Digital Nomad Visa – Tax and Social Security
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Digital Nomad Visa – Tax and Social Security
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BY COLIN JAMIESON
It is clearly the intention of the legislator that individuals requesting the DV Visa/Stay Permit need to be entirely compliant with their Italian tax and social security obligations.
Italy has two very attractive tax regimes which can apply to digital nomads:-
- the Regime Forfettario – a 5% flat tax for the first five years on a percentage (typically 78%) of gross billings, for the self employed earning (gross) up to Euro 85,000 per year;
- the Impatriates Regime – a 50%/60% exemption in calculating earned income subject to tax. This relief is available to both the employed and the self-employed. For the self employed the salary/profit reduction also applies for purposes of social security
For many individuals benefitting from the new visa regime, the effective rate of Italian tax on earnings can be extremely low, at least in the early years. Statutory social security contributions to the Italian Social Security Institute (INPS) on the other hand may represent a higher cost. Contributions are generally due where the work is being performed from Italian soil. The contributions made may entitle the worker to a pension in future providing the relevant requirements are met. The contributions include also a healthcare contribution and it is hoped that this will enable workers to avoid the need to pay for private healthcare insurance at least on renewal of their stay permits (although this remains to be seen). Italian social security contributions are compulsory for all workers unless exemption applies (and these are limited). Since compulsory social security contributions are tax deductible, the payment of contributions reduces the tax bill even further. For remote workers working under a contract of employment with a non Italian employer, the employer will need to register in Italy with the social security authorities and pay the relevant social security contributions, contracting with an Italian payroll bureau or staff agency to handle the payroll.
Self employed workers will need to register with the Italian Tax Agency, applying for a VAT number and with INPS (or alternative social security authority) within 30 days of starting work in Italy. They will also need to register with an electronic invoicing platform (either (without cost) via the Italian Tax Agency, a private provider or their accountant’s system (for a fee) prior to issuing any invoices. Since the Tax Agency platform can only accessed with an Italian digital ID (SPID) and a SPID cannot be issued before the individual is registered as registered, at the outset pr9ivate arrangements will need to be made pending acceptance of the application to be registered as resident.
Relatively few social security exemptions apply to workers carrying on their activity from Italian soil. U.S. and dual U.S./Italian citizens working in Italy may (opt to) remain covered by U.S. social security arrangements by virtue of the treaty between Italy and the US providing they obtain appropriate certification of coverage from the U.S. Social Security Administration. There are no similar facilities under any other of Italy’s other social security treaties. But on the whole digital nomads while resident in Italy, will find themselves with a relatively low tax bill and a bigger amount to pay in terms of social security, the bulk of which represents a personal pension contribution. And eligibility to actually receive a pension will depend on personal circumstances – minimum number of qualifying years of contribution, minimum income and other factors.
Individuals, especially those moving during the course of a calendar year, will need to understand whether they are tax resident in Italy or not for the year of arrival (and of departure) by reference to the Italian statutory tax residence test. If so they will likely be liable on income received during the whole of the year and liable to wealth tax on foreign assets held during the year.
Regardless of their residence status digital nomads will in general be liable to income tax and social security contributions in respect of any income derived from a working activity carried on from Italian soil.
Published on https://taxing.it/italy-enacts-new-digital-nomad-work-visa/
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