Inland Revenue: clarifications on the repatriated workers tax regime and re-employment

28 March 2022

In its answer to question no. 85/2022, Inland Revenue confirmed that an employee hired under a contract governed by local law by a foreign subsidiary to which they had been initially seconded and returned to Italy to be hired by the company that had originally seconded them, could benefit from the repatriated workers favourable tax regime.

The facts

The applicant was an Italian citizen residing abroad who asked the Inland Revenue whether he could benefit from the favourable tax regime for repatriated workers provided under Art. 16 of Italian Legislative Decree no. 147/2015 on his return to Italy, following his employment under an open-ended contract by an Italian company that employed him before his expatriation.

The applicant declared:

  • he had been employed by the Italian company ALFA in 1998 and had been seconded by it abroad to BETA (a group company) from 2016 to 2017;
  • he was hired by BETA permanently in 2017 with a contract under foreign law and assigned to the duties of Managing Director;
  • he had been registered, since 2015, with AIRE (Register of Italians resident abroad);
  • ALFA offered him an open-ended employment, with the manager title, effective from 1 January 2022, without recognition of any contractual seniority and an agreed trial period;
  • the ALFA managerial role was not in continuity with the role held during the secondment or before expatriation.

Inland Revenue guidelines

The Inland Revenue, based on the clarification made in Circular no.  33/E of 28 December 2020, stated that the benefit for “repatriated workers” is not available to taxpayers returning to Italy following a secondment abroad under the same contract and employer. According to the Agency, “if work carried out by the repatriated worker constitutes new work, by signing a new employment contract, different from the contract in force in Italy before posting, the repatriated worker assumes a different corporate role compared to the original. In this case, the worker can access the benefit from the tax period in which they transferred their tax residence to Italy.”

The tax authority specified that the benefit “is not applicable if the worker is in a situation of “continuity” with the previous work position held in the country before the expatriation at the time of repatriation, even if there is a new contract for a different company position.”

The Agency clarified that there are precise conditions that demonstrate substantial continuity of the new employment relationship compared to the one carried out before posting, namely:

  • holidays accrued before the new contact;
  • contractual seniority;
  • absence of a probationary period;
  • clauses to avoid paying the accruals of the thirteenth (and any fourteenth) months’ salary and the severance indemnity at the time of signing the new contract;
  • clauses which state that at the posting’s completion, the seconded person will be reinstated within the home company organisation under the same employment terms and conditions at the home company before the posting.

The Inland Revenue considered that the Applicant may benefit from the favourable tax regime. This was because the ALFA employment relationship was new and did not meet any of the above conditions. The Agency pointed out that contractual relationship autonomy within a corporate group was not an obstacle for using the tax benefit.

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