Global Mobility

News on the special tax regime for inbound individuals

Gabriele Labombarda Gabriele Labombarda

Italy has operated a ‘special tax regime’ for inbound individuals since 2016 and the tax authorities recently released several clarifications on how the provisions of the regime apply. Specifically, two topics have been considered: the need to have a ‘nexus’ between the move to Italy and the start of an employment in Italy; and the fact that a seconded employee, under certain circumstances, could benefit from the special tax regime.

For companies with international operations and globally mobile employees undertaking long term assignments, the clarifications provide opportunity to mitigate employee taxes and potentially the costs of undertaking employee mobility into Italy.Background


Art. 16 of Legislative Decree 14 September 2015, n° 147 introduced the special tax regime for inbound individuals in order to boost the transfer to Italy of highly qualified workers and to promote the technological, scientific and cultural development of Italy. When the requirements provided by the law are met, the regime allows the exemption of 50% of Italian-sourced employment income or self-employment income from taxation. The regime is temporary and applicable for the first five years of tax residency in Italy, according to the content of art. 2 of the Italian tax law.

The requirements to qualify for the provided by the law are the following:

  • the employees must qualify as tax resident of Italy;
  • the employees must commit to living in Italy for two years at least;
  • the employment activity should be carried out under an employment with an Italian resident company or with a company controlling the Italian entity or with controlled Italian entities (e.g. branch of foreign companies).
  • the employment activity should be carried out in Italy during a period longer than 183 days during each fiscal year;
  • the employees should have managerial roles or should be highly qualified employees, as defined by Italian legislation.

New clarifications for certain employees

The law providing the special regime for inbound individuals has been subject to several amendments since it came into effect and the last version in place since 2017 extends the regime to individuals of any citizenship and to those who start a self-employment activity. The application to benefit from the special tax regime is however not straightforward and is dependent on the individual situation of for the person applying.

For this reason, in May 2017, the Italian tax authorities released Circular Letter n° 17 giving more explanation relating the factual application of the law. During 2018, tax authorities published several official interpretations in order to provide further clarifications relating to specific personal situations of different individuals.

The 2018 clarifications and interpretations are outlined as follows:

  • Resolution n° 72/2018 – the special regime is applicable also to cases involving the internal transfer of an employee between companies part of the same Group.
  • Resolution n° 76/2018 – the special regime is applicable in cases where an employee undertakes an international assignment outside Italy.
    Circular letter n° 17/2017 outlined that the regime was not applicable to individuals returning to Italy following the conclusion of an assignment abroad because the transfer back to their original position in Italy was regarded as the natural consequence of the end of an assignment. The position taken by the authorities was that such circumstances do not satisfy the aim of the law, which was to attract highly skilled individuals to Italy.
    The Resolution highlights the anti- avoidance aim of the provision included into the Circular Letter but outlines the chance to evaluate specific situations where the return to Italy may not be linked to the normal end of an assignment. The Resolution specifies that this could happen when the assignment is extended several times and an individual spends a long time overseas, thereby weakening previous ties to Italy.   In such cases, the closer links to the foreign territory may allow for the special tax regime to be applicable. This could be the case where an employee returns to a new role Italy with greater responsibilities or for a more specialised position because of the experiences and of the professional skills gained during the period of work abroad.
  • Answer n° 919-114/2018 – the clarification from tax authorities outlines the nexus that must exist between the return to Italy and the start of the employment activity. Tax authorities deny the opportunity to apply the special tax regime to those individual moving to Italy and intending to find a job and who do not have an employment agreement already signed with an Italian company. This determination is the conclusion of a dispute between the tax authorities and an Italian citizen working in Ireland who asked his foreign employer to be transferred to an Italian entity in the Group. After denial from the Irish employer, the employee left the employment in Ireland and returned to Italy without a signed employment agreement and with the intention to find a new role. After 10 months the employee found a new job in Italy however as the tax authorities determined there was no evidence of nexus between the two events, the benefit of the special regime were not available.


The clarifications released by tax authorities are very important to any of company undertaking employee relocations, by way of new or ending assignments or permanent transfers, with Italy.  While it is still important to review the specific facts of each case, the clarifications are helpful to employers with a global workforce in determining when the special tax regime may apply in order to mitigate costs and effectively structure assignment compensation and benefits.


For further information please contact Gabriele Labombarda or Paola Lova.