The heavenly aroma from Rome’s Pasticceria, the eclectic mix of art, fashion and awe-inspiring architecture, the endless varieties of gelato and sublime pasta dishes – time spent in Italy lasts long in the memory.
From the Eternal City to the island of Sardinia, the alpine resorts, Lake Como, Venice, Florence and just about everywhere in between, Italy is a stunning, fascinating and truly welcoming country.
If you’re an expat who likes to travel, Italy’s location offers convenient access to the rest of the EU, the UK, North Africa and the Middle East. Italy’s agreeable climate, free and high-quality health system and its low-cost educational programs are also major draws.
But there are other potential advantages to Italy: by becoming a resident, you can also avail of tax benefits and investment opportunities.
How to Secure Residence in Italy
Unsurprisingly, Italy’s residence programs are in high demand. After all, this is one of the most beautiful countries in the world, with a rich history, culture and stunning landscapes.
Many people secure Italian residence via the country’s Golden Visa program, also known as the Dolce Visa. This offers a renewable residence permit to those who invest in Italy. The options for applicants to this program range from investing a minimum of €250,000 in an innovative start-up to placing €2 million in an Italian government bond. The visa is valid for two years and can be renewed for a further three.
The requirements to secure the Golden Visa include proof of income from the previous financial year, evidence of suitable accommodation in Italy, proof of funds to support your investment and proof of a non-criminal record.
After five years of residency, participants can become permanent citizens of Italy. There aren’t any Italian language tests or physical presence requirements and you can enjoy almost all the same benefits of being an Italian citizen while you gather the requirements for your Italian passport application.
Becoming an Italian Citizen
There are three ways to obtain Italian citizenship: descent, marriage and naturalisation.
Citizenship by descent (CBD) is available to those with Italian ancestors. If you have parents, grandparents or even great-grandparents who were born in Italy and had not renounced their citizenship at the time of your birth, you may be eligible to apply. You will need to prove a connection to your ancestors with valid documents such as their birth, death or marriage certificates, plus legal records demonstrating your relationship to them.
If accepted, your children can automatically claim citizenship at no additional cost. It may initially seem simple, but you must be aware of the generational limit to ancestral ties. For example, those with ancestors who were born in Italy but migrated abroad as minors or were naturalised in another country before July 1992 may not qualify because Italy did not allow dual citizenship before that date.
Also, women were generally not allowed to pass citizenship down to their children before 1948. So, if your female ancestor gave birth before that date, you may need to enforce your right to citizenship in an Italian court.
In truth, there are many details to consider and the required documents may vary depending on the consulate or embassy you work with and, obviously, on your personal circumstances.
The process can take anything from a few months to several years. That’s something our Nomad Capitalist team regularly encounters on a client’s behalf and usually comes down to individual Italian embassies having to deal with a high volume of applications. If you want to submit your application now, you’ll typically have to wait until 2025 to get your first appointment with the embassy.
If you don’t have Italian ancestry, you can still obtain citizenship through naturalisation, but you need to be a non-EU citizen. To qualify as a non-EU citizen, you must maintain legal residence in Italy for ten years. This residency requirement is reduced to three years if you’re married to an Italian citizen. You’ll also be expected to demonstrate knowledge of the Italian language and culture and be of good character.
Italian citizenship for EU citizens is a quicker process that takes three to four years. Italy also allows dual citizenship, so you can keep your second passport.
Here at Nomad Capitalist, we specialise in citizenship-by-descent applications and can help you navigate what is often a challenging process. Find out more here.
Italy’s Flat Tax Regime
Lump-sum taxation is a special tax regime created by a country to attract investors willing to become Italian tax residents. These rates are offered to attract successful entrepreneurs, investors and high-net-worth individuals to the country. Lump-sum tax countries are generally not zero-tax, don’t offer tax incentives and are not tax havens.
While some tax-free countries like the Cayman Islands have similar requirements, lump-sum taxation programs are generally reserved for those with existing wealth rather than those who aspire to be wealthy.
Given the romance associated with living in Italy, its lump-sum program has proven to be a popular alternative to more expensive options in countries like Switzerland. Unlike the Swiss version, which is based on living in specific cantons, Italy’s scheme allows participants to live anywhere in the country.
