Expath wins court case: Victory for Italy impatriate tax clients
We recently obtained a significant victory in court to defend one of our impatriate clients. This success underlines Expath’s commitment and expertise in providing comprehensive assistance to its clients, not only in tax matters but also in defending their rights before the tax court.
The impatriate regime, introduced in the 2016 tax year, offers favourable tax treatment to those who transfer their tax residence to Italy. The aim is to attract human capital to Italy, encouraging qualified professionals from other countries to contribute to the country’s economic and cultural development.
Understanding the Impatriate Regime
To benefit from the impatriate regime, as of 2023, the following requirements must be met:
- Residence abroad for at least two tax years
- Transfer of residence to Italy
- Commitment to reside in Italy for at least two tax year
This scheme provides a lower tax base on income, allowing recipients to pay less tax. This preferential taxtreatment is designed to make Italy more attractive to skilled workersfrom abroad.
Challenges & Our client's defence
Recently, Agenzia delle Entrate (the Italian tax authority) attempted to restrict access to this scheme. They used criteria not specified by law to deny tax refunds to impatriates.
One emblematic case involves an Expath client, who moved to Italy from South America in 2017 to complete a university MA degree and start working in 2019. Agenzia delle Entrate denied the client a tax refund, arguing that the time between moving to Italy and starting work was too long, thus breaking the causal link.
Expath vigorously defended its client, highlighting two key points:
- Absence of legal basis for the restrictive interpretation:
We contested Agenzia delle Entrate’s restrictive interpretation, pointingout that the requirement of the time elapsed between moving to Italy andstarting work is not covered by the law on the impatriate regime. Nominimum time period is prescribed by law, so the arbitrary addition ofthis condition by the Agenzia delle Entrate was challenged as notlegitimate. The tax administration cannot introduce new preclusions usingits own circulars without a legal basis.
- Demonstration of the causal link:
Despite the absence of this requirement in the law, we pointed out thatthe causal link between the move to Italy and the start of employmentwas nevertheless present in the client’s case. The client, an engineeringBA graduate, had moved to Italy with the explicit aim of findingemployment appropriate to his skills. The time elapsed between themove and the start of work was justified as a necessary period to learnthe Italian language (as shown by his attendance of Italian coursesthroughout 2018) and specialise through an academic course (as shownby his attendance of an MA course at university), making the client fullyeligible for the impatriate scheme.
Conclusion
Ultimately, the verdict fully supported Expath and our client. The court ordered Agenzia delle Entrate to pay the wrongfully denied refund and cover the court costs. This decision confirms the validity of Expath’s defense arguments and our correct interpretation of the impatriate regime.
This victory further strengthens Expath’s position as a reliable partner for impatriate clients, offering them high-level tax advice and an effective defence of their interests before the Italian tax authorities. We invite all those in similar situations to contact Expath to assess the best legal strategy to protect themselves and assert their rights.
