How to obtain residency in Italy

When people think of obtaining residency in Southern Europe they typically think of Portugal, Spain, and Greece but the reality is that one can obtain residency in Italy combined with unique tax advantages. Let’s explore!

Video: How to get Residency in Italy

I interviewed Nicolo, who specializes in helping foreigners obtain residency in Italy and in helping them with local tax strategy.

Why obtain residency in Italy?

• Live freely across the entire Schengen area – once you have residency in Italy you can relocate freely to any other country in the Schengen community.
• Become eligible for Italian citizenship – time spent living under the visas detailed below will progress towards Italian citizenship. After 10 years spent living in Italy you can apply for citizenship.
• Enjoy affordable real estate – Italy often makes headlines for charming, low-cost real estate.
• Take advantage of a dry, warm Mediterranean climate – the virtues of the weather in Italy do not need much explaining.
• Healthcare and education benefits – Italian permanent residency will grant you access to Italian public health and education facilities, which can be of particular interest to American retirees or those with younger children.
• Tax incentives – Italy is traditionally known as a high-tax country but has recently developed specific schemes designed to welcome pensioners, the self-employed, and HNWIs.

How to obtain residency in Italy

Apart from the usual work permit or marriage options, there are several pathways that lead to Italian residency that work for different categories of people. We will go over four principal ways to obtain residency in Italy if you are a non-EU person.

1. Italian Golden Visa
2. Representative Company Office option
3. Elective Residency Visa
4. Digital Nomad Visa

Obtain residency in Italy through Golden Visa

The Italian Golden Visa is obtained through one of the following investment options:

• €1 million in government bonds or investment funds OR
• €500,000 into a private company. This requirement is reduced to €250,000 if the company is a startup.

People often overlook the option of investing in an approved Italian government fund. The advantage is that there are market traded funds offering more liquidity for divestment once the five-year holding period has elapsed. These funds can be purchased directly in your name through an investment brokerage account, without the need for company formation. Some of these funds have exposure beyond Italy, so you can buy shares in an Italian fund that invests, for example, in US stocks, precious metals, or other asset classes.

There is only one applicant on the Golden Visa itself, but you can qualify your spouse, your children under 18, and under 24 if in college and parents over the age of 65 to tag along under family reunification or family cohesion.

If you are from a country that has visa waiver with Italy, such as the United States, you can move to Italy as a family on tourist visas, and then within the 90 days allowed by the tourist visa you may apply for family reunification or family cohesion.

After five years of residency, you may divest from the fund or company and convert the visa to an EU permanent residency.

Obtain residency in Italy through the Digital Nomad Visa

The Italian digital nomad visa requirements are:

1. 28,000 euros of annual active income, or self-employment income.
2. Must prove that your work responsibilities can be achieved remotely.

You will receive a one-year permit that is extendable.

Obtain residency in Italy through the Representative Company Office Visa

This is an alternate route which consists of a self-employment visa granted to individuals with a registered profession or directorship at the local Italian Chamber of Commerce.

If you own a non-Italian company, you can create a local Italian office and register it with the local Italian Chamber of Commerce. Using this local office, you may then claim a long-term self-employment visa premised upon you moving to Italy to run the Italian office.

The requirements are:

1. Have a limited company outside Italy which you can use to create the local office. The foreign company must be actively operating for at least one year and must be a limited company earning at least 12,000 euros (because you must pay yourself a minimum salary of 12,000 euros to qualify). It is advised to apply from the country where your business is registered so that the consulate can verify documentation related to your company. Note also that the representative office cannot make money itself.
2. Establish yourself as the director of the Italian entity.

For immigration purposes this is sufficient to obtain residency. The representative office does not need to be profitable.

Obtain residency in Italy through the Elective Residence Visa

This is a visa category primarily intended for people with passive income sources.

Passive income includes pension, rental income, royalties, capital gains, interest, or any income that is not from employment or self-employment activities.

