With its circular no. 33/E/2020 of 28 December 2020, the Inland Revenue, provided new instructions regarding the favourable tax regime granted to repatriated workers and recently governed by the “Growth Decree” (Decree Law no. 34/2019) and Tax Decree linked to the 2020 measures (Law no. 124/2019).
The “Growth Decree” has broadened the range of beneficiaries of the five-year favourable tax regime as from the 2020 tax year.
The Decree no longer requires that the “repatriate” worker has a top-management role and possesses “high qualification or specialisation requirements.” It is sufficient to have spent a period of residence abroad of at least two years before entering Italy and a commitment to remain in Italy for at least two years.
The incentive is increased by raising the taxable income reduction percentage from 50 to 70 per cent, with a possibility of a further increase up to 90 per cent with certain conditions (such as the transfer of the employee to a region in Southern Italy).
The benefit’s duration is extended for a further five tax periods for those who: (i) have a minor or dependent child and (ii) have purchased a residential property in Italy in the 12 months preceding the move or by the end of the first five-year period. In these cases, the taxable income would be reduced by 50 per cent, or 90 per cent for repatriates with at least three minor or dependent children.
To complete the regulatory framework described above, the Tax Decree linked to the 2020 tax measures has extended the start of the new tax regime as of 2019 to workers who had transferred their tax residence in Italy between 30 April 2019 and 2 July 2019.
Inland Revenue clarifications
This last “extension” required an Inland Revenue measure which, with its circular no. 33/E/2020, clarified that the reduction of taxable income from 50 to 70 per cent is not yet applicable.
It is necessary to wait for the Ministry of Economy and Finance to issue an implementing decree that will shed light on the criteria to access the new favourable regime for 2019, considering the limited resources available.
According to the circular, pending the implementing decree issuance, those who “have transferred their tax residence in Italy from 30 April 2019 to 2 July 2019, and meet regulatory requirements, may use the benefit in the lower measure of 50 per cent.” There is no mention of regime extensions for cases under the new description.
It is understood that “for those who have returned during the 2020 tax period, the favourable regime is operational regardless of the decree issuance.”
All that remains is to wait for the implementing decree.