This program is for new tax residents in Italy: you must move there, become a resident and then apply to pay €100,000 per year as your entire tax obligation. This only applies to your non-Italian source income – any income from an Italian source will still be taxed.
You can opt for this regime if you transfer your tax residence to Italy, but there is a criterion to meet: you must not have been a tax resident there for nine of the ten preceding years in which the option is exercised. There is no restriction on nationality and you must transfer your residency to Italy by July 2, the year following the first fiscal year in which you request this special tax regime.
The lump-sum regime can be extended to your family for an additional amount of €25,000 per family member. The definition of dependents is flexible and can include a spouse, siblings, sons and daughters, sons- and daughters-in-law, and parents and parents-in-law.
To apply, you need to make an official enquiry with the Italian tax authorities and submit the required financial and residency documents. They will conduct a first assessment of the case and you’ll face a wait of up to 122 days for a ruling on your application.
Following this, the next step will be to apply for a visa in an Italian embassy in your place of residence. If successful, you’ll be able/expected to travel to Italy, where you can apply for a residency permit.
If you’re a US citizen and spend six months in Italy, you can benefit from the maximum tax burden of €100,000, which will be recognised as a tax credit in the United States. Italy and the US have a tax treaty, so this is an excellent opportunity to legally reduce your taxes and live in Italy.
Italy’s Tax Regime for Resident Workers
A special tax regime exists for new resident workers or those relocating to Italy to perform their work. The ‘lavoratori impatriati’ tax break is a significant exemption from income tax due on income originating from work carried out in Italy. One significant feature to note about this option is that, in an attempt to level up the disparity in wealth between Northern Italy and Southern Italy, the North offers a 70% exemption, while it’s 90% in the South.
For example, if you make €1 million in Northern Italy, you pay tax on €300,000; if you earn €1 million in Southern Italy, you will pay ordinary tax on €100,000. In all cases, the income needs to be sourced in Italy.
All income, regardless of where it is earned, is taxable in Italy. However, if you have a main operating company in another jurisdiction and establish a company in Italy, you can avail of this tax incentive.
Under transfer pricing rules, your Italian company can legally provide services to your operating company. Still, the payment must be a fair market value – you can’t simply transfer any sum to Italy. Once you’ve identified a fair market value, you can bring the money you get paid for the services into Italy and receive a 70% or 90% exemption, depending on whether you’re in the North or South of the country.
Companies moving to Italy can also benefit significantly from reduced tax equalisation costs and reduced foreign taxes on employees who meet the requirements.
New resident workers pay Italian income tax rates that range from 23% to 43% on the portion of their income that isn’t exempt.
The scheme lasts five years but can be extended if you have children or have purchased a house anywhere in Italy within 12 months either side of relocation. However, the exemption rate falls to 50% of your income after the first five years.
To be eligible for this particular exemption, you must be an employee, a self-employed worker or an entrepreneur who relocates to Italy. You must also have been a resident outside Italy during the two previous years. You can elect to be taxed under this regime simply by filing a tax return at the end of the year.
Potential Changes to Italy’s Low-Tax Regime
Following the example of Portugal, which this year proposed to end its Non-Habitual Resident (NHR) tax regime for foreigners, the Italian Government is submitting proposals to make its Tax Regime for Resident Workers less attractive.
The move, if accepted, would reduce the exemption from 70% and 90% to a new rate of 50% in both the South and North. The proposal is controversial, not least because the tax regime also applies to returning Italian workers who have lived outside the country for two years. One criticism of the proposal is that the changes would stem the increased flow of people moving from abroad to the South of the country.
Just as Portugal rolls back on proposed changes by granting the NHR for at least another year, it remains to be seen if Italy will enact the proposals. Whatever happens, trust Nomad Capitalist to keep you informed. At the moment, there’s no indication that the Italian government will change its lump-sum tax regime, so the underlying message, if you want to live in Italy and pay lower taxes, is to get in touch with us now to start the process.
If you’re interested, we can create a holistic strategy that fits your needs and includes diversification and protection of your assets. Discover the Nomad Capitalist difference here.
