What is Italy's impatriate tax rule and how is it changing?

If you're considering a move to Italy as someone of working age, you may want to check out its lavoratori impatriati or 'inbound workers' tax regime.

The scheme, which was introduced in 2015, provides significant tax breaks for workers who move to Italy after being out of the country for at least two consecutive tax years.

The regime primarily targets Italians who've gone abroad for work, which is why it's alternatively known as the Regime per il Rientro dei Cervelli or 'Reverse Brain Drain' scheme.

However, there's nothing stopping foreign nationals with the right to work in Italy from taking advantage of it.

READ ALSO: Reader question: When do I need to start paying Italian taxes?

According to Italy's Agenzia delle Entrate revenue agency, the scheme currently offers the following benefits:

• • You get a 70 percent income tax break your first tax year in Italy and the next four after that, or 90 percent if you become resident in Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia, or Sicily.
  • You can can receive a 50 percent tax exemption for a further five years if you have a dependant under the age of 18 or if you buy property in Italy.

To qualify under the current rules, you should not have been resident in Italy for the past two tax years, and must commit to moving your tax residency to Italy for at least two years.

There are currently no requirements around your level of education or qualifications, and you can be an employee or self-employed.

It's important to note that the Meloni government in its 2024 draft budget has proposed overhauling the regime to bring it more in line with a less generous system that was previously in place between 2015 and 2019.

READ ALSO: The tax reforms to expect in Italy's 2024 budget

Under the proposed changes, you would get:

• • A 50 percent tax break for the first five years, capped at an annual income of €600,000, with no opportunity to extend after the five years are up.

You would need to have been out of Italy for at least three years, and would need to commit to relocating for at least five years.

Only employees at the managerial level, or highly qualified or specialised self-employed people would be eligible.

Employees wanting to take up this offer would need to switch companies or organisations in order to qualify (transferring to the Italian branch of a multinational company wouldn't count).

The bill is likely to undergo further amendments before the end of the year, so these changes aren't final.

If you were planning a move to Italy anyway, taking advantage of the regime seems like a no-brainer.

Under the proposed changes, however, the benefits may not be enough to actively incentivise people to relocate; particularly self-employed workers, whose incomes are subject to steep social security payments before tax.

It's also important to bear in mind that the regime is only available to people who already have the right to live and work in Italy - that is, EU citizens or those with visas that allow the holder to work.

See more in The Local's 'working in Italy' section.