The Italian Budget Law introduced a new tax relief for retirees who move to a town in southern Italy with fewer than 20,000 inhabitants.
The tax scheme provides for a 7% tax rate on foreign income for five years, therefore no further tax obligations will be required by the Italian tax Authority on income arising abroad.
The Italian tax regime could be viewed as having the same scope as the Portuguese regime of 'non-habitual residents' which provides for a tax exemption from income tax for pensions and other income of non-Portuguese sources received by individuals that transfer their tax residence to Portugal.
In order to benefit from the new tax scheme and to apply for the option, the following two points will need to be considered:
The above provisions have been introduced with the hope of attracting foreign retired individuals. With this new scheme in place, it will have a relevant impact on the tax planning of individuals going forward which will need to be considered before taking action.