To qualify:

1. 31,000 euros of passive income for one applicant or 37,000 for two applicants.
2. Income must be substantiated by income statements and tax returns.

Satisfying these requirements grants you a one-year visa renewable up to 5 years as long as the requisite income is maintained. It is not convertible into an employment-based visa; you must remain under the elective residency category.

What are available tax incentives when you obtain residency in Italy.

200,000 € Flat Tax for Foreigners

Under this scheme, you pay a flat tax of 200,000 € against all your non-Italian income. You can also relocate the taxed income to Italy and spend it without paying further taxes.

You are also able to add family members to this scheme for an additional 25,000 per dependent.

CFC rules do not apply under this scheme – if you pay yourself a dividend through a BVI or UAE company, or other tax haven, you aren’t required to report the non-Italian asset.

This regime lasts up to 15 years. You can leave anytime but if you do so you cannot partake of this scheme again.

7% pensioner scheme

If you have not been a resident of Italy during the five years prior to moving, and you move to a municipality in the South of the country with less than 20,000 inhabitants you can enjoy the 7% tax regime.

For up to 10 years, your pension and all of your non-Italian income is taxed at a 7% flat rate, as opposed to the standard Italian tax bracket. You are not required to report any non-Italian assets.

This is also an option for people who are still working provided they have at least one pension income source.

5% flat-tax scheme

There is a compelling 5% flat rate tax available to individuals with start-up businesses who meet certain requirements, chiefly that they have not participated in any business activity during the prior three years.

This applies to Italian tax residents living in Italy – those living abroad are not eligible. 

In such cases, the individual can enjoy a 5% flat rate tax for the first five years of their operation.  This tax rate is invalidated if at any point over the five years the individual earns over 100,000€ in one tax year.  Note also that there are a number of other exclusions and exceptions to this regime that may apply, but are too numerous and specific to list here.  

New provisions of the Inbound Workers Tax Regime

The Italian government recently approved some changes to the Special Tax Regime for Inbound Workers.

Workers that meet a high level of specialization who have not also been a tax resident of Italy during the prior three fiscal years qualify under the new rules. They enjoy a 50% tax exemption on up to 600,000€ of income for a duration of five years. If you leave Italy sooner than four years, you will owe taxes on the income that was previously exempted.

If you move to Italy with a dependent minor and apply for this scheme, the deduction will be 60% instead of 50%.

Contact Nicolo to Obtain Residency in Italy

Immigration and tax strategy should always be planned together, and Nicolo happens to be an expert in both. He has been helping foreigners move to Italy for over a decade and can help you design and implement a cohesive strategy around you, your family and your taxes.

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Transcript of “How to obtain residency in Italy and qualify for tax incentives”

LADISLAS MAURICE: Hello, everyone. Ladislas Maurice from thewanderinginvestor.com. Today, we’ll be discussing how to obtain residency in Italy. Look, generally speaking, moving to Europe is relatively easy if you’re doing it illegally, or if you have a job offer, but for people who want to move there independently, moving to the European Union is becoming ever harder. Today, we’ll be discussing how to move to Italy, which is a country that actually few people discuss in this space, because it’s very poorly marketed and everything appears to be a bit complicated, I mean, just like Italy, generally speaking.

And then we’ll be discussing some of the very interesting tax incentives. This is really primarily for people from non-EU countries, though the tax incentive part is for EU people as well. Nicolo, how are you?

NICOLO: I’m very good. What about yourself?

LADISLAS MAURICE: Good, good. Nicolo is based in Italy, he has a team of lawyers and CPAs. And you’ve been helping hundreds of people move to Italy and take advantage of various tax incentives. 

What are main ways to move to Italy?

LADISLAS MAURICE: Nicolo, can you, please, tell us what are the main ways to move to Italy if it’s not related to getting a job, or marrying someone, or one of those? Just, I’m independently well off, I want to enjoy life in Italy, I want to move there, I don’t have an EU passport, what are my options?

