How the Flat Tax works
The Flat Tax can be defined as the substitute tax of the IRPEF one, on income produced abroad, applied to individuals who transfer their tax residence to Italy.
It is established on a flat-rate basis, with a fixed rate, for each period of effectiveness of the scheme: for the single option it is € 100,000, while for family members, it is € 25,000.
The purpose of this tax model is to encourage the owners of large assets and income from foreign sources to move their tax residence to Italy.
The subsidized tax regime
The Stability Law n. 232 of 2016, introduced a particularly facilitated tax regime, regulated by paragraph 152 of art. 1, which establishes that: “Individuals who transfer their residence to Italy pursuant to article 2, paragraph 2, may opt for the substitution tax, referred to in paragraph 2 of this article, of their income products abroad identified according to the criteria referred to in Article 165, paragraph 2, provided that they have not been fiscally resident in Italy, pursuant to Article 2, paragraph 2, for at least nine tax periods during the ten preceding the start of the option’s validity period “.
The clear objective underlying the law is to encourage investments, consumption and the rooting of families and individuals with high potential (income or assets) who want to establish themselves in Italy on a lasting basis.
You can access the option, if the following requirements are provided:
- Transfer of tax residence pursuant to Article 2, paragraph 2, of Presidential Decree no. 917/86;
- The beneficiaries of the option must not have resided in Italy for a time equal to nine tax periods during the ten preceding the beginning of the validity period of the option itself.
If these two requirements are met, the subjects will be considered as “newly domiciled” in Italy, and the subsidized tax regime may therefore be applied.
However, this regime has a limited duration: the effects cease to exist fifteen years after the first tax period of validity of the option.
At the end of the period of operation (which can in any case always be subject to revocation), the subject and his family members lose the advantages and remain subject to the ordinary rules on income taxes.
The right of option: how to exercise it
With the provision n. 47060 of 8 March 2017, the Revenue Agency has issued the instructions necessary for exercising the Flat Tax option: this is completed with a declaration contained in the tax return referring to the tax period in which the individual has transferred residence in Italy, or the tax period subsequent to that in which the natural person has transferred his residence to Italy. This declaration does not imply the obligation to submit an application for an interpello which, in this case, is only optional (the interpello is a request that the taxpayer addresses to the Revenue Agency before implementing a tax-relevant behavior, e.d.).