Italy is going to follow Portugal’s example in weakening the special tax regime

What has happened? Just weeks after Portuguese Prime Minister Costa has announced the abolition of the special tax regime for new residents “Non Habitual Residence” (NHR) from 2024, the Italian government has submitted a proposal that would make a similar national scheme called Lavoratori Impatriati significantly less attractive. The legislative proposal is currently under consideration by the competent parliamentary committees.

What is Lavoratori Impatriati? This is a special tax regime that allows foreigners and Italians to pay tax only on 30% (or 10% if living in the south) of their incomes, provided they have resided outside Italy for two full years. The special rates are valid for five years, but those who have children can extend them for another five years.

To be eligible for the Lavoratori Impatriati, the applicant should:

• Not have been a tax resident in Italy for the previous two tax years.
• Commit to reside in Italy for at least two years and be a tax resident of the country for two tax years, otherwise you will lose the benefit and pay a penalty.
• Perform work primarily in Italy (at least 85% of working time should be spent in Italy).
• Have a higher education/highly specialized qualification (not applicable to Italian citizens).
• Move to Italy in direct connection with the start of a new professional activity, for example, with a job offer or beginning a self-employed activity.

What will change? In connection with the introduction of the state budget bill for 2024, the government proposes the following changes:

• To reduce tax-exempt income from 90% and 70% to 50% across the board.
• To eliminate the possibility of renewal after the initial five years, even for those who have children.
• To introduce an income limit of €600,000, after which normal tax rates would apply.
• To increase the number of years an applicant should have resided abroad from two years to three.

Source: Investment Migration Insider

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