NICOLO: All right. There are quite a few options, and one just came out recently, which is the digital nomads visa. It’s currently in progress but finally released. There are various ways to move to Italy as self-employed, as a director of a foreign company, which can be easily your company, if you make investment like the golden visa, or if you have enough passive income sources. The whole point is, what is the best strategy for you depending on your current status. And sometimes, you need to adjust before moving, so you need to review your wealth, and your income structure, and your employment or self-employment basis.

Italian Golden Visa 

NICOLO: The first easy option in regards to the timeline is the investor visa. It’s the Italian golden visa, and you have various investment options. You either invest €1 million in government bonds, or you invest half a million into a private company paid up capital, or €250,000 if the company is a startup. What people tend to overlook is that you may as well invest into approved Italian government funds or funds approved by the Italian government, meaning that those funds can be private equity, can be monetary funds, can be startup funds, etc., etc., but the advantage is that they are traded on the market. So you put half a million there, depending on market condition, after the five years, you can easily divest and get all your money back.

LADISLAS MAURICE: Cool. So you still have to create a company and buy these funds through the Italian company, or can you just buy these funds directly in your name?

NICOLO: You don’t need to have a company, you can buy directly in your name. It’s like an investment brokerage account, which then you have to put your half a million and buy those funds, which are traded all the time in the stock market, and they are not just related to Italian stocks, or Italian assets, they can also invest in non-Italian assets. That is sufficient to satisfy the golden visa requirements.

LADISLAS MAURICE: That’s fascinating. That’s fascinating. So essentially, you can just buy a fund that is investing in US stocks, or just gold, whatever gold mining companies, or whatever, half a million, this gets you your golden visa.

NICOLO: That is correct. Of course, it depends on your risk appetite. I mean, that becomes a financial question, but at least those are not private companies, so it’s easier to get the money back in the future, or at least it’s more flexible option.

LADISLAS MAURICE: Look, this is really interesting. Because everyone’s marketing Portugal, even though Portugal’s absolutely not interesting anymore and the funds are mostly garbage. This is actually a genuine investment. You can choose whatever you want, and it’s not just clown funds that were structured by seedy lawyers sitting in Lisbon trying to sell essentially crap to people. This is a genuine investment. I mean, objectively, it’s really interesting, it’s completely under-marketed. You can qualify your spouse, your underage children as well?

Sponsoring family for residency in Italy

NICOLO: Well, it’s a two steps process, because there’s one applicant for the golden visa then family members, so spouse plus children under the age of 18, or up to 24 if they are in college, or parents 65 and upper they qualify, they tag along. The first step, the main applicant moves to Italy. By the way, if you’re from a country that has a visa waiver with Italy, like the United States, Australia, United Kingdom, the whole family can move along on a tourist visa. Main applicant makes the investment, claims residency, and within the 90 days, the family tags along under the family reunification or family cohesion.

LADISLAS MAURICE: Fascinating. Cool. That’s the golden visa. Essentially, it’s valid for five years. What happens after the five years?

Renewing Golden Visa and conversion to Permanent Residency in Italy

NICOLO: Well, it’s valid for two years, renewable for as long as you keep the investment. Upon reaching the fifth year, you can convert that into the EU permanent residency. At that point, whenever you get EU permanent residency, you can divest the fund, or I mean, you can keep the fund if you like to, if you like the type of investment, but it is not necessary to have it in order to retain that type of residency permit.

LADISLAS MAURICE: So to be able to work towards permanent residency, do you need to spend a minimum amount of time or be a tax resident, etc., during temporary residency? My question is, essentially, can you use this as just a paper residency to work towards permanent residency, or do the Italian authorities expect you to actually spend time, pay taxes in Italy before you can apply to permanent residency?

