Changes introduced by Circular no. 33 / E / 2020 on the cd. "Special regime for inpatriate workers"

The main points examined are the following.

The subjective and objective scope of the new inbound regime

Incomes from employment and similar, those from self-employment and employment, produced by workers who have not been resident in Italy in the two tax periods prior to repatriation, who transfer their tax residence into the country and undertake to reside there for at least two years, working mainly in the Italian territory, are eligible. The benefit is also aimed by Italian and no-Italian graduates, who have carried out "continuously" abroad a work activity outside Italy in the last twenty-four months prior to repatriation and those who, for the same period, have carried out study activities in order to obtain a degree or a post-graduate degree and who transfer their tax residence to Italy in order to work there.

Eligible income amount

The tax rate of income produced in Italy goes from 50% to 30%; it is further reduced to 10% for those who transfer their residence to some central-southern Italy’s regions.

The effective date of the facility

The "Crescita" decree provided for the changes to take effect "starting from the tax period following the one in progress at the date of entry into force of this decree", or rather from 2020 and, therefore, applied to subjects transferred to Italy after 2 July 2019. Subsequently, the "Associate" changed the effective date of the novel, providing that the same applies, starting from 2019, to subjects who transfer their residence to Italy starting from 30 April 2019.

For those who have returned between 30 April and 2 July, the circular specifies that the most favorable legislation, which concerns workers who transfer their residence to Italy from the 2020 tax period, also applies to who returned to Italy starting from 30 April 2019, who, in the absence of the regulatory provision, would still have enjoyed the concerned benefit, but in the less favorable version (tax reduction of 50% and not 30% of income produced in Italy).

By doing so, the legislator intended to correct a clear difference in treatment between the subjects who would have returned to Italy as of 3 July 2019 and those who had already returned from 30 April 2019, who for about two months would have been excluded from the more favorable legislation. However, the circular clarifies that the subjects who have transferred their tax residence in Italy from 30 April 2019 to 2 July 2019, in the presence of all the requirements provided for by the law, can avail of the benefit at a lower rate of 50%, in the wait of the decree issued by the “Ministero dell’Economia e delle Finanze”, which establishes the criteria for requesting access to the services of the “counter-exodus fund”.

Application period

The duration of the benefit, set in five tax periods, is extended for a further five tax periods (with taxation of 50% of the income in the further five periods), in the presence of particular hypotheses, that means if the worker:

1. has a minor or dependent child;
2. purchases a residential property after the transfer to Italy or during twelve months preceding the transfer;
3. has at least three minor or dependent children. Only in this case the tax rate is reduced to 10% in the further five tax periods.

Commenting the new inbound regime, the circular resolves some interpretative doubts, including some useful examples which are shown below:

Assumptions for the temporal extension

In this regard, the circular states that the conditions required by the law, for the purpose of extending the facility for a further five years, must come into existence within the first five years of use of the facility. In particular:

• minor or dependent children (even in pre-adoptive foster care, or the three children) must be born within the expiry of the first five years of use of the facility. The circumstance that, after the return, the children become of age (so no longer dependent on tax), does not result in the loss of tax benefits for the further five years. In the event that the minor or dependent children are not resident in the territory of the State at the time of return, they must transfer their tax residence to Italy within the first five years of use of the facility;
• the purchase of the real estate unit "after" the return must be made within (and no later than) the first five years of use of the scheme (the date of the preliminary contract is not relevant); The purchase can only be made for consideration and for the entire property (100%). In this regard, the purchase of only bare ownership or the right of usufruct is not relevant.

Entities producing business income

The circular clarifies that the subsidized business income is only the one of the individual entrepreneur (article 2082 et seq. of the civil code), since it is produced by the natural person through the exercise of a business activity, while the income produced by partnerships and charged directly to each shareholder, in proportion to their share of ownership, are excluded from the facility in question.

Likewise, business income produced by limited liability companies with a "restricted ownership base" whose shareholders are exclusively natural persons is excluded from the subsidized regime pursuant to art. 116 of the TUIR.

Residence concept

In case of transfer of residence in some of Central and Southern Italy’s regions, the tax for the subject is equal to 10%. In this regard, in the document of practice it is specified that the provision refers to the civil notion of "residence", which could therefore not coincide with the place of work and that, what is relevant, for the purposes of access to the facilitated most favor, is the place of acquisition of the residence at the time of return.

Failure to register with AIRE

The regulatory provision provides that, in the event of non-registration in AIRE, the benefit can be accessed provided that the immigrant is able to demonstrate that he has been fiscally resident in a foreign country based on the double taxation agreement during the two tax periods prior to the transfer.

This amnesty is also applied in the event of "insufficient" registration with the Aire (or for less than two tax periods) and also against the foreign citizen who has not canceled himself from the register of the population resident in Italy (and who would not have able to register with AIRE as a foreigner), but is able to prove residence abroad on the basis of the provisions contained in the agreements to avoid double taxation in the tax periods in which he was formally resident in Italy.

