Expatriate Executive: Italy

A foreign national working in Italy or based there will be taxed in Italy either as a resident or as a non-resident.

An individual is deemed to be tax-resident if:

• he is in the country for more than 183 days in a tax year; or
• if Italy is the centre of his business or economic interests.

Tax is due on world-wide income (both earned and investment) and capital gains for tax-residents, and on Italian income and capital gains for non-tax-residents. In the event that someone has dual tax-residency, there will often be a double-tax treaty which sorts it out.

Profits or gains derived by a resident from trades, professions or vocations carried out in Italy including self-employment are subject to tax; for a non-resident, such income is taxable in Italy only if the activity is carried on through a permanent representation.

There are some domestic Italian tax-privileged savings and investment instruments which are attractive if residence is going to last for a significant period.

Italian law does recognise trusts, and there is so far no general anti-avoidance rule applying to individuals, so that there is no need for incoming residents to be too concerned about existing trust structures. However, in 2008, the Italian Supreme Court issued a ruling which allows the tax authorities to disregard a transaction with no economic substance other than to avoid taxation.

Since general anti-avoidance legislation has not progressed far in Italy, holdings in offshore or foreign assets, whether taken on before residence commenced, or during residence, will probably be subject only to income taxation. There is thus a case for switching income-generating assets into capital appreciation assets, or at any rate for ensuring that gains are not made during Italian residence which could incur capital gains tax.

The Italian tax rules are, however, considerably more complicated than the above simplified summary, and there are plans to introduce more extensive anti-avoidance rules, so that professional advice on the situation of any particular individual is a necessity.

www.lowtax.net contains extensive information on the investment, tax and legal regimes in 35 of the main offshore jurisdictions. Further information is available in our Investment Information Providers Section, and the four main types of offshore investment are described in the Guide to Offshore Investment on this site.

NB: The suggestions given above do not constitute investment advice. They are intended only to assist individuals in finding appropriate professional advice, which is essential for anyone planning offshore investment.