Tag Archive for: Italian Law Provisions

Elective Residence In Italy. Frequently Asked Questions

What is a national visa for elective residence?

Elective residence in Italy requires a national visa. This grants access to Italy for overseas nationals wishing to reside in Italy. Applicants must be able to support themselves financially, without carrying out any type of work.

Article 13 of Attachment A of the inter-ministerial Decree MAE n°850 defines the types of Italian entry visas and requirements to obtain them.

What paperwork is necessary to obtain an elective residence visa?

Foreigners wishing to obtain an elective residence visa will have to provide documentary proof that they own or rent a property in Italy. This will be where you  will be living. In addition, proof of adequate financial resources is necessary.

Successful applicants for an elective residence visa should have annual funds of at least €31,000. This equates to approximately triple the required per diem amount, on an annual basis, as estimated in Chart A. This chart is an attachment to the Ministry of Internal Affairs directive of March 1st 2000.

Annual income may derive from savings, pensions, annuities, real estate, businesses or from other sources. However, it cannot be from employment.

Who is entitled to an elective residence visa in addition to the applicant?

A cohabiting spouse or registered partner, minors and adult dependent children will receive the same visa, so long as financial means are adequate to support them. This means your total amount of annual income should include an extra 20%, if the visa is for a spouse whereas an additional 5% is necessary for each dependent child.

What level of annual finances do you need to gain elective residence in Italy?

The “minimum financial requirement” in accordance with Italian legislation is approximately €31,000 per annum. However, it is likely that authorities will assess the situation on a case by case basis.

How long is an elective residence visa valid and, can it be renewed?

An elective residence visa is valid for 1 year. Thereafter, the visa is renewable at provincial police headquarters on the condition that the previously mentioned original requirements remain unchanged.

You must apply for an elective residence visa at an Italian Consulate in your home country and convert it into a residence permit within 8 days of your arrival in Italy – as is the case for all other types of extended stay national visas.

It is not possible to renew or reinstate a residence permit if you interrupt your stay in Italy for a span longer than six months, unless you can prove that the interruption was for significant motives such as military duties.

Is any type of employment permitted with an elective residence visa?

No. This type of visa does not permit any employment activity in Italy. You must therefore be able to support yourself on an income that derives from other sources.

Is there any other type of visa for a long-term stay in Italy?

After 5 years of residence in Italy, you can request a permanent EU residence permit. This means that a holder will be able to benefit from the same terms as those of EU citizens.

Finally …

We have over 55 years of helping overseas nationals obtain Italian residence. If you need help or would like to discuss your situation, please get in touch with us.

You may also find our guide to buying property in Italy useful.

High Net Worth Individual Tax Regime in Italy

What is Italy’s high net worth individual tax regime? 


On 9th March, 2017, Italy introduced a high net worth individual tax system. 

Pursuant to article 24 bis of Italy’s Budget Bill, a codicil introduced an annual fixed €100 thousand forfeiture substitutive tax rate for foreigners. The tax regime also applies to EU citizens, who decide to move their residence to Italy.

There is no fixed level of income attached to this tax regime. Individuals must be resident in Italy and tax is payable on worldwide income. However, tax will not be due on the value of real estate and financial investments located outside of Italy.

Individuals need to apply for the high net worth individual tax regime

According to the bill, uptake of the high net worth individual tax regime is neither an automatic right nor an obligation – it is a choice.

Individuals electing to take advantage of this fixed tax rate option, will have to file an advance application with the Italian tax authorities. The Agenzia delle Entrate then decides whether or not to grant the forfeiture substitutive tax rate to individuals. The Italian tax authorities will base their decisions on investigations with tax authorities in the individual’s country of origin. They will also check that an individual has not previously been tax resident in Italy.

The option extends to the individual’s family members provided they also meet the conditions of no previous tax residency in Italy. Each family member included in the option is also subject to an annual forfeiture substitutive tax on non-Italian sourced income. This is a lower fixed amount of 25,000 Euros.

If the Agenzia delle Entrate accepts an individual’s application, the option expires after 15 years. It is revocable at any time but in revoking the option, an individual loses the right to restore it.

After the 15 year residence period, the fixed tax rate will no longer be applicable. The individual will thereafter need to decide whether to continue to be resident in Italy. Should an individual continue to reside in Italy, standard tax rates apply.

Italian visa for investors

The Budget Bill also introduces a “visa for investors”. This means that any foreign national bringing a capital of at least €1 billion into Italy, and investing it within three months of arrival, automatically gains entitlement to a two-year residence permit.

Finally …

Should you need help to understand your personal tax situation, please get in touch or seek advice from a qualified accountant registered with the ODCEC, the Italian professional accounting association of certified public accountants, auditors and advisors.

For more comprehensive information about the Italian property purchasing process, you might like to read our guide. You may also like to watch our info videos about Italian property law.

Resident or Domiciled in Italy for tax purposes?

Are you resident or domiciled in Italy?

In this article, we compare being resident or domiciled in Italy and explore the tax implications.

According to Italian tax law, individual tax residency is pursuant to tests. An individual may find themselves tax resident although they only have relatively minor contacts with Italy. This might be property ownership, frequent visits to the country, or business interests in Italy.

If the Italian tax authorities determine that an individual is tax resident in Italy, the taxpayer is subject to worldwide taxation in Italy.

