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22.122021

Inland Revenue: expat workers benefit from favourable tax regime for repatriated workers

In its answer to question no. 789 of 24 November 2021, the Inland Revenue clarified that those who meet the requirements provided for by Decree Law no. 34/2019, can benefit from the favourable tax regime for repatriated workers for a further five tax periods if they have been registered with AIRE.

Question subject

The applicant taxpayer is an Italian citizen with a university degree who:

  • moved abroad to attend a Master’s degree course in September 2009, obtaining her degree on 30 September 2011;
  • after the study period, she remained abroad until February 2013 to carry out two internships, the last of which was transformed into an open-ended contract;
  • she was registered with the Register of Italians resident abroad (“AIRE”) from 8 November 2012 to 13 March 2013;
  • she returned to Italy in March 2013 to work for an employer, benefiting from the “expat workers” regime under Law no. 238/2010;
  • she exercised the option referred to in Article 16, paragraph 4, of Legislative Decree no. 147/2015 to take advantage of the special regime for “repatriated” workers until 31 December 2020.

The worker, who is a mother of two minors, has purchased a property in 2019 where she lives.

The Applicant considered that she met the requirements set forth in Article 5, paragraph 2-bis, letter a), of Decree Law no. 34/2019 for the benefit extension outlined in article 16 of Legislative Decree no. 147/2015 for a further five tax periods. According to her, AIRE registration for a period of less than two tax periods (i) was irrelevant (ii) the “AIRE amnesty”, under article 16, paragraph 5-ter, of Legislative Decree no. 147/2015, introduced by the Growth Decree, should be applied.

The favourable tax regime regulatory evolution

In its reply, the Inland Revenue explained how Article 5, paragraph 1 of the Decree has (i) modified the requirements relating to the tax benefit scope, (ii) increased the taxable income reduction percentage and (iii) extended the tax benefit period for a further five years, if conditions were met.

These amendments, applicable to persons transferring their tax residence in the Country as of 30 April 2019, were clarified in Circular no. 33/E of 28 December 2020.

The circular stated that, through the amendments made by the Growth Decree to the legislation, the legislator introduced a temporal extension of the tax benefit to a further five tax periods, with taxation at a rate of 50 per cent of taxable income, if one of the requirements were met such as:

  • have at least one minor, including those in pre-adoptive foster care;
  • purchase of a residential property unit in Italy directly by the worker or their spouse, cohabiting partner or children, including jointly owned units. This last case must take place “after the transfer to Italy or in the 12 months preceding the transfer.”

The tax authority stated that Article 1, paragraph 50, of Law no. 178/2020 (“Budget Law 2021”) inserted in the above Article 5 of the Growth Decree, paragraph 2-bis, to allow the extension for a further five years of the tax benefit for repatriated workers including those “who have been registered with AIRE or are EU Member State citizens who have transferred their residence before 2020 and who, as of 31 December 2019, are beneficiaries of the regime under Article 16 of Legislative Decree 14 September 2015, no. 147.”

The 2021 Budget Law established that the following individuals could benefit from the extension, by exercising a specific option:

  1. being registered with AIRE or are EU Member State citizens during their stay abroad.
  2. transferring their tax residence to Italy before 2020;
  3. already benefited from the special regime for repatriated workers on 31 December 2019.

This option is completed by paying:

  1. 10 per cent of the tax-advantaged employment and self-employment income produced in the tax period preceding the one in which the option is exercised, if at the time of exercising the option the worker meets the following requirements:
    • having a minor, (including those in pre-adoptive foster care), or
    • owning at least a residential property in Italy after the transfer, within the previous 12 months or within 18 months from the date on which the option is exercised;
  2. Five per cent of the taxable employment and self-employment income produced in the tax period preceding the one in which the option is exercised, if at that time the employee has at least three minors (including those in pre-adoptive foster care) and becomes the owner of at least a residential property in Italy after the transfer, in the preceding 12 months or within 18 months from the date on which the option is exercised.

If the applicant fails to meet the requirements the additional benefit will be refunded without penalty.

Please note that “provided that they maintain their tax residence in Italy, employees may exercise the option, as for the special regime for repatriated workers, by submitting a written request to the employer, within 30 June of the year following the end of the first five-year period of benefit.”

In view of the legislation, the option in question cannot be exercised by:

  1. those who transferred their residence to Italy as of 30 April 2019, due to incompatibility with the Growth Decree regulatory provisions;
  2. professional sportsmen.

The option for the tax benefit extension is reserved for those who have acquired Italian tax residence before 30 April 2019, provided that on 31 December 2019 they are beneficiaries of the favourable regime.

The Inland Revenue considers that the option in question may be exercised by “expat workers” who availed themselves of the option under Article 16, paragraph 4, of Legislative Decree no. 147/2015, and have benefited from the special regime for repatriated workers from 2016 or 2017 and until 2020. This is the regime version prior to the Growth Decree amendments. The extension is accessible for those meeting the requirements of Article 2, paragraph 1 of Law no. 238/2010 who benefited from the pre-Growth Decree repatriated workers regime under paragraph 4 of Article 16 of Legislative Decree no. 147/2015.

(i) those who have not been registered with AIRE and (ii) non-EU citizens, even if beneficiaries of the special regime for repatriated workers are excluded from exercising the option.

Applicability to “expat workers”

The Inland Revenue considers that “expat workers” registered with AIRE, who benefited from the special regime for repatriated workers as of 31 December 2019, may exercise the option under Article 1, paragraph 50, of Law no. 176 of 2020 and, have access to the measure provided for by Article 5, paragraph 2-bis, of the Growth Decree.

Given her registration with AIRE during her stay abroad, the tax authority considers that the applicant worker can benefit from the special regime for repatriated workers for a further five tax periods, as she meets the requirements set out in the above article.