With provision no. 60353 of 3 March 2021, The Inland Revenue provided operating procedures by which workers, employees and self-employed, beneficiaries of the special regime for repatriates, may opt for the extension of the tax benefit, under Article 1, paragraph 50, of Law 178 of December 30, 2020 (the “ 2021 Budget Law“), for an additional five years.
Regulatory framework
Article 1, paragraph 50, of the 2021 Budget Law – supplementing article 5, of Decree-Law no. 34/2019 – provided for the possibility for repatriate workers to opt for the extension of the tax benefit for an additional five tax periods. For the extension duration, employment (or similar) and self-employment income will be subject to reduced taxation, as we will see more fully below.
This option is permitted, from 1 January 2021 to workers who are already enrolled in the Registry of Italians resident abroad (AIRE), or have been citizens of European Union Member States. They must (i) have transferred their tax residence to Italy before 30 April 2019 and (ii) as of 31 December 2019 be beneficiaries of the special tax regime provided for by Article 16 of Legislative Decree no. 147/2015 for repatriated workers.
Under the above provision, the possibility of benefiting from the favourable tax regime is open to workers who
- have at least one minor or dependent child, including those in pre-adoptive foster care, or
- become owners of at least one residential property unit in Italy, after their transfer to Italy or during the 12 months preceding the transfer of their tax residence in Italy. The regulation specifies that the purchase is relevant when it is completed directly by the worker or spouse, cohabiting partner or children. This includes joint-owned property.
Employment (or similar) or self-employment income produced in Italy will be taxable only for 50 per cent of its amount. The taxability is further reduced to 10 per cent if the worker has at least three minor or dependent children.
The option, without prejudice to compliance with the above subjective requirements, may be exercised on condition that the worker pays:
- 10 per cent of the employment (or similar) or self-employment income produced in Italy and subject to the favourable tax regime received in the tax period before the period during which the option is exercised. This is without prejudice to the fact that, at the time of (formal) exercise of the option, the worker concerned must (a) have at least one minor child, including those in pre-adoptive foster care, or (b) have become the owner of at least one residential property unit in Italy after the residence transfer or during the preceding 12 months, or become owner within 18 months from the option exercise date;
- 5 per cent of employment (or similar) or self-employment income produced in Italy and subject to the special tax regime relating to the tax period before that in which the option is exercised. This is the case if, when exercising the option, the worker has at least three minor children, including those in pre-adoptive foster care, and becomes (or has already become) the owner of at least one Italian residential property, after the residence transfer for tax purposes or in the preceding 12 months, or they become owner within 18 months from the option is exercised date (the property ownership may be acquired under the procedures outlined in letter b) above).
The 2021 Budget Law required procedures for exercising the option be subject to a provision of the Inland Revenue, issued on 3 March.
Worker obligations and the withholding agent
Under the 2021 Budget Law, the provision describes the fulfilments that must be carried out by the worker (the employee) and the withholding agent.
A worker who meets the requirements for exercising the option must pay the amount referred to in the previous paragraph:
- using the F24 tax form, without the possibility of compensation provided for by article 17 of Legislative Decree no. 9 July 1997, no. 241. The Inland Revenue specifies that, with a subsequent resolution, the tax code to be inserted during payment will be established, and the instructions for completing the F24 tax form will be provided;
- by June 30 of the year following the end of the first period of the benefit’s use. Those for whom the period ended on 31 December 2020 must make the payment within 180 days of the measure’s publication (i.e. by 30 August 2021).
Employees who intend to benefit from the extension of the favourable regime must inform their employer that they have exercised the option by submitting a signed application containing:
- name, surname and date of birth;
- tax code
- statement that the residence was transferred to Italy before 30 April 2019, under article 2, paragraph 2, of the Consolidated Law on Income Tax;
- statement of the permanent Italian residence on the application date;
- a commitment to promptly communicate any change in residence or domicile, relevant to the benefit application by the employer;
- identification data of the residential property unit including joint-owned property, purchased directly by the employee or spouse, cohabiting partner or children, and the purchase date, or a commitment to communicate such data within 18 months from the option exercise date, if the employee becomes the owner within this last term;
- the number and date of birth of the minor children, including those in pre-adoptive foster care, on the date the payment is made;
- the year of first use of the special regime for repatriate workers;
- the employment and self-employment income produced in Italy under the benefit referred to in Article 16 of Legislative Decree no. 147/2015, related to the tax period prior to that of the option exercise;
- the details of the payment made under the procedures set out in the Inland Revenue provision.
Following the extension of the favourable regime made by the employee, the employer will operate the withholding taxes on the lower amounts and taxable values paid from the wage period following the receipt of the application signed by the employee.
At the end of the year or the employment relationship termination, the employer will make a settlement between the withholdings made and the tax due on the remuneration, reduced under the tax benefit for which the “repatriate” employee is a beneficiary, paid from 1 January of the reference year.