Under a law introduced in 2017, people who move to Italy pay only an annual lump-sum tax on all foreign income. Depending on the year of arrival, the tax is $100K to $200K euros. Additional family members pay only another $25K euros annually.
In order to get this tax break, an American Citizen must do the following…
1 – You must have been a tax resident outside of Italy for at least nine of the ten years preceding your move.
2 – You must become an Italian tax resident. This involves residing in Italy for more than 183 days a year, registering with the Italian civil registry, and establishing Italy as your main center of interests.
3 – The flat tax only applies to foreign-sourced income. Income earned inside Italy is taxed under the standard Italian progressive tax rates.
4 – The benefit can be used for a maximum of 15 years.
This tax break is nicknamed the “CR7 Rule” after the initials and jersey number of soccer star Cristiano Ronaldo, who was one of the early beneficiaries of the tax change when he played for Turin-based team Juventus from 2018 to 2021.
The CR7 Rule is a fraction of the taxes many wealthy individuals pay elsewhere, other than in jurisdictions with no income tax like as Monaco or Dubai. So far, this tax policy has been used by around 5,000 people who have moved to Italy, according to Maisto e Associati, an Italian law firm specializing in tax law.
Let me leave you with this…
Politicians in neighboring France have accused Italy of “fiscal dumping”, which is the practice of using lower taxes to lure away higher income individuals. But Britain is one of the biggest sources of people utilizing CR7.
The U.K. recently scrapped a tax benefit for expats, known as the non-domiciled regime, that allowed foreigners living in the U.K. to pay tax only on what they earned domestically. Money made abroad was ignored unless brought into the U.K.
Their move to raise taxes on wealthy foreigners this year, was designed to raise much-needed revenues for the government. Instead of raising additional tax revenue, it has prompted many expats to leave for greener pastures.
As usual, voters vote with their feet.
So how about it? You spend half of the year in Italy. A few months in Florence enjoying the masterworks of the Renaissance and the rest of your time on the Amalfi coast.
You bask in the sun, eat pasta, drink wine, enjoy life, and pay very little in taxes. Of course, you’d need to give up your American Citizenship to do this.
Without that, you’d still be subject to the IRS Rules on universal income and would pay the same taxes as before. So Mrs. Lincoln, how was the play?
Of well, it was a nice thought while it lasted. If you need to talk, you know my number.
Arrivederci.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.SalarySolutions.net
www.AccountingSolutionsLtd.com
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.