Inland Revenue: tax relief for professional footballers

23 July 2021

In its answer to question no. 447/2021, the Inland Revenue examined the question raised by an Italian football club playing in the top league, which asked for clarifications on the requirements and application scope of the special regime for repatriated workers applied to professional sportsmen.

The company hires its players under employment contracts governed by Law 91/1981, which regulates the relationship between clubs and professional sportsmen.

At the same time, the club acts as a withholding agent, for tax on the remuneration it pays to the players.

Players who meet the requirements request the application of the repatriated workers regime (art. 16, paragraph 5-quater, Legislative Decree no.  147/2015), withholdings are made on 50 per cent of the taxable income.

According to the requesting company, to access the repatriated workers regime by nationals of non-EU countries, it is sufficient to meet the requirements of the first paragraph of Art. 16 of Italian Legislative Decree no. 147/2015, since it is not necessary to meet further requirements set out in the second paragraph of that article. 

Regulatory references

Under Legislative Decree no. 147/2015, employment income, similar income and self-employment income produced in Italy by workers who transfer their residence to the country under Art. 2 of Presidential Decree no. 917/1986, is included in the total income limited to 30 per cent under certain conditions.

Workers must not have been resident in Italy in the two tax periods preceding the transfer and must agree to reside in Italy for at least two years.

At the same time, work must be carried out mainly in Italy.

This provision was subject to regulatory changes made by art. 5 of Decree Law no. 34 of 30 April 2019 (converted into Law  no. 58 of 28 June 2019), in force since 1 May 2019.

To obtain the benefit referred to in the above art. 16, in force from 1 May 2020, the worker must

  • transfer their residence in the country;
  • not have been resident in Italy for two tax periods preceding the transfer;
  • agree to reside in Italy for at least two years and,
  • work mainly in Italy.

The tax benefit is available to EU citizens or non-EU if the country has an agreement against double taxation or on the exchange of information in tax matters, who:

  • have a university degree and
  • have worked “continuously” as an employee, self-employed person or business outside Italy in the last 24 months or,
  • alternatively, have “continuously” pursued education outside Italy in the last 24 months, obtaining a degree or a postgraduate specialisation.

Taxpayers may benefit from this relief for five years, starting from the tax period in which they transfer their tax residence to Italy.

Paragraph 5-quater – introduced in Art. 16 following the amendments made to Art. 5 of Decree Law no. 34 of 2019 when it was converted – extended the range of benefit beneficiaries to professional sportsmen, providing that they contribute to the creation of income limited to 50 per cent of their taxable amount.

In circular no. 33/E of 28 December 2020, the Inland Revenue clarified that the regime applies to workers who have transferred their tax residence in Italy as of 30 April 2019, under legal conditions.

Later, the Inland Revenue Director’s order of 3 March 2021, established that to access the benefit, it is necessary to pay an amount equal to 5 or 10 per cent of the income received in the previous year.  Professional sports workers, whose income is 50 per cent tax-free and provided they pay a contribution of 0.5% of their taxable income, intended for the development of youth sectors, are excluded.

Using tax leverage is an aspect that is not overlooked by other European countries. Art. 16 reflects a process that has been underway for years in several EU countries.

Similar tax regulations in favour of repatriated workers have been established in France, Spain, the Netherlands and Portugal, not to mention the “remittance basis” system in place in Ireland and the United Kingdom.

The question’s answer

Based on the clarifications provided and the above regulatory developments, the Inland Revenue, in its answer to the question, clarified that a worker who transferred their tax residence in Italy in 2020 might benefit from the tax relief for repatriated workers for the employment income produced in Italy starting from the 2020 tax year (and the four subsequent periods). This is because it is sufficient to meet the requirements set out in the first paragraph of Art. 16 of the above Legislative Decree, i.e. that the person has not been resident in Italy in the two previous tax periods, that they agree to reside in Italy for at least two years and the work is carried out mainly in the country.

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