so-called tax ruling) and to opt out of the tax regime at any time.

Potential disadvantages:

1. Capital gains from the sale of qualifying shareholdings during the first five years of residence are not exempt and are subject to normal Italian tax. Qualifying shareholdings represent 20% of the voting rights or 25% of the share capital of foreign companies (for listed Italian companies, the qualifying threshold is 2% of the voting rights and 5% of the share capital).

2. The Italian flat tax does not apply to US citizens, as they are known to be taxed on their worldwide income (personal tax system).

3. The Italian flat tax is not so attractive for people with (high) Italian income, which continues to be taxed at the conventional Italian tax rate of up to 43%.

Requirements for applying for the Italian withholding tax:

1. The applicant (and all family members) must not have resided in Italy for at least 9 years from the date of application;

2. The main applicant must pay an annual flat-rate tax of €100,000;

3. For each family member of the main applicant, an additional €25,000 flat-rate tax must be paid annually.

4. The flat-rate tax must be paid by June 30 of each year.