Italy’s Forfait Tax Program

Taxes and specifically income taxes can be troublesome for many high net worth individuals. Certain countries, many of which are in Europe, have unique tax programs that help reduce your taxes legally.  A destination that is attracting many foreign investors is Italy. Investors and residents can make use of Italy’s Forfait Tax Program.

What is Italy’s Forfait Residence Tax Program? 

The Italian Forfait Residence Tax Program, also known as the Italian Forfait Tax Program, is a special tax regime that allows eligible individuals to pay a flat tax on their foreign-sourced income and assets instead of the regular Italian income tax. This program is designed to attract high-net-worth individuals and foreign retirees to establish their residence in Italy.

Who can apply to the Italian Forfait Residence Tax Program? 

To be eligible for the program, an individual must not have been a tax resident of Italy for at least nine out of the previous ten years and must establish their residence in Italy. Italian citizens are not eligible to apply for the Forfait Tax Program in Italy, as the program is designed specifically for non-Italian residents.

The program is designed to attract high-net-worth individuals and retirees to establish their residence in Italy, and it offers a special tax regime that allows them to pay a flat tax on their foreign-sourced income and assets.

Can Golden Visa Holders apply to Italy’s Forfait Residence Tax Program? 

Yes, Golden Visa holders can apply for Italy’s Forfait Residence Tax Program as long as they meet the eligibility criteria for the Forfait program. The program allows non-EU citizens to obtain a residence permit by investing in Italian assets, such as real estate or government bonds, or investing in an innovative startup.

What are the benefits of the Italian Forfait Residence Tax Program? 

There are several financial and other benefits of the ItalianForfait Tax Program. individuals can pay a flat tax of €100,000 per year on foreign-sourced income and assets, regardless of the amount earned or held. There is an additional €25,000 per dependent under the primary individuals tax liability. 

Other financial benefits include being exempt from inheritance and gift taxes on foreign assets and having no obligation to declare foreign assets on the Italian tax return. Currently Italy does not have any taxes on wealth, property or financial activities carried out outside of Italy.

The process is a simplified tax system with no need to keep detailed records or file complex tax returns. This can reduce the cost of annual accounting and tax reporting services that high net worth individuals use to complete their tax returns. 

Individuals can make use of the Italian Forfait taxation program for fifteen years.

What is the process for applying to Italy’s Forfait Residence Tax Program? 

The process for applying to Italy’s Forfait Residence Tax Program involves submitting an application to the Department for Alternative Taxation of Residents of Italy/the Residents Abroad Tax Office. Applicants must provide proof of identity, proof of financial resources, and proof of residence in Italy. Once the application is approved, applicants will receive a certificate of Forfait residence. 

Can a person apply to Italy’s Forfait Residence Tax Program before gaining a residence permit? 

No, a person cannot apply to Italy’s Forfait Residence Tax Program before gaining a residence permit. To be eligible for this program, applicants must first establish their residence in Italy and obtain a valid residence permit. Once the residence permit is granted, the applicant can apply for the Italian Forfait Tax Program.

Two other tax policies that are interesting for non Italian citizens include the Impatriati” (or “Inpatriate”) Regime and Pensionati” (or “Retiree”) Regime. 

The “Impatriati” (Impatriates)  is a special tax regime in Italy designed to attract highly skilled foreign workers to the country. Under this regime, eligible workers who establish tax residency in Italy can benefit from a reduced tax rate of 70 to 90% on their employment income for the first five years of their stay in Italy. 

To be eligible, the individual must not have been a resident of Italy for tax purposes for at least two years before taking up the job in Italy, and must have specialized skills, such as those in the areas of science, engineering, technology, or humanities.

The “Pensionati” (or “Retiree”) tax regime is designed for foreign retirees who want to move to Italy to enjoy their retirement years. Under this regime, eligible pensioners who establish tax residency in Italy can pay a flat tax of 7% per year on their foreign pension income, regardless of the amount.

How can I learn more about Italy’s Forfait Residence Tax Program?

To gain more information, the most effective approach would be to schedule a thorough consultation with the team at MOVEANYWHERE. Our experienced team is well-versed in providing assistance to clients seeking tax status in various European countries. We will provide comprehensive guidance on all aspects of the process.

During the consultation, the MOVEANYWHERE team will assess your unique situation, including your existing tax obligations. Using this information, we will work to identify the optimal solution for your needs. To get started, simply reach out to us today.