The new tax regime for foreign retirees who move their fiscal residence from abroad in the small Municipalities of Southern Italy. Set the rules for applying the 7% substitute tax - Are now available the Italian Revenue Agency's instructions for taxpayers holding foreign pension incomes who transfer their fiscal residence in Italy, in one of the Municipalities belonging to the Regions of Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise and Puglia, with population not exceeding 20 thousand inhabitants, thus benefiting from a substitute tax of 7% to be applied to any category of income produced abroad. The option is valid for 5 years. This provision, introduced with the 2019 Budget Law, is aimed at favoring investments, consumption and settle in the Municipalities of Southern Italy with certain demographic characteristics, by non-resident individual retirees, not only foreigners but also Italians, who receive foreign pension incomes. With today's Decision of the Revenue Agency Director, are defined the methods for exercising and revoking the option, the termination of the effects, the payment of the substitute tax as well as the source of information to identify the Municipalities with the characteristics envisaged by the norm.
The requirements to exercise the option – In brief, can opt for a 7% flat tax rate applied upon all their non-Italian sourced incomes, individuals having the characteristics required by the law. In particular, in the tax return the taxpayers must report the requirements that give the right to the option: that have not been Italian tax resident for the 5 years preceding the one for which the option is effective; that come from Countries having administrative cooperation agreements in force with Italy; and then, naming the foreign States or territories for which they do not intend to benefit of the new substitute tax; and also the have to indicate the State of residence of the foreign subject that pay their holding pension incomes and other similar remunerations and, finally, the amount of foreign source income to be subject to the substitute tax.
How to identify the Southern Municipalities in which to transfer the residence - First of all, for the purpose of identifying the resident population in the Municipality in which the pensioners decided to transfer the residence, the data to be considered are those resulting from the “Annual municipal survey of the movement and calculation of the population" published on the site of the National Institute of Statistics (ISTAT) referred to 1 January of the year prior to the first year of validity of the option.
Termination of the effects and revocation of the option - The option for the new flat tax regime for retirees ceases naturally its effects at the end of the fifth year. Yet taxpayers can also revoke the option, communicating this revocation in the tax return relating to the last tax period of validity of the option itself, without any prejudice to the effects produced in previous fiscal years. At the same time, the option expires if the Italian Tax Administration challenges the lack of the requirements provided by law or in case of omitted or partial payment of the 7% flat tax yearly due within the deadline. Particularly, In cases of revoke due to challenge from Italian Revenue Agency and partial or omitted payment of the flat tax due, a new option cannot be exercised. In general, the possible lapse of this regime always occurs if the requisites required by the law are not met anymore.
How to pay the tax - For each tax period of effectiveness of the scheme, by the date set for the payment of income taxes due, the individuals who have exercised the option pay in a single solution the substitute tax, calculated at the rate of 7 percent on the income produced abroad.