NICOLO: Well, the newer requirements for this type of residency permit are, A, have a place to stay in Italy. You need to have a residential place. You either own real estate or you rent real estate. It’s not a P. O. Box address, it’s a genuine residential property. Then you need also to retain the investment. Now, it makes a little different if you claim children who should be in school. If children are in school, they have to go to school in Italy, they cannot go to school anywhere else. In that case, they need to spend time and they need to have a guardian in Italy. But if you don’t have the problems, or your children are grown up, yes, you can. There’s no minimum stay requirement. In order to renew, you need to show that investment is still active at a time of renewal and you need to show that you have a rental or a property that you claim residency at.

LADISLAS MAURICE: But what about to get permanent residency status, because there it’s not a renewal, it’s applying for a different status?

NICOLO: Well, that’s based on the type of residency permit you had. As long as you satisfied the requirements of the old residency permit, then you can move to the permanent residency. Just an example. digital nomads visa requires you minimum €28,000 of income per year to renew that. Well, you need to have that in order to claim the permanent residency.

LADISLAS MAURICE: Okay.

NICOLO: Different tiers, if you have the representative office route, which is directorship self-employment, well, the minimum income is €8,000. So yes, you need to have that in order to claim the permanent status. So it depends the route you come from.

LADISLAS MAURICE: Okay, cool. Interesting.

Tax residency complications and planning in Italy

NICOLO: Well, generally speaking, you need to acquire tax residency to Italy, you may also claim coverage under a double tax treaty between Italy and your home country, but being covered under that and assessing the situation normally takes a lot of legal efforts and still doesn’t screen against dispute from the Italian tax office in the event of an investigation.

LADISLAS MAURICE: Cool. So people need to be very careful. If they’re trying to get the permanent residency without being tax residents in Italy, they’re really they’re walking on a minefield that will at least cost them a lot in legal fees and with no guarantee of outcome in the end, so people just need to be careful with that one. It’s just safer to run with the assumption that you’ll have to pay taxes in Italy if your objective is to get permanent residency. Is that fair to say?

NICOLO: Well, that’s fair to say, and especially what I cannot stress enough the importance of a good tax planning when moving to Italy, because if you can combine tax incentives plus restructuring of your income sources, you may not end up in paying high taxes at all. Italy is a nominally high tax jurisdiction, but practically, with all the write off, incentives to move, etc., etc., your effective tax burden may be lower than you would expect, at least compared with other European countries.

Digital nomad visa in Italy

LADISLAS MAURICE: Yeah. We’ll discuss taxes in the second part of this interview a bit later. Okay, so we discussed how to get residency through the golden visa. The digital nomad visa, you said, is €28,000 a year. It’s active income, so essentially, any job that gets you €28,000 a year, and you’re good?

NICOLO: Correct. It’s self-employment or employment income sources. And you need to prove that at least six months’ proficiency in your profession as– By the way, they talk digital nomads and remote workers, so self-employed and employees. And you need to make €28,000 and prove you can perform your work remotely. It’s fairly hard if you are a nurse, I think it’s easy– Well, actually, nurse can also do consulting via video call as we do, but probably this is more targeted to individuals working with a laptop, consultants, marketers, or even accountants, lawyers, that is more feasible.

LADISLAS MAURICE: And that’s open to any country?

NICOLO: Correct. There are no country restriction. The only restriction is the amount of income and the high skills in the professions.

LADISLAS MAURICE: Cool. And you can help people with that application from A to Z?

NICOLO: Correct.

LADISLAS MAURICE: Cool. All right. That’s the digital nomad visa, which is really, really interesting. I mean, that’s one good way of moving to Europe for people who want that, especially combined with the tax incentives we’ll be discussing. 

Representative company office option in Italy

LADISLAS MAURICE: And then there is when you’re the CEO, you’re the founder of your company back home, and you create a representative office, can you elaborate a bit on that route?

NICOLO: Correct. This is, I would say, an alternative route. So basically, we call it the representative office visa but, generally speaking, it’s a self-employment visa granted to individuals with a registered profession or directorship at the local Italian Chamber of Commerce. What’s the easiest level to achieve that? If you have a non-Italian company, you can create a representative office so you’re registered at the local Italian Chamber of Commerce. And based on that, you can claim a long-term self-employment visa to move to Italy to basically run the Italian office. Now, this is not a permanent establishment, it’s just a representative office.

