Can You Switch From the Flat-Rate to the Impatriate Tax Regime?

Moving to Italy often comes with tax incentives designed to make the transition smoother for professionals. Two popular options are the flat-rate tax scheme (regime forfettario) and the impatriate tax regime (regime impatriati). But can you switch from the flat-rate to the impatriate tax regime? Let’s break it down.

Understanding the Flat-Rate Regime and Impatriate Tax Regime

The flat-rate tax scheme offers a simplified approach for individuals starting a business or working as freelancers in Italy. It caps your income tax at 15%, or even 5% for the first five years under specific conditions.

The impatriate tax regime, on the other hand, is aimed at attracting professionals to Italy. It reduces taxable income by up to 70%, or even 90% in certain southern regions. The incentive is particularly attractive to highly skilled professionals or “brain returnees” coming back to Italy.

Can You Switch From the Flat-Rate to the Impatriate Regime?

Yes, switching is possible under Italian tax law, provided you meet the eligibility criteria for the impatriate regime. A recent ruling by the Lombardy Court confirmed that taxpayers can transition from one tax scheme to another as long as they fulfill the conditions for the new regime.

For example, even if you initially opt for the flat-rate scheme, you can later benefit from the impatriate tax regime once the flat-rate period ends. The ruling emphasized that Italian law supports flexibility, allowing taxpayers to make decisions that align with their evolving professional and financial situations.

Why Is This Flexibility Important?

The core goal of the impatriate regime is to attract talent back to Italy, fostering economic growth and innovation. Restricting access to the regime due to prior participation in another scheme would go against this objective. As long as you meet the requirements—such as moving your tax residency to Italy and having not been a resident in the previous two years—you can take advantage of the benefits.

What Should You Consider?

If you’re planning to switch:

• Evaluate Timing: Ensure your current scheme’s obligations are complete before transitioning.
• Meet Eligibility Criteria: Confirm that you fulfill all requirements for the impatriate regime.
• Consult a Tax Expert: The Italian tax system can be complex, and professional advice is crucial to maximize your benefits.

We’ll Be Happy to Guide You

So, can you switch from the flat-rate to the impatriate tax regime? The answer is yes! If you’re moving to Italy or returning after time abroad, the impatriate tax regime can offer significant savings, even if you previously opted for the flat-rate scheme. With the proper guidance, you can make the most of Italy’s tax incentives and focus on building your career or business. Contact us now for more information!