The Financial Statements Law 20191 introduced in the Income Tax Consolidation Act (Testo Unico delle Imposte sui Redditi) a facilitated tax regime, in force as of the 2019 tax period, to which non-resident individuals, holders of pension income paid by foreign entities, who transfer their tax residence to Italy, can have access. The facilitated scheme allows taxpayers to opt for the substitute tax on income produced abroad in place of the ordinary rules.

In particular, the aforementioned non-resident individuals, by transferring their tax residence to certain municipalities in the South of Italy, may opt to subject income of any category, produced abroad, to a substitute tax, at a rate of 7 per cent to be applied up to a maximum of ten tax periods starting from the first option.

The application of this relief, in the form of a substitute tax, applies on condition that:
– The person transfers his or her tax residence to one of the Regions of Southern Italy (Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise and Puglia);
– The country chosen for the transfer must have a population not exceeding 20,000 inhabitants.

An additional requirement to be able to join the option is that the person returns or repatriates for the first time to Italy after a period of at least 5 tax periods with foreign tax residence.

The applicant is required to indicate the willingness to adhere to the facilitated tax regime in the tax return, without prejudice to the right not to make use of the substitute tax for income produced in one or more foreign states specifically indicated.

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