The favourable tax regime for repatriated workers does not require the employer to be Italian

With its answer to question no. 596/2021, the Inland Revenue has expressed its opinion on the recognition of the tax favourable regime for repatriated workers who come back to Italy from abroad as “smart workers.”

The facts

The applicant is an Italian citizen who moved abroad in 2013 and has been registered since 2019 in the Register of Italians residing abroad (AIRE), who:

• from 30 June 2014 to 31 January 2016 worked for an employer;
• since 1 February 2016 has been employed by a new employer;
• since 1 May 2021, he has moved to Italy with his family to smart work for that employer.

The applicant specified that on 23 February 2021 the foreign employer granted him the right to work “remotely from Italy as an employee” for at least two years. The worker asked for clarification as to whether he can benefit from the special regime for repatriated workers, including the extension of five additional tax periods for having a minor child.

Legal requirements

Considering the question, the Inland Revenue analysed the main features of the legislation, in which Article 16 of Legislative Decree no. 147/2015 lists the subjective and objective requirements to define its scope of application.

The above provision has been subject to several amendments, made by Article 5 of Decree Law no. 34 effective from 1 May 2019, which apply to those who, as of 30 April 2019, transfer their residence to Italy under Article 2 of the Consolidated Law on Income Tax – TUIR.

The Inland Revenue highlighted that the worker needs to meet the following requirements to benefit from the favourable tax regime:

1. a) transfer their residence to the country under Article 2 of the Consolidated Law on Income Tax – TUIR;
2. b) have not been resident in Italy for the two tax periods prior to the transfer and undertake to reside in Italy for at least two years;
3. c) work mainly in Italy.”

Under the same provision, the tax benefit is available to “EU citizens or non-EU if the country has an agreement against double taxation or on the exchange of information in tax matters, who:

1. a) have a university degree and worked “continuously” as an employee, self-employed person or business outside Italy in the last 24 months or,
2. B) have “continuously” pursued education outside Italy in the last 24 months or more, obtaining a degree or a postgraduate specialisation.”

Inland Revenue conclusions on the case

Considering the above regulatory provisions, the tax authority stated that specific clarifications were provided in Circular no. 33/E of 28 December 2020, about the tax benefit.

Paragraph 7.5 of the Circular clarifies that “the above Article 16, as amended by Article 5, paragraph 1, of Decree-Law no.  34 of 2019, does not require the activity to be carried out for a company operating in the country. Individuals who come to Italy to work for an employer based abroad, or whose principals (in case of self-employment or business) are foreigners (non-residents), can access the benefit.”

In this case, the Inland Revenue considered that the worker, if possessing the requirements, “can benefit from the favourable tax regime provided for in Article 16, paragraph 1, of Legislative Decree no. 147 of 2015 […] for employment income produced in Italy from the 2021 tax period, when they transfer their tax residence to Italy, and for the following four tax periods.”

Having a minor child will allow them to benefit from the favourable regime for a further five tax periods, with taxation of the income at a reduced rate of 50 per cent, under paragraph 3-bis of Article 16.