Flat tax: What is it and how does it work? 

The Flat Tax is already in force. From today, the new Italian "Budget-law" 2017 allows wealthy foreigners living abroad for at least 9 tax years, over the past decade, to transfer their fiscal residence in Italy, benefiting of a fixed substitute tax on incomes earned abroad (regardless of their amount).

The option provides for the payment of a flat-rate tax of 100 thousand euros for each tax year for which it is exercised.

Flat tax: how does the new contribution-based system work in practice? 

Who will decide to take up residence in Italy can choose to pay only a fixed tax of 100 thousand euros. The deposit of this sum will be paid in a lump sum, for each effective tax year, no later than the date laid down by the Italian Government for the payment of the balance of income taxes.

Moreover, according to the new flat tax, the new flat-rate regime can also be extended to one or more family members of the "wealthy-taxpayer." In the latter case, the substitute tax is equal to 25 thousand euros for each of the family members transferred in Italy.

The option can also be exercised by Italian citizens living abroad in tax-havens States, who decide to return to Italy.

Flat tax: how can you exercise the option? 

Taxpayers meeting the requirements may decide to join the new regime in the time of submission of the tax return, referred to the tax period in which it overflowed the tax residence in Italy or in the immediate aftermath.

In order to be certain of meeting the requirements of the law, it will be possible to submit a specific instance to the Assessment Central Department of the Italian Tax Agency, in advance online.

The request can be delivered by hand, by registered mail or electronically, using the Italian certified mail.

In the instance the taxpayer must indicate:

a) the biographical data and, if already granted, the tax code, in addition to the taxpayer’s home address in Italy, if he is already resident;

b) the status of non-resident in Italy for a period of time at least equal to nine tax years during the ten years preceding the beginning of the validity of the option;

c) the jurisdiction or the jurisdictions that have regulated the fiscal residence before exercising the option;

d) the foreign States for which the applicant intends to exercise the option of not using the substitute tax.

The taxpayer must also indicate the existence of the elements required to access to the tax regime, filling out a check list and presenting the supporting evidence.

Flat tax: when can you submit the application for the flat tax? 

The option must be exercised by deadline for the submission of tax returns, even if the Tax Agency has not responded to the instance.

The instance may be submitted even if the time-barred to entrench the tax residence in Italy are not active.

Flat tax: all the advantages 

Thanks to the introduction of this kind of proportional taxation, the tax base of wealthy taxpayers will be taxed with a same percentage and not with a growing rate related to the increasing income produced.

Actually, the flat tax will allow to apply a flat tax at the tax base of each taxpayer. Thus, it will be sufficient to fill a form showing how much the taxpayer must pay, without the need for detailing the expenses deductible even with the benefit of the operators of the Tax Administration and the Tax Agency that will be relieved from the obligation to verify the correctness of the statements by the taxpayer in terms of requests for deductions and deductions.

Flat tax: What are the intentions of the legislator? 

The flat tax law is designed to attract foreigner and (mainly) wealthy taxpayers, that have never been in Italy, not only attracting them with tax rebates, but with the Italian beauty, culture and food.

It is a measure specifically designed by the Italian Government with the aim of reviving the economic fortunes of Italy, entering into competition with countries such as England and Spain, which have certainly excelled in terms of cost savings and tax benefits.

Flat tax: Rabushka, Salvini and the Italian economic vision 

The idea of introducing the flat tax in Italy arises form Alvin Rabushka's Italian economic vision.

According to Rabushka, the flat tax may work very well also in Italy giving that “Italy is the second submerged country in the world after Greece”. Lower taxes would convince people not to evade taxes.

A supporter of the flat tax is Mr Matteo Salvini, main leader of the Italian political party Lega Nord, who agrees with Rabushka and who is considered one of the first promoter of the introduction of the flat tax system also in Italy.

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