The requirement is to have a limited company outside of Italy, create the representative office, and transfer yourself, or, well, as a director of the Italian entity, you obtain a transfer. And the company needs to be running for at least one years. So the foreign company, not the Italian office. And you have to pay yourself €12,000. A dormant company doesn’t work, a company liquidation doesn’t work, a company that is subject to bankruptcy doesn’t work, or a partnership, or charity. It has to be a limited, Ltd, LLC, and at least make €12,000. So how can you pay yourself a salary of €12,000 if you don’t even make it?

LADISLAS MAURICE: Cool. Okay. So you need a real company back home that’s actually functioning and then just create a representative office, and even if it’s not very active in Italy, correct?

NICOLO: Correct. In fact, the representative office does not need to make money, cannot make money. It’s just a way, basically, to expand the business and potentially, in the future, create a local permanent establishment or set up a new company, but for the sake of immigration that is sufficient to secure self-employment visa. The only countries disbarred are countries that do not belong to WTO. On top of my head, I have Serbia, Algeria, Iran, North Korea, and most of the Pacific Islands. But most jurisdiction, I would say 85% of the jurisdictions in the world qualify.

LADISLAS MAURICE: Can you be, for example, a, whatever, Canadian with a US LLC applying or does it need to be a company in your country of citizenship, or can it be any?

NICOLO: Well, technically, you can. The biggest problem is that whenever you walk at the Italian consulate to request the visa, they may not approve that because they cannot check documents outside of the consulate jurisdiction. So Americans, it’s easier if they apply with a US LLC, Canadians with Canadian LLC, UAE residents with Dubai LLC or Abu Dhabi. That’s the only issue. Technically, you can, but for practicality, better if same company in the same country where you apply.

Review of visa conversion and privileges in Italy

LADISLAS MAURICE: Cool, fantastic. And then, as with all these visas, after five years of actually living in Italy, you can get permanent residency, and then another 5 years to 10 years, you can apply for citizenship, essentially, that’s–

NICOLO: Correct. All the visa carry the right, well, they can then tag spouses and children using family reunification or cohesion. All the visas, apart from the digital nomads, allow you to register for Italian healthcare for free. So you don’t have to be covered by private health insurance. That’s another advantage, especially the American audience is very interested in. And well, another type of visa that we’ve been working is in the event you’re claiming Italian citizenship, so if you have the documents to apply for Italian citizenship, you don’t have to wait for the Italian consulate outside of Italy. You can move to Italy, claim residency. And if your stay extends 90 days, you can claim for a temporary permit, which then, of course, whenever they grant you your citizenship, you’re done. But that is also another route to move to Italy, which we’re seeing more and more people interested in.

Elective visa for passive income in Italy

LADISLAS MAURICE: That’s brilliant. That’s really brilliant. Cool. And then the last one is the elective visa. So that’s for people with passive income.

NICOLO: Correct. Basically, you can define passive income as pension, rentals, royalties, financial income, such as dividends, capital gains, interest, basically, any type of income that is not from employment or self-employment activities. It’s €31,000 for one applicant, €37,000 for two applicants, and then increases of 5% for any further applicants. And if you can prove those income sources, normally through your income statement, tax return, etc., you are granted a one-year visa, which is not renewable, up to five, so it can lead to permanent residency, but you still need to maintain that sufficient income.

That visa is not convertible. All the visa we discussed before, you can enter the self-employment and then move into employment, for instance, if somebody hires you, or different self-employment category. Elective residency, you have to remain under that, and you cannot undertake employment or self-employment activity.

LADISLAS MAURICE: In Italy?

NICOLO: In Italy, correct. So you have to think whenever you move to Italy, you just reduce the type of activities you can perform. If you’re interested in starting your self-employment, I wouldn’t recommend to start on this route.

