Revenue Agency: tax treatment of the incentive to leave (“incentivo all’esodo”) for impatriate workers

With Resolution no. 40/E of 23 July 2024, the Italian Revenue Agency provided specific clarification on a question concerning the tax treatment of sums paid as an incentive to leave and other contractual amounts paid on termination of the employment relationship with workers benefiting from the so-called impatriate incentive regime, under Article 16 of Italian Legislative Decree no. 147 September 2015, no.

The request for clarification

The Applicant informed the Italian Revenue Agency that it had reached an agreement for the consensual termination of the employment relationship with some workers who were beneficiaries of the tax incentive regime for so-called impatriates, involving payment to the latter of sums as an incentive to leave and other settlement amounts.

In light of the above, the Applicant requested clarification on the possibility of applying the preferential regime referred to in Article 16 of Italian Legislative Decree no. 147 of 14 September 2015 to the aforementioned sums in derogation from the separate taxation regime referred to in Articles 17 and 19 of the Italian Income Tax Consolidation Act (Testo Unico delle Imposte sui Redditti, ‘TUIR’).

Reference legislation

As a preliminary point, it should be noted that in line with the provisions of Article 17, paragraph 1, letter a), of the TUIR “the tax is applied separately on the following income: a) […] other one-off compensation and amounts received relating to the termination of the aforementioned relationships […], as well as the sums and amounts received in any case net of legal costs incurred […]”. These also include “other compensation and amounts received on a one-off basis in relation to termination”, such as sums paid as an incentive to leave, up to an overall limit of EUR 1 million.

As is well known, for such income the taxation applied by the withholding agent is to be considered provisional, since it is only at a later date that the Italian Revenue Agency provides for its recalculation by determining the tax actually due, applying the average rate of the preceding five-year period or by including the income in the total income of the year of receipt, if this is more favourable to the taxpayer.

With reference, however, to the applicability of the preferential tax regime for impatriate workers, it has been clarified on several occasions that the preferential income “must be determined according to the provisions set out in the TUIR for the individual categories of income, namely Article 51, if deriving from employment relationships, Article 52, if deriving from relationships assimilated to employment and Article 54 if deriving from the exercise of arts and professions”.

The Italian Revenue Agency’s conclusions

Without prejudice to the point highlighted above, in this resolution the Italian Revenue Agency clarified at the outset that, for the purposes of applying the special regime in question, “the relief applies to income from employment in Italy which is included in the total income according to the ordinary provisions of the TUIR. However, income which is not included in the taxable base for Italian Personal Income Tax (Imposta sul Reddito delle Persone Fisiche, ‘IRPEF’) purposes is excluded, including income which is taxed separately under the aforementioned Article 17 of the TUIR”.

Consequently, the ruling confirmed that amounts that do not contribute to the formation of the taxable base for IRPEF purposes are excluded from the “impatriates” preferential tax regime. This includes those subject to separate taxation such as the compensation that is the subject of the request for clarification. 

It introduces, however, one new aspect, guaranteeing that workers benefiting from the so-called impatriate regime can apply, after receiving the notice of the results of the tax assessment, to the competent regional office of the Italian Revenue Agency, which, upon verification of the conditions, will reassess the tax due, including the income in question in the total income for the year in which it is received.

Alternatively, while waiting for the notice from the Italian Revenue Agency, workers can submit a request for reimbursement under Article 38 of the same Italian Presidential Decree no. 602 of 1973.