With answer to question no. 42 of 18 January 2021, the Inland Revenue has expressed its opinion on the application of the favourable regime introduced by art. 16 of Italian Legislative Decree no. 147/2015 for repatriated workers. The Inland Revenue focused on the possibility for workers returning to Italy, following a posting abroad, to benefit from the above regime.
The taxpayer’s question
In formulating his question, an Italian citizen stated that:
The taxpayer asked the Inland Revenue whether it was possible to benefit from the special regime reserved to repatriated workers starting from the tax year 2021.
The Inland Revenue’s opinion
The Inland Revenue summarises the tax benefit conditions, considering the latest regulatory changes, pointing out the possibility for the worker to benefit from the abatement of the taxable income up to 70 per cent if:
The benefit is available starting from the tax period in which the worker transfers their tax residence to Italy and for the following four tax periods.
However, as already expressed in the previous Circular no. 33/E/2020, the Inland Revenue specifies that, for taxpayers returning to Italy following a posting abroad, the tax benefit cannot apply:
The Inland Revenue provides an example, and identifies the following as indicators of “continuity” which determine the worker inability to access the tax benefit including:
These indicators suggest a substantial continuity with the employment relationship established before the posting in which the original contractual terms and conditions before the posting abroad continue to apply and exclude the applicability of the favourable regime.
If work carried out by the worker, after their return to Italy, constitutes a “new” activity which involves signing a new employment contract for a company role completely different from the original it would be a different case. In this situation, the worker would be entitled to benefit from the favourable regime.
Since it is unable to verify the applicant’s employment situation, the Inland Revenue outlines the principle according to which the taxpayer could benefit from the favourable regime starting from 2021 only if the work carried out in Italy after the posting abroad is completely “new” and does not have continuity with the previous employment relationship existing before the expatriation.