Work in Italy: Tax Incentive
In previous articles, we have discussed the values of Income Tax, Social Security Contributions, and Taxes on Assets and Wealth. Generally, these taxes are quite high in Italy and consume a significant portion of your salary while delivering public services that are considered of good quality.
But did you know that there are several tax incentive programs (agevolazione) aimed at attracting qualified workers to the Italian job market? These programs are usually known as Rientro di Cervello (brain return) and can offer up to a 90% discount on Income Tax for several years. Even Italian-Brazilians who have never lived in Italy can benefit from them. Let's learn more about them:
Lavoratori Impatriati (Repatriated Workers) - Law of 2015, in effect
This program focuses on attracting qualified workers (with a university degree) to job positions in Italy. To take advantage of this incentive, the worker must meet the following criteria:
Not have been a Tax Resident in Italy in the last two fiscal years. This includes those who have never been residents, so those who recognize their citizenship outside Italy are also eligible.
Carry out a work activity mostly within Italy.
Become a resident in Italy due to work, meaning it must be clear that the person moved to Italy to work in a specific job.
Possess a university degree, and the job must require such a degree.
It is not necessary to be Italian to benefit from this incentive, but it is necessary to be in regular immigration status and register residency.
Those who meet the requirements of this program will have the income tax base reduced to 30% if residing in Central-Northern Italy and 10% if residing in Central-Southern Italy for five fiscal years. In other words, the Income Tax discount will be 70% or 90%, depending on the region.
These discounts can be extended for an additional five years if the person meets the following additional criteria after moving to Italy (within the five years) or in the 12 months before the move:
Having a minor child. In this case, the discount for the additional five years will be 50%.
Acquiring a residential property in Italy. In this case, the discount for the additional five years will be 50%.
Having three or more minor children. In this case, the discount for the additional five years will be 90%.
Please note that the discount applies exclusively to Income Tax. Social Security Contribution rates are not subject to a discount.
Let's see an example: A worker finds a job in Italy and moves to the country for this work. The salary is 70,000 Euros per year.
| Without a discount | With 70% discount | With 90% discount |
Gross annual salary for income tax calculation, after payment of Social Security | 63341 | 19002 | 6334 |
Total income tax to be paid | 20137 | 4451 | 1457 |
Net Monthly Salary (13 times a year) | 3222 | 4721 | 4872 |
Total income tax rate | 40% | 12% | 10% |
In the scenario above, the worker without the benefit of an income tax discount will receive a net monthly salary of approximately 3,222 Euros. The worker who benefits from this program and resides in Turin will receive a net monthly salary of 4,721 Euros. And the worker within the program, residing in Catania, will receive a net salary of 4,872 Euros.
Please note: Those who use this program must reside in Italy for at least two fiscal years. If the person ceases to be a tax resident before two years, the discount amounts must be refunded to the Italian Tax Authority, with interest applied.
To learn more about the Lavoratori Impatriati Program, please consult this page on the Agenzia Entrate (Italian Revenue Agency) website.
How to Benefit from the Program
Applying for the benefit is relatively easy once you can prove that you meet the program's criteria. However, many companies are unaware of this benefit and may make the process difficult.
There is no need for any approval from the Italian Tax Authority to use the benefit. The request must be made directly to the employer through a self-certification signed by the worker. The employer must apply the discount and withhold the tax according to the program's rules.
Please note: Self-employed workers who meet the criteria should apply for the discount directly in the Income Tax Declaration.
The responsibility for ensuring compliance with the program's criteria lies solely with the worker. Failure to meet the requirements may result in a tax audit, repayment of any discounted amounts, and penalties.
Usually, companies have their own program forms, but the form below can also be used.
Are you a professor or researcher?
Professionals in the teaching, education, and research fields who move to Italy to work in their respective areas have even more benefits. The discount is 90% regardless of the region of residence and can be extended for 8, 11, or 13 years in case of property acquisition or having minor children. For details, please refer to this page.
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