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1 August 20232 minute read

Cooperative Tax Compliance for High-Net-Worth Individuals (HNWIs) as a barometer of Italy's tax policy direction

Cooperative Tax Compliance for High-Net-Worth Individuals (HNWIs) will be implemented in Italy as a component of the most extensive Italian tax reform in the last 50 years.

The Senate has approved an amendment to the tax delegation bill, extending the existing regime designed for multinationals to include individuals who wish to participate in the cooperative tax compliance program with the Italian tax authorities. The tax delegation bill will then undergo final approval in the Chamber of Deputies. The main purpose of this scheme is to establish a structured framework for HNWIs who fulfill specific criteria:

  • Individuals who transfer their residence to Italy, including those benefiting from the EUR100,000 flat tax on foreign income (whose number has steadily increased year by year).
  • Individuals who maintain their residence abroad but have a total income of EUR1 million or more in Italy, which may encompass income held through third-party entities or trusts. Income subject to substitute tax or withholding tax will also be considered for this threshold.
  • While the specific implications of adhering to the cooperative compliance regime will be defined through the upcoming legislative decrees in the next few months, some anticipated advantages should include:
    • Simplification of tax compliance procedures.
    • Reduction of tax penalties in case of any violations.
    • Enhanced communication and dialogue with Italian tax authorities, who will collaborate with the clients' professionals to address intricate cases involving foreign trusts, inheritance and gift taxes, double taxation issues and cryptocurrencies.

The extension of advance tax agreements with Italian tax authorities is expected to establish a new relationship between taxpayers and authorities, providing greater certainty for those who select Italy as their country of residence and investment.