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The so-called “functional link” of the repatriated tax regime and remote workers

by Giovanni Barone | Mar 3, 2022 | Blog

The special regime for the so-called repatriated individuals, introduced by Article 16 of Legislative Decree 147/2015 and amended by the Law Decree N. 34/2019 , is an special regime which purpose is to attract individuals to Italy with the aim of having them contribute to the economic, financial and cultural growth of the Country. One of the requirements for the application of the regime is the presence  of a functional link between the beginning of  the work activity in Italy and the transfer of the employee.

This condition – which is not required by Legislative Decree 147/2015 – was explicitly provided Circular N. 17/E of 2017 issued by the Italian Tax Authority, which provided for it as part of the interpretation of the rule.

Its existence as a condition to be met in order to access the benefit of the repatriated regime has also been provided by several resolutions that have followed since the first introduction of the regime,  as well as reiterated by the Circular of the Italian Tax Authority N. 33/E of 2020, which provided clarifications on the application of the  regime after the amendments introduced by the Law Decree N. 34/2019, which significantly simplified the conditions to access the regime.

As a result of the changes made by the legislator, it is no longer required that the repatriated individual carries out his or her work activity with a company resident in Italy, and Circular N. 33/E of  the 2020 has clarified that individuals who come to work in Italy on behalf of a foreign employer who is not resident in Italy may also access the regime, provided the general conditions laid down are met.




This possibility has been confirmed by recent responses from the Italian Tax Authority, lastly the response N. 55 of the 31/01/2022 regarding an Italian citizen, registered with AIRE (Office of Record of Italian citizen resident abroad) since 2012 and resident in an EU country since 2018, the year in which he signed an employment relationship with a local foreign company.

Later the employee expressed to his (foreign) employer “the desire to move back to Italy in January 2022, keeping the employment relationship, and obtaining authorization to carry out his work iremotely  from that State for the years to come“.

The Tax Authority has granted the individual with the possibility to benefit of the repatriated scheme.

In such a circumstance, leaving aside the analysis of the corporate tax aspects (i.e. risk of permanent establishment), in lack of an assignment or business mission of the employee, there is no doubt that social security contributions are due to be paid in Italy.

In addition, the question arises as to which law should be applied to regulate the employment relationship.

Without prejudice to the will of the parties for the regulation of the employemnt relationship, since the work activity is carried out in the territory of the State, the question is  whether the Italian Labour legislation should “prevail” over the foreign one implied by the upkeeping  of the original employment relationship, taking into account that the Italian laws on the subject could be more favorable for the employee if compared to foreign laws.

In this context, therefore, there are many aspects to be analyzed.

From a purely fiscal point of view, a doubt arises along with a  conflict between the interpretations provided by the Italian Tax Authority: if, on one side , the functional link between the transfer and the beginning of the working activity is still required, on the other side, in the case of remote work, it seems that the simple will of the employee to transfer his/her tax residency to Italy is sufficient to ensure – together with the existence of the other conditions – the application of the regime.

A greater clarity from the Italian Tax Authority  would therefore be required.



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