The inpatriates tax regime set out in the legislation provides for the taxation of 50% of the employment and self-employment income derived in Italy by workers who transfer their residency to Italy, in accordance with article 2 of the Italian Income Tax code. Specific requirements have to be met:
Based on the latest Italian Tax Authority communication, the “inpatriate” tax regime will also apply in cases where the return to Italy, after the employee's assignment abroad, is linked to a different company role with respect to the original one thanks to the skills acquired.
The Italian Tax Authority overcame the previous position regarding the assignment hypothesis, which had been considered excluded from the facilitation. This will therefore impact on the tax scheme application.
The Tax Authority changed the position in Circular no. 17/2017, where the benefit was excluded for those individuals that were coming back to Italy after having been assigned abroad and having acquired the foreign residence for the necessary period. This is because, based on the Circular, going back to Italy was in execution of pre-existing employment contract clauses, thus was in substantial continuity with the previous assignment of workers. It is now possible to benefit from the “inpatriate regime” where re-entry to Italy after the assignment is linked to a business role different from the original one held.
These conditions could be met in certain circumstances, for example the return to Italy is not a continuation of the previous employment in Italy; perhaps due to the individual carrying out a different role from that original held.
A case by case approach is needed in order to verify the correct application of the tax scheme. In fact the tax implications for both employer and employee need to be considered in cases where the favourable tax scheme are entered into.