The new Flat Tax System in Italy is an interesting fiscal initiative for new Residents only

Let’s have a look how to move to Italy taking advantage on the very competitive new Italy flat tax system. The new Italian tax regime is unique and very competitive, compared with similar programs in Malta or Cyprus. It’s brand new. It came out last week. The flat tax rate amounts to 100’000 EUR only. The new tax regime is not limited to your close family members but you can bring with you: your mother in law, your great grandfather, your nephew, your brother and additional relatives. I show you how to move your residence to one of the most beautiful countries of the world paying EUR 100’000 only.

What is unique with the new Italian flat tax regime is that it’s not restricted to your close family members but you can move with all your relatives. For each additional relative, you have to pay 25’000 EUR only. Compared with the Swiss relocation and lump-sum taxation program, the Italian flat tax regime is very attractive. Eligible candidates can first come to Italy and subsequently present their tax declaration.

The other option consists of presenting a preliminary request for a tax ruling to the Central Direction of the Italian Revenue Agency, the so-called Agenzia Delle Entrate. My advice is to exercise the option number two. Entering in a tax ruling with the Italian Revenue Agency is much better because the tax ruling a proper and official agreement with the Italian government and much more reliable. You can file your application in person in the office of the Italian Revenue Agency or by email or by a specifically certified email.

We advise you to use our specific certified email, the so-called PEC. Every Italian tax lawyer has a specific PEC. I work with an Italian team of tax lawyers since years. We will use our PEC for your application. If you deal with the Italian authorities it’s of paramount importance to have a clear relationship with them. To be on the safe side, it is much more reliable and secure, if you have a tax ruling in your hands and a proper communication based on certified email exchange before taking residence in Italy. The flat tax regime is for physical persons only and not for companies. To qualify for the regime 10 years before the application you should not have already been a resident of Italy.

We will complete the official checklist for you and make sure that you are eligible for the new flat tax system in Italia. The 100’000 EUR flat tax covers the income produced abroad but does not cover capital gains earned from a sale of participations in companies for the first five years starting from the validity of the tax ruling. The practical application can be quite uncertain because the law is brand new. There are no existing leading cases. That’s the reason I advise you to choose the tax ruling option and start with the negotiation of a proper tax ruling with the Italian Revenue Agency.

My team of senior Italian tax lawyers is very familiar with the Italian Revenue Agency because we have filed hundreds of Voluntary Disclosure applications. We will do everything for you from A to Z. If you are considering to move to Italy taking advantage from the new flat tax regime, take the phone and call me now on +41 44 212 44 04 or contact me online.

I will lead the team of my Italian lawyers guiding you through this new and attractive opportunity if it’s done in the right way.

Enzo Caputo

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How The New Italian Flat Tax System Will Legalize Secret Swiss Bank Accounts

Article 1 of the 2017 Budget Act provided for the introduction, with the article 24-bis of the Consolidated Income Tax Act (Consolidated Tax Act), an optional benefit scheme for individuals who were to transfer their residences in Italy. It is a scheme aiming to encourage the transfer of residence to Italy, allowing you to opt for the application of a substitute flat tax of EUR 100,000 per year and to replace the ordinary taxation related to foreign income. Whatever the foreign income is, it will be replaced with the Flat Tax of EUR 100,000 – except the capital gain tax based on the selling of participations of company shares, if the share transfer deal has taken place in the first 5 years of residence.

Physical persons who are not tax residents in Italy for 9 tax years of the last 10 years before the introduction of the new flat-rate scheme are eligible to file for the new Flat Tax regime.

The benefit of the lump-sum option arrangements is the application of a substitute tax on all foreign income. The Flat Tax amounts to EUR 100,000 for each tax year, to be paid in a single instalment with the due date for the payment of ordinary income tax.

What are the benefits?

The new tax regime covers all foreign income: on land, income from immovable property (Italian tax called IVIE, tax value of real estate located abroad); income derived from foreign holdings of financial products, current accounts and savings accounts (Italian Tax IVAFE, value of financial assets held abroad); and all self-employment income abroad regardless of the object, scope and the nature of the activity. The other unique benefits offered with the new Flat Tax regime include full exemption from inheritance and gift tax, for all the existing products or rights abroad. In addition, the legislation offers the exemption from the requirements of the so-called fiscal monitoring “monitoraggio fiscale” and the exemption from the filing obligation of the tax return with the tax form called RW (Investments and financial assets abroad, monitoring – IVIE / IVAFE must not be declared).

Meeting about the new Flat Tax System in Italy

This exemption is of significant importance as the taxpayer who chooses the new Flat Tax scheme must not indicate the goods and rights held abroad, the amounts of foreign investment, the amount of current accounts or deposits, making use, therefore, of the possibility of drawing up a statement of the narrowest income and avoiding costly penalties resulting from failure, infidel or incorrect filling of RW forms. The scheme may be extended to more family members (spouse, child, descendants, grandson, great-grandson, parent, other ascendant, grandfather, great grandfather, father and brother and sister, daughter in law and more) with the same requirements as the physical person who exercises the option.

In this case, the lump sum to be paid is EUR 25,000.00 only, for each family member. The eligible person who exercises the option for themselves and for their family members mentioned above, can express their desire not to use the substitute tax in relation to one or more foreign states, by giving specific instructions on the exercise of “option or with subsequent modification”. In this case, for income produced in the states for which you do not exercise the option, the ordinary regime is applicable, taking benefit from the tax credit calculations for foreign income.

