As Italy plans to hike a contested flat tax on international earnings, we have a look at how many individuals already use it – and the way issues might change.
A controversial flat tax on international earnings for top earners relocating to Italy has made worldwide headlines in current weeks, after the federal government unveiled plans to lift the levy from €200,000 to €300,000 a 12 months from January 1st.
The transfer comes amid concern that the scheme, which was first launched by Matteo Renzi’s centre-left administration in 2017 to draw international capital to Italy, could not have had the meant financial impression.
As the deliberate hike works its approach by way of parliament, right here’s an in-depth have a look at how many individuals have claimed the scheme to date – and the way issues might change subsequent 12 months.
How many individuals profit from the flat tax scheme?
The variety of taxpayers claiming Italy’s imposta forfettaria regime has grown steadily since its introduction.
According to the most recent obtainable information from the Italian Revenue Agency, a complete of 1,495 folks opted for the flat tax scheme in 2023 – up from 803 in 2021 and 263 in 2018.
The whole figures offered by Italy’s Revenue Agency embody the scheme’s ‘essential claimants’, in addition to the relations they prolonged the flat tax to by paying a further €25,000 a 12 months.
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How a lot income has the flat tax generated?
The income generated by Italy’s flat tax has additionally risen steadily according to the rising variety of claimants.
In 2023, the final 12 months for which information is obtainable, the scheme generated almost €118 million in income. That’s virtually six occasions the €21.28 million collected by tax authorities in 2018, through the regime’s first 12 months of operation.
To give a clearer general image, the flat tax injected over €371 million into state coffers between 2018 and 2023. Of that determine, over half was collected between 2022 and 2023 alone.
It’s value noting that the Italian Revenue Agency doesn’t maintain any information relating to the full quantity of international earnings the flat tax utilized to in any of the years following its introduction.
A report by Italy’s Court of Auditors in August discovered that tax authorities “aren’t conscious” of how a lot international earnings its beneficiaries are receiving and the way a lot tax they might have paid below the usual IRPEF regime, making it tough to measure the scheme’s financial impression.
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How would the deliberate tax hike change issues if authorized?
Under the present system, the scheme permits high-net-worth people transferring to the nation to pay a lump-sum tax of €200,000 a 12 months on any earnings generated overseas.
This, nevertheless, might quickly change after Giorgia Meloni’s authorities unveiled plans to lift the levy to €300,000 a 12 months from January 1st.
Italian tax consultants have just lately clarified that the rise wouldn’t be retroactive, that means it could solely apply to folks relocating to Italy after January 1st.
“Italy can’t make modifications to tax rules with retroactive impact. Anyone who joined [the scheme] below the present system will ‘stick with it’ for 15 years,” Alessandro Morlin Visconti, chartered accountant and founding father of tax agency Morlin Visconti, advised The Local.
This signifies that taxpayers who’ve already opted for the flat tax regime would proceed to pay the present €200,000 price even after the January 1st improve.
Though not retroactive, the deliberate hike has sparked intense media debate in Italy in current weeks, with political commentators elevating questions over its potential impression on the scheme’s attraction going ahead.
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As issues stand, consultants agree that the rise would chop the regime’s eligibility pool, proscribing the variety of excessive earners for whom claiming the flat tax could be advantageous (the present threshold hovers round €500,000 in annual international earnings).
Nevertheless, a number of analysts at the moment see the hike as unlikely to scale back the scheme’s attractiveness amongst rich international nationals.
Tax and authorized advisor Marco Mesina stated in late October that, even with the next price, Italy’s flat tax would proceed to “provide a degree of certainty and ease unmatched by most European jurisdictions,” particularly as “nations such because the UK and Portugal abolish their particular tax regimes.”
The scheme would stay “obtainable and aggressive” however “come at the next price for newcomers”, Mesina added.
