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How much will Italian residency cost and what are the benefits of Italian taxation?

The Italian authorities have repeatedly thought about competing with Switzerland for wealthy immigrants. But only the end of 2016 was marked by the adoption of a number of legislative acts have determined the conditions for obtaining a residence permit for investors and a favorable tax regime for foreign taxpayers, who decided to become tax residents of Italy (Investor's visa)

At the beginning of 2017, it seemed that the investor’s visa was already decided, and applicants can start working on paperwork. However, in accordance with “Italian traditions,” it took almost a year before the press conference of the Italian Minister of Economic Development took place in mid-December 2017, which announced an online platform for applying for a new entry visa for investors (visto investitori).

Conditions for obtaining a visa.

It should immediately be noted that the visa is intended for foreign citizens who intend to invest or donate very significant amounts in Italy. Four investment options are provided (no combination allowed):

• government bonds. Amount of investments - € 2 million;
• investments in capital of companies registered and operating in Italy. Amount of investments - € 1 million;
• investments in the capital of innovative startups. Amount of investments - € 500,000;
• philanthropic donations to education, culture, scientific research. The amount of investment is € 1 million.

In this case, the investor must:

• provide documents confirming that he is the true owner of the above amounts (available for subsequent transfer to Italy);
• to sign a declaration (obligation) of the intended use of the above funds within three months after entering Italy.

The visa holder receives a two-year residence permit (Permesso di soggiorno per investitori) with the possibility of extending it for three years and then obtaining a permanent residence in Italy.

How to get a residence permit.

The procedure for obtaining a residence permit is inextricably linked with the verification of the fact that the investments were made within the prescribed three months after entry in full and in accordance with the commitments made.

A residence permit can be canceled ahead of schedule if it is established that the investor has not fulfilled its obligations regarding the timing and intended use of funds. The extension of the residence permit provides that the initial investment is retained at the time of receipt of the new (extended) Permesso di soggiorno.

An application for an investor visa may be submitted by persons over the age of eighteen. Family members of the investor also receive a residence permit in accordance with applicable law.

To make a decision on how the applicant for an investor visa complies with the requirements of Italian law, an interdepartmental committee has been created, which includes representatives of the Ministry of the Interior, the Ministry of Foreign Affairs, financial intelligence groups, tax authorities, etc.

What kind of investment to choose.

Assessing the attractiveness of various investment instruments, the majority of stakeholders agree that the options for philanthropic donations and investments in an Italian company in the amount of € 1 million may be the most popular.

Donations were and remain the lot of wealthy "adherents of Italy."

As for investments in the company: it is not difficult to establish a company in Italy, the corresponding procedure is not associated with significant costs, and the subsequent financing of your own company is a reasonable way to use the funds (for example, to purchase profitable real estate).

If we talk about other options, the profitability and liquidity of Italian government bonds raises serious doubts; the search for an Italian innovative startup is an entertaining idea, but only for a narrow circle of venture investors.

In general, the prospect of obtaining a residence permit in Italy as a result of investments of € 1 million or more looks partly dubious, since this amount significantly exceeds the costs in Spain, Luxembourg, and Portugal.

A Cyprus passport, for example, costs € 2 million (with subsequent partial refund), and you can get it in a relatively short time.

So, even though the Italian authorities associate certain expectations with the investor’s visa, estimates of the demand for the visa are very contradictory. It is advisable to evaluate the first results no earlier than the end of 2018.

Residency issues.

The very fact that the Italian authorities at the same time as the investor’s visa proposed a program for obtaining the status of “tax resident”, says that they are seriously concerned about the creation of special tax conditions for large taxpayers with income outside Italy.

From a fiscal point of view, the Italian authorities provide the opportunity to limit themselves to paying a single (fixed) tax rate of € 100,000 on all income received outside Italy.

The single tax rate is only valid for individuals who become tax residents of Italy and who have not been for 9 of the last 10 years.

In order to be considered a tax resident of Italy, a person must be registered in the local municipality and physically stay in the country for at least 183 days a year.

The law does not provide for restrictions related to citizenship of the taxpayer. The exception is persons for whom the Italian authorities conduct “budget” investigations.

A single tax can be applied to family members of the taxpayer. For them, the annual single tax amount is € 25,000.

The tax regime can be used for a limited period of 15 years, at the end of which it should be canceled without the right to recovery.

Single tax.

The flat rate is applicable to any foreign income, and the taxpayer can decide for himself which incomes fall under the regime and which are not.

Standard tax rates apply to income not included in the tax regime, as well as income:

• received in Italy in accordance with applicable law;
• received in foreign states, but voluntarily excluded from the single tax;
• such as capital gains from the sale of qualified blocks of shares (sold within 5 years from the date of acquisition).

The law also confirms that the single tax is applicable to foreign income collected through intermediary organizations. Payment of a single tax can be made by installments.

Additional benefits associated with single tax are as follows:

• the taxpayer is exempted from the obligation to fill out sections of the Italian tax return related to the disclosure of foreign investment and financial assets outside of Italy;
• the taxpayer is exempt from paying IVIE (tax on real estate owned by him outside of Italy) and IVAFE (tax on financial assets owned by him outside of Italy).

It should be clarified that exemptions apply only to jurisdictions whose revenues are included in a single tax rate.

Thus, if we now compare the Swiss and Italian conditions for obtaining a residence permit and tax resident status, then the Italian option wins in terms of total costs.