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Friday, April 21st, 2017

Advantages of the flat tax in Italy’s luxury real estate sector

Flat tax – advantages for Italy's luxury real estate sector

On March 9th 2017, the flat tax came into effect, a new fiscal regime thought to increase the number of investors and foreign capital in Italy.

The new regime approved by the Italian Tax Agency and introduced with the 2017 Budget Law, is aimed at high net worth individuals that decide to set up a fiscal residence in Italy.

During a period of 15 years maximum, the new residents can turn to this system and pay for each tax period, a flat tax on their foreign earnings. This flat rate of 100,000 euros is applicable to earnings made abroad, excluding earnings made in Italian territory, as well as capital gains derived from the authorised involvement of those subject to their own normal tax and should be paid in a single payment within the predetermined period of liquidation.

The flat tax provides huge advantages for those individuals with a high net worth and/or earnings, but also for families that also want to benefit from the substitute tax given that they will only have to pay 25,000 euros per tax year.

Also, those interested in this flat tax rate will not have to declare all of their foreign assets, since they will be able to choose which assets to apply the tax to and will benefit from exemption of inheritance and estate tax.

However the new residents will be obligated according to article 2 of the T.U.I.R. (Italian consolidated law on income tax) to reside in Italy for more than half of the tax year.

Buying and selling of luxury properties in Italy

The requisites to benefit from the flat tax are as follows:
1. To be a natural person.
2. Not be an Italian resident at the time of the request. In the case of those with Italian nationality, they must not have been fiscally resident in Italy for 9 out of the last 10 years.

In regards to when and how to present the request, those that which to benefit from this fiscal system, can request this via the income tax return relative to the tax period when one will be a fiscal resident in Italy. You only need to mark the corresponding box of the tax return and specify if any other relative will be benefiting from the tax also.

In the case that you are unaware if you meet the requirements of the flat tax, a preliminary request can be put to the Direzione Centrale de Accertamento of the Italian Tax Agency and you can obtain a prediction of your eligibility.

When submitting this request, you should mention your personal information, including your VAT identification number and your new address; the countries that you do not want included in this singular tax and documentation proving non-resident status in Italy, during the required period. To this, you will need to attach the duly completed checklist (PDF) provided by the Agenzia delle Entrate in order to verify the viability of the required entry criteria.

Advantages of the flat tax for the luxury real estate sector in Italy

Other advantages of this measure that has already been applied in European countries such as Spain, The United Kingdom, Portugal and Malta, are the huge benefits it provides for Italy’s luxury real estate sector. These new residents become potential buyers that may be interested in the luxurious properties of the Costa Smeralda and Porto Cervo and the Russian and Arab investors or important investment banks could see Italy as an alternative to the city of London, due to the uncertainty caused by Brexit.

The flat tax 2017 offers numerous fiscal benefits but also the opportunity to access the west and its exclusive lifestyle. Areas such as Costa Smeralda, the most prestigious areas in Gallura and Porto Cervo could draw the attention of those that wish to enjoy a high standard of living in an exceptional region.

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