Non-dom tax changes in the UK

The UK government recently announced plans to repeal the existing UK tax regime for non-domiciled individuals (non-doms) from 2025. Those adversely affected by changes to the UK regime wish to consider alternative options and, in this context, Italy has an attractive tax regime available for people who move their tax residence to Italy.

What’s new?

The UK government has recently announced a proposal to repeal the UK non-domiciled tax regime with effect from April 2025, with limited transitional rules for existing non-doms.

In its place, the UK government proposes to introduce a new regime for individuals who become UK tax resident under which they will not pay tax on foreign income and gains arising in the first four tax years after becoming UK tax resident and will be able to remit such income and gains to the UK free from any additional charges (the FIG regime).

Italian flat tax for new residents

Individuals transferring their tax residence to Italy may opt for the application, on an annual basis, of a EUR 100K flat tax instead of paying personal income taxes ordinarily due on their non-Italian source income as well as certain other taxes due on ownership/transfer of financial and immovable assets held outside of Italy (the Flat Tax Regime).

Requirements

Individuals can opt for the Flat Tax Regime if the following conditions are met:

(A) they have moved their tax residence to Italy;
(B) they were not tax resident in Italy for, at least, nine of the previous ten fiscal years preceding the election for this beneficial tax regime.

The option for the Flat Tax Regime can be exercised by both non-Italian and Italian individuals, regardless of their citizenship.

Tax relief

The Flat Tax Regime allows new Italian tax residents to opt to pay an annual tax of EUR 100K instead of:

(A) personal income taxes on any non-Italian source income (excluding, capital gains realised upon the disposal of certain shareholdings during the first five fiscal years of the eligibility of the Flat Tax Regime);
(B) 0.2%/o.4% tax on financial assets held abroad (i.e. IVAFE);
(C) 1.06% tax on immovable property held abroad (i.e. IVIE);
(D) Gift and inheritance taxes on transfers of assets held outside of Italy.

Furthermore, the Flat Tax Regime exempts individuals from the reporting obligations related to the holding of assets abroad (i.e. the so-called RW form reporting obligations).

By comparison with the proposed UK FIG, the Italian Flat Tax Regime operates for a maximum of 15 fiscal years.

In addition, individuals who have opted for the beneficial regime can request its extension to one or more family members by paying a substitute tax of EUR 25K for each family member.

Individuals can opt to exclude from the Flat Tax Regime in relation to foreign-source income on a country by country basis. A foreign tax credit is generally recognised with respect to the foreign-sourced income excluded from the option.

How to exercise the option for the Flat Tax Regime

A taxpayer can opt to apply the Flat Tax Regime either by:

(A) Submitting an advance tax ruling request to the Italian tax authority; or
(B) Exercising the option directly (i) in the annual tax return related to the fiscal year in which the applicant moved his/her tax residence to Italy or (ii) in the tax return of the subsequent fiscal year.

Timing of the tax ruling process

The advance tax ruling must be submitted by the deadline for submitting the annual tax return for the year in which he/she moved his/her tax residence to Italy. However, if the taxpayer intends to obtain the Italian tax authority’s opinion in advance, he/she can file the tax ruling request before moving to Italy. The Italian tax authority generally responds to the tax ruling request within 120 days (without prejudice to the possibility of requesting additional documentation) by confirming (or not) that the applicant meets the conditions to benefit from the Flat Tax Regime.

What Simmons & Simmons can do for you

Simmons & Simmons’ Italian tax team has extensive expertise in assisting international HNWIs in relocating their tax residence to Italy and benefitting from the Flat Tax Regime, including drafting, submitting and discussing the advance tax ruling with the tax office in order to successfully apply for such regime.