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Secret Bank Accounts with Swiss Banks are Legalized with the Flat Tax Scheme

Many Russian investors have secret bank accounts in Switzerland. According to Swiss bankers, most of the Russian clients are reluctant to disclose their Swiss bank account with the Russian tax authorities. Very few have disclosed the offshore assets at home, as they are afraid to give such sensitive bank account information to Russian authorities. Based on the Italian Flat Tax Regime, the Swiss bank account can be maintained in Switzerland and officially disclosed to the Italian Tax Agency with the new Flat Tax opportunity. Beside the flat tax of EUR 100,000 there is no additional taxation in Italy on the Swiss account; the account is now 100% legalized with the new Flat Tax program.

This is a very important side effect and benefit for a myriad of Russian investors that have secret money in Switzerland. After having moved to Italy, they can use their money in Switzerland without any further complications and freely invest in Italian real estate for example. The Italian real estate market is significantly undervalued; you can buy top villas or even historical buildings for small money. After the legalization of secret money held with Swiss banks, millions upon millions of new money will become available for investments in Italy or elsewhere. The new Swiss money flow will have a tremendous impact on the real estate market in Italy. We help our clients to find good investments in real estate and to invest their money stashed in Switzerland.

Germany attacks Italy to be unfair

The Bundesfinanzministerium, the Ministry of Finance in Germany, attacks the Italian Flat Tax Regime. The tax benefits offered in Italy are part of a tax dumping system damaging and harming other European countries. The Ministry of Finance says that Italy supports a “Race to the Bottom” and the new Flat Tax System is contrary to the interests of Europe. Italy has introduced the new flat tax without informing their partners in the European Union.

The elimination of the donation and inheritance taxation and the dumping tax of EUR 25,000 for each extended family member are not in line with accepted taxation principles in Europe. The harsh tone of the German government addressed to Italy is astonishing. The reaction of the Ministry of Finance in Germany provides strong evidence that the Italian Flat Tax system offers unique advantages to eligible physical persons interested in moving to Italy to take advantage of the Flat Tax Scheme.

Procedure: Tax Ruling Request with Check-List and supporting documents

Discussion about the Flat Tax System in Italy with PartnersIn order to avoid possible circumvention or abuse of the advantages offered by the new flat rate system, there is an exception in the law for capital gains realized by the transfer for qualified participations in company holdings for all participations sold during the first 5 years. For the first 5 years the taxation on sold participations is subject to the ordinary tax regime. The new Flat Tax regime can be extended to a maximum period of 15 years.

Under the provisions of the decision of the Italian Revenue Agency, in Italian “Agenzia delle Entrate”, the procedures for the exercise, modification or revocation of the Flat Tax Regime for new residents abroad can be presented with the tax return related to the tax period or to the tax period after the transfer of residence.
According to our experience, eligible clients should file a so-called “Istanza di interpello” according to article 24-bis of TUIR-legislation, starting negotiations for a proper tax ruling in writing with the Italian Revenue Agency before entering Italy.

Based on a tax ruling there is a real commitment between the Inland Tax Agency and suitable candidates in writing. The tax ruling is optional and not mandatory, and is a very efficient instrument frequently used in Switzerland and other jurisdictions offering much more comfort to the new residents. The negotiation power is much better if exercised before entering and taking residence. Uncertainties and misunderstandings are eliminated.

The Italian Tax Agency has created and published a 3-page checklist with 30 questions presented with the check-the-box-system. The questions must be answered carefully because they are decisive if the candidates are eligible for the Flat Tax System. The checklist must be attached to the “Istanza di interpello”, including supporting documents, and filed jointly by a physical presentation at the physical office of the Tax Agency, by specific email or by a specific official email, the so-called PEC email. The PEC email is a specific email reserved for the communication between governmental authorities and regulated tax lawyers and accountants. Eligible persons should communicate using PEC only. The PEC communication will constitute hard evidence in case of a tax dispute. Indeed, this is a tremendous advantage in case of any subsequent tax litigation.

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Compared to the Swiss tax authorities, the Italian tax authorities are under-staffed and there are less qualified employees working for less salary. Thus, mistakes cannot be excluded. As such, any communication should be kept and saved in case of mistakes, misunderstandings, future disputes and litigation.
Italy is introducing larger cuts in taxes for foreign companies and new resident physical persons moving to Italy. The 152-year-old flat tax system in Switzerland, for example, is directed at elderly individuals for retirement in Switzerland, not allowing professional activities. The Swiss flat tax system has attracted 5600 foreign new residents. The Italian Flat Tax Scheme wants to attract young entrepreneurs supporting the economy, and this is one of the benefits making Milano attractive again. International companies have relocated to Milano, in the centre of Europe. Brexit is making Milano extremely attractive for companies and young professionals.
The Italian government expects at least 1,000 candidates. We are confident that the Flat Tax will convince many more eligible persons to move to Italy and save taxes.

More rock stars are moving to Italy to save on taxes

This opportunity to move to Italy and take benefit from favourable taxation is unique and exceptional. Many stars and celebrities already live in Italy such as Elton John, Sting, Max Weinberg and many more artists with Italian origin such as Bruce Springsteen, Steven Tyler, Lady Gaga, Michael Bublé, Madonna, Ariana Grande and others will move to Italy and not pay taxes on their foreign income, except the EUR 100,000 flat tax.

Enzo Caputo is a Swiss banking lawyer and the owner of Caputo & Partners AG, a boutique law firm based in Zurich offering services to international private clients. He leads a team of Italian tax lawyers helping international clients to move to Italy and Switzerland. For more specific information on the Flat Tax Scheme in Italy call Enzo Caputo +41 44 212 44 04 or write him an email: enzo.caputo@swiss-banking-lawyers.com. www.swiss-banking-lawyers.com