Impatriate regime: the case of the nonresident employer

We first go over the main requirements needed for the purpose of qualifying for the tax break under Article 16 of Legislative Decree 147/2015. Specifically:

• it is required that the person who intends to take advantage of the benefit has not lived in the territory of Italy in the two years preceding the application;
• the worker must move his or her residence to Italy, committing to reside there for at least two years following the move;
• the worker agrees to work mainly in the territory of Italy.

It seems clear, in relation to this last point, how questionable the position of the worker may be smart-worker in the employ of a foreign employer for the purposes of compliance with the above condition, i.e., that the work activity be performed predominantly on Italian territory. It is precisely on this aspect that the Internal Revenue Service has pronounced itself in Interpelli No. 55/2022 and No. 186/2022.

The answer to interpellation No. 186/2022, is very interesting all the more so if we contextualize it in the current historical period, in which, by virtue of the global pandemic situation, we have witnessed an increasing incidence of the performance of remote work.

In the case at hand, the agency ruled on the possibility of recognizing the tax benefit, as per Article 16 of Legislative Decree 147/2015, to an executive employed by a multinational company with headquarters in New York and operating offices in several European states, including the Netherlands, where the employee resided for several years.

As a result of the global emergency situation, the Company offered the executive the opportunity to work in smart working. On this point, it should be pointed out that the executive in question appears to have been hired for activities that can also be carried out remotely, such as performing the task of project coordinator also providing support to the Society's various operating offices.  

In light of this, the worker decided to transfer his tax residence to Italy by June 2022 and was requesting the possibility of applying the tax benefit under Article 16 of Legislative Decree 147/2015.

First of all, the first requirement demanded by the legislature, regarding the transfer of residence to Italy, as well as the worker's intention to maintain his or her tax residence on Italian territory for at least two years, is met.

Doubts remain as to whether the work activity can be considered to be carried out "predominantly on the territory of Italy."

In this regard, however, the Agency, in providing an answer, recalls how Circular No. 33/E of 2020, clarified that for the purposes of the application of Article 16 of Legislative Decree 147/2015, as amended by Article 5, Paragraph 1 of the "Growth Decree", it is not required that "the activity is carried out for an enterprise operating in the territory of the state; therefore, individuals who from Italy carry out work activities in the employ of an employer based abroad, or whose principals (in case of self-employment or business) are foreigners (nonresidents)".

The Internal Revenue Service, in its answer to interpellation No. 186/2022, also recalls how the requirement of "work activity performed mainly in Italy" is considered satisfied if this is found to have been provided in Italian territory for a period exceeding 183 days within the year. During this period, among other things, as clarified in Circular No. 17/E of 2015 (Section 3.3), not only working days but also vacations, vacations, weekly rests and other non-working days are counted.

This "does not, therefore, exclude that access to the special regime for impatriate workers is also allowed for workers who transfer their tax residence to Italy in order to continue, in remote mode, the work activity rendered for the benefit of their foreign employer under a pre-existing contract of employment (...)."

Employees of foreign companies that are without a permanent establishment in Italy, which therefore do not assume the status of tax withholding agent, will have to take advantage of the benefit directly when filing their income tax return by filling in the "special cases" box in square C of the 730 or RC of the PF income tax return form relating to income from employment and assimilated work, and indicating the employment income in the lines paid already in the reduced amount.

Article 16 of Legislative Decree 147/2015 stipulates that the benefit applies starting from the tax period in which the transfer of residence to the state territory took place and for the following four periods. This period may be extended for an additional five years if:

• the worker has at least one minor child as a dependent;
• the worker becomes "the owner of at least one unit of residential real estate in Italy, subsequent to moving to Italy or in the 12 months preceding the move," which may be purchased directly "by the worker or by the worker's spouse, cohabitee or children, including in joint ownership."

In both of these cases, in the additional five tax periods, they contribute to the formation of total income limited to the 50 percent.