Is Italy a tax haven? From Paperoni to pensioners: the identikit of those with record tax discounts

There are those who pay only 10% of the income earned in Italy and if it really goes wrong, they only calculate the taxes due on 50% of their annual income. There are those who, on the other hand, like good old-fashioned scrooges, pay a total of 100,000 euro to close their accounts with the tax authorities, or those who leave 7% of their pensions to the Treasury. These are the 37,331 taxpayers who, by transferring their residence to Italy, have found their tax paradise. Updating the numbers of taxpayers who take advantage of the special regimes of the Italian tax system introduced to bring back to Italy expatriate professionals and employees, or even pensioners or newly rich residents, was the Department of Finance at the end of April by publishing on its website the 2023 tax returns for the 2022 tax year.

The newly rich residents who have chosen Italy to live are close to a thousand. According to the latest tax returns available, there are a total of 957 wealthy people who have declared their income to the tax authorities. 46% of these individuals produced a total income of 75 million euro in Italy, mainly consisting of income from employment (86% of the total). The facilitated regime, in force since 2017, provides for natural persons who move to Italy and opt for the neo-resident facility, irrespective of the performance of a particular work activity, the application of a flat-rate substitute tax on income produced abroad calculated at a flat rate of €100,000 for each tax period in which the option is valid. The relief may also be extended to family members. For the latter, the flat-rate tax is reduced to EUR 25,000. The option is revocable and in any case ceases to produce effects once fifteen years have elapsed from the first tax period of validity and cannot be accumulated with the facilities for the return of teachers and researchers and of expatriates. For income produced in Italy the taxation remains the ordinary one.

To compete with Portugal, Italy has also introduced a drastic tax cut for foreign pensioners moving to Italy from 2019. But not in the whole of Italy. In fact, the relief is granted if the pensioner takes up new Italian residence in a municipality in the regions of Sicily, Calabria, Sardinia, Basilicata, Abruzzo, Molise and Apulia with a population of no more than 20,000 inhabitants. The discount granted is particularly inviting given that on the 93% of the pension from a foreign source nothing is paid in Italy, being able to apply a substitute tax rate of 7%. A total of 474 individuals chose the tax haven of southern Italy and the islands, according to data from the 2022 tax year (2023 declarations). They declared foreign pension income of EUR 19 million (EUR 40,210 on average) and total foreign source income of EUR 28.7 million. The substitute tax declared came close to EUR 2 million.

The preferential regime for bringing talent and workers back to Italy underwent more than one change at the beginning of the year with the implementation of the tax reform and in particular with the decree on international taxation, which cut the preferential regime to 50 per cent and not for all workers. In any case, the snapshot taken by the Department of Finance with the latest declarations made available shows that in 2022 the teachers and researchers affected by the 90% income tax exemption were over 3,300 for an average gross amount from employment of €56,492, while the impatriate regime involved over 32,600 employees for an average gross amount from employment of €114,501.