LADISLAS MAURICE: What if you move on that one and do self-employment but overseas? Can you still, essentially live in Italy, get paid through a UAE or US structure, and then declare the tax in Italy, but like clearly you’re not working in Italy?

NICOLO: You can, but the position is not freelance, has to be through a company so you can obtain dividends. It’s a little bit trickier to structure but yes, you can.

Tax incentives in Italy

LADISLAS MAURICE: Fantastic, so many ways to move to Italy. Thank you, Nicolo. Now let’s go into the interesting topic of tax incentives, of which there are many in Italy. Some of them are really interesting. And those apply to EU people as well. For non-EU people, the first step is figuring out how you move to Italy. So that was part one. And now Part Two is which tax incentives can you benefit from? The first one that we constantly hear about online, blah, blah, is essentially the €100k flat tax a year. Can you say two words about that one?

NICOLO: Yeah. This is similar to the UK resident dom. Basically, you pay €100,000 of tax against all your non-Italian income, so income source from outside of Italy, you pay €100k, you’re good to go. Unlike the resident dom, you don’t pay further taxes if you move that money to Italy. You have foreign income, you pay €100k, then if you want to take that money and buy anything in Italy, you’re good, you don’t have to pay further taxes. Another advantage is that that also excludes CFC rules. Basically, if you pay yourself a dividend, or if you make money through a UAE company, or a BVI company, or any jurisdiction, any tax haven, well, you don’t have to report any non-Italian asset.

And if you receive income from a company or from a jurisdiction affected by CFC rules, well, those are disallowed, because for the flat tax purpose. And this regime lasts up to 15 years, you can hop off anytime. Of course, once you hop off, you cannot hop back on. But this is very interesting. And any family member can be tagged along even later. So let’s say I move to Italy– Well, I’m already in Italy, but let’s say you move to Italy, and then, in five years, and if your family member does, well, they can be tagged along. Of course, the maximum period is 15 years for the main applicant, so the second applicant exhausts that alongside you. But yes, they can be tagged along. And they need to add €25,000 per individual tagged.

LADISLAS MAURICE: All right, so for people with a lot of income, at least a million, I mean, they can end up living in Italy, enjoying life, and paying less than 10% taxes. I mean, that’s really attractive. Cool.

NICOLO: Correct. Or, you can use that as a bridge. For instance, you may have a large private pension fund that is outside of your home country, then you can wrap it up and pay yourself, pay your whole complimentary fund, while in Italy, you pay €100k, you’re good to go. And then the year after, we just have this after-tax money, and you can use it freely. That can also be an option.

7% pensioner scheme in Italy

LADISLAS MAURICE: All right, very interesting. Thank you. Let’s move on to the tax incentives for people moving to little villages and towns in the south of Italy. Can you elaborate on that, or various parts of Italy?

NICOLO: Correct. That’s the 7% pensioner scheme. Basically, if you were not a resident of Italy in the last five years before moving, and you move into a municipality with 20,000 inhabitants or less located in the south, and you were a resident of a jurisdiction with which Italy had a double tax treaty in place, for up to 10 years, your whole income, so pension plus other non-Italian income sources, are taxed at flat 7%. So pension plus capital gains, rentals, royalties, whatever, 7% flat for 10 years. No, you don’t have to report your foreign non-Italian assets.

This scheme is quite interesting, especially for capital gains. If you realize a large capital gains and receive a pension, you can claim 7% of the whole bundle. The whole game here for the flat tax, and for the €100k flat tax, and the 7% is to restructure your income in a tax efficient way that 7% or €100k is the only tax you pay on.

LADISLAS MAURICE: And that’s for people that are retired, officially retired?

NICOLO: Well, they need to receive a private or public pension based on the local system. For instance, they may not qualify for Social Security in their home country, but the fund they contributed into they may pay at 50 years of age. So may still be working but they have one pension income source.

LADISLAS MAURICE: Okay.