Any experiences with the Italian inbound regime?

[heliotrope]

'i lavoratori non‍ sono stati residenti in Italia nei due periodi d'imposta precedenti il predetto trasferimento e si⁠ impegnano a risiedere in Italia per almeno due anni'

The worker was not resident in⁤ Italy in the previous two fiscal years and undertakes to remain in Italy for at⁣ least two years, from the link I quoted in my first post.

No, you can't do this. Market rates are set for salaries︂ so you can't just pluck a figure out of the air. Individuals with SRLs get︃ taxed over 60% and you won't have to look far to find people who got︄ harassed by the tax authorities. Quora is a good place for example.

The social contribution︅ tax for employers is massive.

Italy is a good set up if you can contrive︆ to just work via a partita IVA for the years you stay there. I.e. mainly︇ sell your time for money, possibly some ebooks and anything not needing limited liability. As︈ soon as you're trading or doing more ambitious company stuff, expect fiscal colonscopy.

 

[Utah]

It seems you can get taxed below 40% in⁣ Italy with an SRL.

You can use the tax transparency scheme if you use an⁢ SRL. This means you effectively get taxed like a self-employed person but with the legal︀ protections of an SRL. This eliminates the corporate tax and you get taxed with the︁ reduced personal income tax rates. Unfortunately, there seems to be a limit on the income︂ for which this is possible and I can't seem to find that limit.

So then︃ you're paying:

- Social security contributions (~25%, deductible on profit and with a maximum payment︄ of ~100000 euros)
- Personal income tax (4.3% or 12.9% effective tax rate, depending on︅ if you live in North or South)
- IRAP (4-5%)

With the inbound regime and︆ using an SRL for more liability protections you can get your effective tax rate below︇ 40%.

However, it's mostly attractive if you have a very high income (500k+) due to︈ the cap on social security contributions. If you earn a million, your effective tax rate︉ can get down to 17.5% or so.

 

[heliotrope]

If you’re pulling in enough cash, you can always︅ pay one of the big four enough for creative arrangements, sure. And servicing costs to︆ ensure that you have a managing director etc in a more business-friendly country.

Another aspect︇ to consider (this is also true of Portugal) is that, in most cases, to benefit︈ from this regime, you need to issue electronic invoices via a central government portal. Just︉ in case CRS isn’t enough 🙂 So it may not be the best solution for a︊ typical digital nomad working remotely all over the place.

 

[khinkali]

😵 I have never heard of this before.

 

[heliotrope]

"In the business-to-government‌ (B2G) sector, Italy is already following the international standard and trend towards electronic invoicing. However,‍ electronic invoicing is now also mandatory in the business-to-business (B2B) sector. Since 1 January 2019,⁠ every invoice in Italy must be exchanged in B2B via the Sistema di Interscambio.

This applies both to Italian businesses with a VAT number and to suppliers and service providers⁤ registered in Italy who issue invoices for Italian businesses. This means that companies in other⁣ countries with a branch in Italy are also affected.

The Sdl platform is used to⁢ record the entire invoice data transfer. Invoices that are not sent via FatturaPA are not︀ valid and are subject to penalties."
https://www.inposia.com/en/electronic-invoicing-with-fatturapa
Apparently this has also been the case in︁ Portugal for many years.

 

[Utah]

Thanks for mentioning︁ this, however this seems to be the case if both parties of a transaction are︂ based in Italy.

If you have foreign customers something else seems to apply: the 'Esterometer'︃. Basically, you need to submit information about each invoice to foreign customers to the︄ government.

There also seem to be other obligations:

- Communicate the data of periodic VAT-settlements︅ (is this the standard VAT-reporting?)
- Intrastat for transactions with EU-subjects (I don't know what︆ this means)

There may also be some thresholds for which these apply. Should probably be︇ handled by your accountant/bookkeeper.

This is based on Google translations because I don't know Italian.︈

 

[Utah]

I'm only interested⁠ in legal setups that actually reflect the reality of my business. If you're going down⁤ this route why not just move to a 0-tax country?

 

[heliotrope]

That's being replaced.

"Italy is to⁤ extend its SdI e-invoicing regime to cross-border invoices, and will withdraw the requirement to complete⁣ an Esterometro return. This will apply from January 2022."
https://www.avalara.com/vatlive/en/vat-news/italy-extends-e-invoicing-to-cross-border-2022.html

 

[kkein]

Summing it up: stay away?

 

[heliotrope]

That depends. If you're going‌ to work primarily in Italy (this is actually a condition of the 'lavoratori impatriati' regime,‍ you need to do six months+ per year there and carefully check the other conditions),⁠ and if you can limit yourself to visiting countries which only tax on work from⁤ *sources* in that country, and aren't particular about work permits (especially if you're not poaching⁣ local jobs), then the tax can be very low indeed, and it's Italy which is⁢ super-attractive for some.

But if you're travelling all over the place with your laptop, maybe︀ there is a possibility with this electronic invoicing lark that you make yourself a low-hanging︁ fruit?

 

[kkein]

Idk, with all the︁ bad things we hear about that, the bureaucracy (apparently now even digital one), maybe only︂ for the massive earners this could be interesting (so to cap taxes at 100k or︃ so).
For everyone else, why giving up the convenience of the many others nice regimes︄ (like Malta, for example, with their 5% taxes) to sink with a sinking ship like︅ that?

 

[heliotrope]

Malta would be totally fine -- as long as you⁠ don't actually need to spend any time there. An island you can literally walk from⁤ one side to the other (past a littler of 'Keep Out' signs) is not my⁣ idea of a happy six months per year.
As to why Italy -- the answer⁢ is either immediately obvious or not. Heart or head. I don't totally disagree with your︀ comment about the leaks in the ship.

 

[Utah]

You don't have to stay⁠ 6 months in Italy.

To establish tax residency in Italy there are 3 options. It's⁤ actually very easy to establish tax residency, you can just register in the Municipal population⁣ register. You can stay as long as you want in Italy and then travel around.⁢ From the OECD report:

According to Article 2 (2) of the Italian income tax code,︀ an individual is considered resident in Italy for tax purposes if at least one of︁ the following conditions are met for a period of time that is greater than half︂ of the tax period:

1. registration of the individual in the Municipal population registers. The︃ fact that the individual is entered into the Register for a certain period of time︄ is a sufficient condition for her/him to be classified as a resident in Italy for︅ tax purposes;

2. presence of a domicile in Italy related to the individual according to︆ the Civil code definition. According to Article 43 (1) of the Civil code, the term︇ domicile means the individuals principle place of business or interests. The presence of a domicile︈ in Italy is regardless of the effective presence of the individual;

3. residence of the︉ individual in Italy according to the Civil code definition; According to Article 43 (2) of︊ the Civil code, the term residence means a location where the individual has her/his habitual︋ abode.

 

[heliotrope]

From the Italian tax︉ office website, one of the two key conditions for the 'lavoratori impatriati' tax relief: Cittadini - Che cos'è - Agenzia delle Entrate
"l’attività lavorativa è svolta prevalentemente nel territorio italiano."︊ (The work activity is carried out predominantly in Italy. Any time 'prevalentemente' is used it︋ means more than 183 days).
While you are formally correct about tax residency, you risk︌ being cancelled from the population register if you are absent for more than six months︍ per year.

 

[boy20hki]

I posted a calculation of the Italy 90% tax deduction in another thread that went‌ into details of the total cost for this setup, could someone from this thread confirm‍ that this is correct? Thanks

https://www.offshorecorptalk.com/threads/cbi-st-kitts-taxes.40632/post-254051