Italian tax incentives for teachers and researchers moving their residence to Italy
The laws providing for such tax incentives were introduced by Article 44 of Law Decree No. 78/2010 and were subject to several amendments, including Article 5, paragraph 5 of Law Decree No. 34/2019 (the so-called "Growth Decree") and most recently by Article 1, paragraph 763 of Law No. 234/2021 (the so-called "Budget Law 2022").
For income tax purposes, 90% of the remuneration received is excluded from the formation of employment or self-employment income of teachers and researchers, who are in possession of a university degree or equivalent, were not occasionally resident abroad, carried out documented research or teaching activities abroad at public or private research centres or at universities for at least two continuous years, and who take up residence in Italy, where they will carry out their activities.
The duration of the benefit was set at four years in the original formulation of the law, and becomes five from 2020, provided that the residence in Italy remains. This period can be increased up to eight, eleven and thirteen years, in the case of teachers or researchers who have minor dependent children and who purchase at least one property residential unit in Italy, as the case may be.
The purpose of this regulation is to avoid the so-called "brain drain" phenomenon and to foster Italy's technological and scientific development. Therefore, it is not only aimed at Italian or European emigrants wishing to return to Italy, but in general at all residents abroad, whether Italians or foreigners, who, by virtue of their special knowledge, can foster the development of research and the dissemination of knowledge in Italy, by transferring here the know-how acquired through their activities.
Option for the extension of incentives
The 2022 Budget Law introduced the possibility for teachers and researchers registered with AIRE (i.e., Register of the Italians living abroad) or who are citizens of the EU Member States and who returned to Italy for tax purposes before 2020 to opt for the extension of the favourable regime up to a total of eight, eleven and thirteen tax years. Taxpayers must have purchased a residential property in Italy after their transfer of residence, within the previous twelve months or within eighteen months from the date in which they exercised the option and/or have between one and three children. The extended duration of the relief is achieved by paying an amount that varies according to the number of children.
Exercise of the option
The option is exercised by paying an amount equal to:
- 10% of the taxable employment and self-employment income produced in the tax period preceding the one in which the option is exercised, if at the time of exercising the option the employee meets, alternatively, specific requirements: he/she has at least one minor child, or has purchased at least one residential property unit in Italy after the transfer, in the previous twelve months or within eighteen months from the date of exercising the option. In the case of failure, the additional benefit enjoyed will be returned, without application of penalties;
- 5% of the taxable employment and self-employment income produced in the tax period preceding the one in which the option is exercised, if at that time the employee has at least three minor children and has purchased at least one residential real estate unit in Italy after the transfer, in the previous twelve months or within eighteen months from the date of exercising the option. In the case of failure, the additional benefit enjoyed will be returned, without application of penalties.
The Circular letter specifies that:
- Teachers and researchers who are employed, provided that they maintain their tax residence in Italy, may exercise the option by submitting a written request to their employer, by 30 June of the year following the year in which the first four-year period of eligibility for the benefit is completed. If the four-year period ended by 31 December 2021, the option must be exercised by 27 September 2022. The employer shall withhold 10% of the remuneration paid out, in the case of employees who, at the time of the option, have communicated that they meet the requirements and satisfy the conditions for the application of the respective measures for the de-taxation of employee and assimilated income.
- Teachers and researchers engaged in a self-employed activity shall communicate the option in the tax return for the tax period in which they have paid the amounts of 10% or 5% of the taxable employment income produced in the tax period preceding the one in which the option is exercised.
- Teachers and researchers who have exercised the option may benefit from the preferential regime for the additional tax periods in which they maintain their tax residence in Italy, losing the possibility to apply the preferential regime starting from the tax period in which this requirement ceases to apply.
Researchers and teachers benefiting from the incentives as of 31 December 2019
Teachers and researchers who benefited from the preferential regime until the year 2019 or in the year 2020 will be able to apply for the aforesaid regime as of the tax year 2022 only. The tax periods covered by the relief, as a result of the exercise of the option provided by the rule, must be counted from the tax period in which the tax residence in Italy is transferred.
For the purposes of calculating the amount to be paid, the rule makes reference to "the income from employment and self-employment produced in Italy which is the subject to the relief". Therefore, the Italian Tax Authority considers that the reference income is represented by employment and self-employment income produced in Italy even if not facilitated under Article 44 of Decree Law 78/2010 relating to the tax period preceding that in which the option is exercised.
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