How to use the tax relief

With reference to the procedures for using the facility, the circular clarifies that if the inpatriate has not made any request to his employer, in the tax period in which the repatriation took place, nor has he given evidence of it in the relative income tax returns, whose submission deadlines have expired, for these tax periods, access to the scheme is precluded. Moreover, the circular reminds that "deadline for submission" means the ordinary one for submitting the “Redditi Persone Fisiche” and that the possibility of submitting a supplementary tax return in favor, being an optional regime, is precluded, pursuant to Article 2, paragraphs 8 and 8-bis, of the Dpr n. 322/1998.

If the terms of presentation have expired, the taxpayer can benefit of the regime in question for the remaining tax periods of the eligible five-year period, with income tax deduction to the extent in force in the tax period in which he transferred the tax residence to Italy.

Presentation of ruling request

The circular reminds taxpayers that, in order to access the inbound regime, it is not necessary to submit a specific request for a probative question - pursuant to Article 11, paragraph 1, letter b), of Law no. 212/2000 - in order to obtain a response from the Revenue Agency on the existence of the conditions required by the rule for access to the scheme.
In fact, where the conditions exist for the presentation of an ordinary ruling, it is clarified that, like the verification of the existence of the conditions for establishing the effective tax residence of a given subject, also the verification of the requirements that must exist for the taxpayer , for the purposes of accessing the special tax regime in question, implies factual assessments that cannot be carried out during the ruling (see circular no. 9/2016).

The Revenue Agency also examined the following cases:

Return from secondment abroad

In this case, it is necessary that the new work activity is not in continuity with the previous work position carried out in Italy before the expatriation, by virtue of the signing of a new contract, assuming a different corporate role than the original one.

Attainment of the qualification after the twenty-four-month period:

In the presence of all the other requisites provided for by the law, the inpatriate can access the benefit even in the event that the mere "achievement" of the qualification occurs after the completion of the aforementioned twenty-four month period (or two academic years).

Incompatibility between flat-rate regime and inpatriate regime

The taxpayer who returns to Italy to carry out self-employment activity, benefiting from the flat-rate scheme, cannot use the scheme provided for inpatriate workers, as the income produced under the flat-rate scheme does not participate in the formation of the total income.

Return following unpaid leave

In consideration of the mere suspensive effects that the institution of unpaid leave produces on the employment relationship, the circular considers that the return to Italy at the end of the leave period, with consequent continuation of the employment relationship suspended during this period, is not in in line with the “vis attrattiva” underlying the aforementioned article 16, as the work position assumed by the worker upon return is in "continuity" with the one prior to the transfer abroad, in consideration of the same employer and the same contractual conditions, and therefore, for taxpayers who return following unpaid leave, access to the tax regime in question is precluded.

The case of professional sportsmen

It is highlighted that art. 5, paragraph 1, lett. d) of the Decreto Crescita (Legislative Decree 34/2019) extended the audience of beneficiaries of the cd. Scheme of inpatriates also for professional sportsmen (athletes, coaches, technical-sporting directors and athletic trainers), providing for them a reduction of taxable income by 50% (instead of the ordinary 70%) with the obligation to pay a 0.50% additional contribution of the taxable amount to be allocated to the youth sectors. For the definition of the criteria for using the contribution and the technical methods of payment, the law refers to a subsequent Decree of the President of the “Consiglio dei Ministri”, on the proposal of the Government Authority delegated for sport and in agreement with the “Ministero dell’Economia e delle Finanze”.

The Revenue Agency, with the Circular under review, stated that for professional sportsmen, the inbound regime cannot be recognized until the Prime Ministerial Decree is adopted. The Circular in question, which is recalled is a mere document of practice and cannot be qualified as a source of law (Cassation 5137/2014) has raised a certain alarm especially among the Serie A clubs and, in any case, among all operators of the sector.

This interpretation has had a disruptive effect on the statements of sports clubs since they would have been forced to pay millions of euros as withholding taxes to be returned. Fortunately, the long-awaited DPCM required by the Decree-law, now close to publication in the Gazzetta Ufficiale, clarifies the point and confirms the right to the inbound regime for both the year 2019 and 2020, leaving the "sportsmen" who adhere to this regime the burden of paying the additional contribution annually using form F24 within the deadline for payment of the IRPEF balance relating to the tax period of reference. With reference to the tax year 2019, for which the deadline for payment of the balance has now passed, it is envisaged that the options made remain valid on condition that the relative contribution due is paid by March 15, 2021, under penalty of forfeiture, from the benefit.

Furthermore, sportsmen who have joined the scheme are subject to an obligation to notify the Sport Department, to be made through an online channel, to indicate membership, the amount paid, employer’s information and the competent sports league.