Expath triumphs in court: Victory for impatriate customers
We recently obtained a significant victory in court to defend one of our impatriate clients. This success underlines Expath’s commitment and expertise in providing comprehensive assistance to its clients, not only in tax matters but also in defending their rights before the tax court.
The impatriate regime, introduced as of tax year 2016, offers favourable tax treatment to those who transfer their tax residence to Italy. The aim is to attract human capital to Italy, encouraging qualified professionals from other countries to contribute to the country’s economic and cultural development.
The Impatriate Regime
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According to the rules in force until 2023, for a taxpayer to benefit from the impatriate regime, the following requirements must be met:
- Residence abroad for at least two tax years
- Transfer of residence to Italy
- Commitment to reside in Italy for at least two tax year
It is important to note that the impatriate scheme provides a lower tax base on income, allowing recipients to pay less taxes. This preferential tax treatment is designed to make Italy more attractive to skilled workers from abroad.
However, Agenzia delle Entrate (the Italian tax authority) has recently attempted to restrict access to this scheme, interpreting regulations restrictively and using criteria (not envisaged by law) to deny tax refunds to impatriates.
Our client's defence
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One emblematic case concerns one of Expath’s clients, who arrived in Italy from South America in 2017 to complete a university MA degree and start work in 2019. Agenzia delle Entrate denied the client a tax refund, arguing that the time elapsed between moving to Italy and starting work was excessive, thus breaking the causal link of moving to Italy to work.
Expath vigorously defended its client, highlighting two key points:Â
- Absence of legal basis for the restrictive interpretation:
We contested Agenzia delle Entrate’s restrictive interpretation, pointing out that the requirement of the time elapsed between moving to Italy and starting work is not covered by the law on the impatriate regime. No minimum time period is prescribed by law, so the arbitrary addition of this condition by the Agenzia delle Entrate was challenged as not legitimate. The tax administration cannot introduce new preclusions using its own circulars without a legal basis.
- Demonstration of the causal link:
Despite the absence of this requirement in the law, we pointed out that the causal link between the move to Italy and the start of employment was nevertheless present in the client’s case. The client, an engineering BA graduate, had moved to Italy with the explicit aim of finding employment appropriate to his skills. The time elapsed between the move and the start of work was justified as a necessary period to learn the Italian language (as shown by his attendance of Italian courses throughout 2018) and specialise through an academic course (as shown by his attendance of an MA course at university), making the client fully eligible for the impatriate scheme.
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Conclusion
The recent ruling of the Tax Court fully supported Expath and our client by ordering Agenzia delle Entrate to pay the refund, which had been wrongfully denied , and court costs. This decision confirms the validity of Expath’s defence arguments and the correctness of our interpretations of the impatriate regime.
This court victory further strengthens Expath’s position as a reliable partner for impatriate clients, offering them high-level tax advice and an effective defence of their interests before the Italian tax authorities. We invite all those in similar situations to contact Expath to assess the best legal strategy to protect themselves and assert their rights.