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BRAIN RETURN TO ITALY
Italy is subject to seeing its citizens move abroad in masses after having finished their studies at an Italian University. These Italian expatriates usually end up finding better work abroad or continue with their studies abroad.
To counteract this phenomenon, the Italian state has introduced a regulation containing special measures for the repatriation of Italian citizens that have left their home country and are working abroad, are teachers at universities or researchers. The regulation is commonly known as the ‘Brain Return’ act.
The ‘Brain Return’ act was issued to encourage the relocation of people with high skills, qualifications and specialization to Italy. This way Italy hopes to promote for years to come to the technological, scientific and cultural development of the country.
The best part about it is that the tax benefit doesn’t only apply to returning Italians but it also applies to foreigners.
FOREIGNERS CAN BENEFIT FROM BRAIN RETURN
#Eligibility for Employees or Self-employed
The facilitated scheme is mostly designed for Foreigners that are employees or self-employed and choose to relocate their tax residency to Italy for more than 183 days in a year starting from 2020.
To qualify for the tax incentive the workers must not have been resident in Italy in the two tax periods preceding the transfer and commit to at least reside in Italy for two years. Further, the work should also be carried out mainly in Italy.
70% of the total amount of income produced by either employment income or income made from self-employment will be exempt if a person qualifies. The exemption is also available to people who decide to set up a business in Italy from 2020 onwards.
#Application of the Tax Benefit
The tax benefit comes into effect from the tax period in which the relocation to Italy took place and last for another following four periods.
If a person qualifies for special working conditions such as taking dependents with them to Italy or buying real estate in Italy then the tax benefit can be extended for another five years to a reduced tax exemption rate of 50% of the total amount of income.
Lastly, it is worth noting that the percentage of income exemption can rise up to 90% if workers move to the southern regions of Italy which include, Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia, and Sicily.
#Italian Passport Holders
The above tax incentive also applies to Italian citizens who are not members of AIRE (Register of Italians Resident Abroad) and return to Italy on or after 1 January 2020 provided that in the two years prior to the transfer they had their residence in another country with whom Italy has a double tax agreement with.
SCHEME FOR RESEARCHERS AND UNIVERSITY TEACHERS
Another scheme under the Brain Return is aimed exclusively at university teachers and researchers who decide to relocate their tax residency to Italy starting from 2020.
#Eligibility for the Tax Benefit
This particular scheme is open to university teachers and researchers who move to Italy for more than 183 days and become tax residents of Italy.
They also must have carried out research or teaching activities abroad at educational institutions or universities for at least two years and possess a university degree.
90% of the total amount of income received from the activity carried out by teachers and researchers is tax-exempt if a person qualifies.
#Application of the Tax Benefit
The tax benefit applies from the year in which researchers or teachers transfer their residence to Italy and for the following five tax years.
The application of the tax benefit may be extended to another seven, ten, or twelve years if the teacher or researcher has one or more children under 18 or has purchased a residential property in Italy.
#Italian Passport Holders
The above tax incentive also applies to Italian citizens who are not members of AIRE (Register of Italians Resident Abroad) and return to Italy on or after 1 January 2020 provided that in the two years prior to the transfer they had their residence in another country with whom Italy has a double tax agreement with.
COMMENT
The Brain Return act is a great incentive designed by the Italian State to attract more foreigners into the country.
It only applies to returning Italians but it is also aimed to encourage all foreign workers, teachers, and researchers to promote the development of research in Italy through their scientific knowledge.
Employers and Self-employed people will only have to pay taxes on 30% of their income received. This applies to all Online Entrepreneurs, Digital Nomads and Location Independent Business Owners.
If you are a teacher or researcher then you may even access greater benefits and you will only have to pay taxes on 10% of your income received.
You definitely draw the biggest tax benefit if you decide to move to Italy with your children and buy a house. If you do so, then you’ll only have to pay taxes on 10% of your income received for the next 10 years.
Written by Italian Tax Consultant Marco Luciani
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