S T A B I L I T Y ( S T A T E B U D G E T ) L A W F O R Y E A R 2 0 1 7

NEW TAX REGIME FOR HNWI (HIGH NET WORTH

INDIVIDUALS)

APPROVAL OF BUDGET LAW FOR YEAR 2017

• The Budget Law (or Stability Law) for year 2017, recently approved by the Italian Parliament, includes special provisions to attract HNWI in Italy;

• The Law 11 December 2016, n.232, consists of 19 articles and waspublished on December 21st 2016;

• Most of provisions of the Budget Law are included into its art.1, whichconsists of 638 paragraphs (commi);

• Budget law comes into force from January 1st 2017, if not differentlyprovided.

1) INCENTIVES TO ATTRACT FOREIGN INVESTMENTS

• Stability law, introduces benefits for foreign investors aiming to transfer their residency to Italy. The new provisions are introduced by art.1, paragraphs 148-159

• There are two types of benefits:Taxation: Paragraph 152, through new art.24-bis of TUIR (Law on Income Tax)

introduces a lumpsum Tax on incomes generated abroad from individuals. Suchregime is optional and should be regarded as an alternative to Income Tax.

Immigration: Paragraph 148 and 156 introduce investors visa, reserved to qualifiedinvestors and simplified procedures to get Visa and permit of stay in Italy

2) IMMIGRATION

• Entry visa and permit of stay will be granted to individuals who willinvest alternatively:a)2.0 million Euros in Bonds issued by the Italian Government to be held for not less

than two years;b)1.0 million Euros in the equity of a company operating in Italy or 500 000 € in an

Innovative Start-up to be held for not less than two years;c)1.0 million Euros in Donations aiming to support projects of public interest

• The Stability law introduces for these qualified investors a new article(26-bis) of the Immigration law and a new kind of VISA: the INVESTOR VISA

• The investment grants Investors Visa (and residence permit ifrequested) for two years plus three years

CONDITIONS:

• In order to get Investor Visa foreign inviduals will have:

To prove the availability of funds which correspond to the investment; To declare that those funds will be used for one of those investments and held for two

years; to prove that money comes from legal sources; To prove the availability of additional funds, not less than the amount which grants the

exemption to contributions to the Health System (Really unrelevant for a HNWI).

OTHER PROVISIONS

• Simplified procedures will be introduced also for:

HNWI who will establish their tax residence in Italy and apply for the Substitutive TaxRegime (see next pages);

Individuals involved in innovative start-up companies, initiatives of investment, high level training, research to be realised with Universities, Companies, Researchentities, other public and private entities;

• For the above cases, the Ministry of Foregin Affairs conjunctly with the Ministry of Internal Affairs will have to issue specific decrees.

3) TAXATION: THE SUBSTITUTIVE TAX REGIME

• A lumpsum substitutive tax is introduced by art.1, par.152, par. for inviduals (both Italian and Foreigners) who transfer their tax residencyto Italy, under the condition that they have not been resident in Italyfor not less than nine years in the last ten years. This provision isincluded in the new art.24-bis of TUIR (Law on Income Tax);

• Substitutive Tax applies to all incomes generated abroad excludedcapital gains generated by the sale of qualified shares in the first 5 years;

• the applicant will be subject to a lumpsum tax of 100 000 € per yearplus 25 000 € per year for each member of his family;

SUBSTITUTIVE TAX: EXTENSION AND REVOCATION

• VERY IMPORTANT: Substitutive tax regime and its extension to single or more members of the family are optional: indivuals may choose to adopt the ordinary regime (Italian Income Tax named IRPEF) for themselves and/or for one or more members of their family. Revocation of the main applicant from Substituive tax regime will be effective also to all Members of the family, subject to the extension;

• Indeed it is possible to the main applicant to revoke the extension of such tax regime to a single member of the family and keep it for the others.

• Failure to pay the Substitutive Tax determines the decadence of suchregime.

OTHER BENEFITS

• Substitutive Tax exempts also from IVIE and IVAFE (taxes on value of real estate and of securities held abroad);

• Substitutive Tax exempts from Inheritance & Donations Tax• It is not obligatory to declare assets held abroad;• The option, if not revoked, lasts 15 years.

CONCLUSIONS ON THE NEW SUBSTITUTIVE TAX

• The new substitutive tax seems to be efficient for HNWI who generate very high income abroad (out of Italy);

• Depending on the amount and on the sources of such income the lumpsum tax could be regarded as convenient or too high;

• The eligible individuals should take in consideration that with ordinary regime, CFC rules apply to dividends and profits

generated by companies established in tax heavens; Substitutive Tax Regime provides exemption from IVIE and IVAFE.• The adoption of Substitutive Tax Regime will allow to receive a Visa

with a simplified procedure, so it could be regarded as an alternative to Investors Visa