Tax would therefore be applicable for both income and estate tax purposes. It would include an obligation to report all assets wherever they are in the world. In addition to financial assets and accounts, it requires an individual to report all non-financial assets such as, cars, houses, planes, artworks.

Non-Italian nationals with interests in Italy should pay particular attention to these matters to avoid becoming an unintended Italian tax resident. Because this is a complex topic and, each case is different, we recommend that you seek advice and guidance from your lawyer and accountant.

Applicable tax laws determine whether an individual is resident or domiciled in Italy

Domicile

Domicile is generally determined by an individual’s intention to permanently or indefinitely reside in Italy. Often, an individual will physically have a presence in the country. Domicile is a legal concept. Its rules have been established by way of case law rather than a statutory definition. There are three types of domicile.

Domicile of Origin

This is usually acquired from an individual’s parents.

Elected Domicile

By actually residing in Italy, the individual demonstrates the intention of remaining permanently or indefinitely in Italy. In this way, an individual may acquire an elected domicile – also known as a domicile of choice. Where an individual later gives up elected domicile, domicile of origin is automatically re-acquired.

Domicile of Dependency

This is the domicile a minor holds. When the minor reaches 18 they then acquire elected domicile.

Residence

Domicile takes into account subjective elements of an individual’s intentions. The country where an individual habitually lives determines residence.

The EU test for habitual residence is based on an individual’s interests rather than by a particular duration of residence. In 2014, the European Commission published a practical guide on the Habitual Residence Test.

Fiscal implications

Under Italian tax law, three alternative tests determine an individual’s tax liability in Italy. The tests are registration, residence and domicile. If an individual meets one of the three tests for more than 183 calendar days per annum, this triggers an Italian tax liability.

Registration test

This is a straightforward test. If an individual has registered as a resident with their local municipal office – in the comune where the individual’s residential address is located, they are liable to pay tax in Italy.

Residence test

The residence test comprises two components.

The first component looks at whether physical presence in Italy is regular and continuous, as opposed to sporadic and occasional. If an individual spends time both in Italy and another country, periods of presence outside of Italy are compared with the periods of presence in Italy. This ascertains where presence is prevalent for tax purposes.

The second component of the residence test is more subjective. It is based on an individual’s intention to stay and live in Italy for the foreseeable future. A variety of aspects will determine an individual’s intention to live in Italy on a regular basis. In order to determine intentions, authorities will look at an individual’s conduct, social and personal habits. Authorities will also consider working relationships, family relationships, business and personal activities.

Italian tax liabilities arise if an individual’s physical presence in Italy is prevalent compared to an individual’s presence outside of Italy. For example, a regular and continuous presence in Italy is deemed to exist even if an individual travels abroad on a frequent basis. In other words, if an individual is away from Italy for extended periods of time but then returns as soon as possible. This would denote that an individual maintains Italy as the principal centre of their social and family relations.

Domicile Test

This third test aims to define the place where an individual has their principal centre of interests for business and or social reasons. In this context, ‘interests’ include personal, social, moral, familiar, economic, professional and business interests and relationships.

The domicile test revolves around an individual’s intention to establish and maintain their main centre of relations and interests in Italy.

There are tax implications based on the nature, extent and quality of the connections between an individual and Italy, compared with an individual’s connections with any other country.  As a result, an individual who primarily lives abroad but, maintains their principal centre of interests in Italy satisfies the domicile test.

The domicile test therefore requires careful and comparative evaluation to balance all the facts related to business or personal relationships and connections with Italy.

Case Law regarding the legal concept of domicile

In 2011, the Italian Supreme Court referred to a 1991 decision of the European Court of Justice relating to a non-tax matter. The Italian Supreme Court concluded that, in the case of multiple relations and ties with different countries, where the location of the principal centre of an individual’s interest cannot easily be determined, a prevalent consideration should be given to the relations of a personal nature.

However, more recent decisions suggest that extensive economic interest may outweigh personal connections in establishing an individual’s domicile. Thus, an individual may still be liable to pay tax in Italy.

In a ruling in April 2012, the Italian Supreme Court held that a tennis player living in Monaco qualified for tax residency in Italy. This, despite the family proving that they lived in Monaco. They provided proof through children’s school attendance records, household utility bills, membership of local clubs. The ruling took into consideration the fact that the tennis player maintained significant interests and management positions at several family-owned Italian companies. The individual mainly managed these matters from Italy.

In this case, residence identified the taxpayer’s habitual and regular place of living, while domicile identified the taxpayer’s main center of personal, financial and business interests.

Resident or domiciled. Tax guidance

The Italian tax authorities have issued specific guidance on determining whether individuals are resident or domiciled in Italy. Circular n. 304/E of December 2, 1997. Circular 304 provides instructions for the tax agency’s control and audit activities, which should include the collection and review of the following.

– All information contained in the tax agency data base system.

– Copies of all public documents relating to purchases. This includes real estate, gifts, formation of companies and entities, capital contributions to companies and entities.

– All information on transfers of money from or to foreign countries.

– Information regarding the taxpayer’s family relations in Italy.

– The taxpayer’s economic interests in Italy.

– Information about taxpayer’s intention to remain and live permanently in Italy.

Finally

De Tullio Law Firm specialises in Italian and international property law. We have over 55 years of helping overseas nationals obtain Italian residence. If you need help or would like to discuss your situation, please get in touch with us.

 

You may like to read How to get a mortgage in Italy