The 2019 Italian Budget Law introduced a new special tax regime, aimed at attracting individuals who hold foreign pensions to transfer their tax residence to one of Southern Italy’s municipalities. The resources coming from the extra-revenues deriving from the implementation of the regime are addressed to the financing of the universities that have their headquarters in Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise and Puglia.
This special regime, which took effect from 1 January 2019, allows taxpayers holding foreign pensions, who have not qualified as Italian tax residents for at least the previous five tax periods, to opt for the application of a flat tax of 7% to all foreign source income (rather than to apply the progressive tax rates, which in Italy may range from 23% to 43% plus 3% as local taxes)
Particularly, taxpayers can opt for the flat tax of 7%, if they:
- transfer their tax residence from a country with an administrative cooperation agreement with Italy to one of the following Italian Southern regions: Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sicily and Sardinia, in a Municipality with a population of less than 20,000 inhabitants;
- have not been tax residents in Italy for at least five tax periods prior to the transfer to Italy;
- currently are in receipt of a foreign pension.
The flat tax can be exercised through the first Italian tax return and it is valid for that tax period and the following five tax periods. Moreover, they can benefit from the exemption from the declarative obligations regarding fiscal monitoring and from the payment of Ivie and Ivafe (valued added taxes on foreign real estate or financial activities).