This guide explains how the Italian tax system works for expats and foreign residents, including tax residency rules, income tax rates, wealth taxes on foreign assets and the special tax regimes available to new residents.
Italian tax residents are subject to a range of taxes on their worldwide income at national, regional and municipal levels. This is in addition to wealth taxes and passive income taxes, which are all taxed at different rates.
This article provides a detailed explanation of your Italian tax obligations to help you understand what you Italian tax liabilities may be, however, due to the complexity, you should always seek help and this article should act as a guide only.
Always get professional help from a qualified Italian tax expert before making any decisions or calculating your tax returns.
By getting your Codice Fiscale. Based on several personal information, like name, date and place of birth, citizenship, and a domicile, showing a valid ID document, any Embassy, Consulate and Agenzia delle Entrate local office can issue one.
Having a Codice Fiscale does not mean you become a tax resident of Italy anyway, the tax residency status is something you may/can get with your whole process of moving the center of your interests. It’s just a personal unique identification code you can use to open a bank account in Italy, to rent, buy a property or start a business.
Italy considers as a tax resident every individual who, for the most part of the tax year (183 days or more, depending), is either registered as a resident in Italy (to the Anagrafe) or domiciled in Italy for more than 6 months. This definition is taken from art. 2 of TUIR, the main Tax Code in Italy.
The consequence of being considered a tax resident of Italy is the application of the worldwide principle.
This means that if you earn any kind of income in and out of Italy, if you have properties outside of Italy, foreign bank accounts paying interest, investment portfolios that pay dividends or realize capital gains, you must file everything to the Italian Revenue Agency.
Instead, if you are not a tax resident you have to pay taxes only on the Italian sources of income and assets (property tax called IMU).
The Italian tax year is the same as the calendar year, starting from January 1st and ending on December 31st.
Personal income and business income is generally taxed on the cash basis, with very few exemptions.
The tax return deadline shows on November 30th of the following calendar year.
A missing tax return - or an incorrectly filed tax return - can cost you a minimum fine of €250 and up to 240% of any tax liability resulting from the tax return bill.
The first tax deadline for payment(s) is usually June 30th and the second is by November 30th.
There are two deadlines for tax payments in Italy that you need to be aware of:
Italy signed hundreds of tax agreements with other countries, in order to facilitate people in their life opportunities.
The main double tax treaty principle is that you ultimately pay tax in the country in which you are a tax resident; however, the other country or the country of origin could claim and require you to pay taxes on income generated on its territory or on any properties(investments there.
Should that happen, you may have the chance to deduct the tax paid in the income sourced country from your residency country tax; in that case you will not be taxed twice on the same income, but you will suffer “only” the highest tax rate between the two countries
Once you become an Italian tax resident, the National income tax you have to pay on your worldwide income will be taxed at the following rates
|
Income between |
Tax on income |
|
0 and €28,000 |
23% |
|
€28,001 – €50,000 |
33% |
|
€50,001 and over |
43% |
You may also be subject to a regional tax (between 1.23% and 3.33%) as well as a municipal tax (up to 0.9%) depending on where you live in Italy.
Depending on your retirement account and source of income, generally Italy gives you the opportunity to benefit from tax exclusions provided by the International agreements in force for public sources of pension.
The main rule is that your pension income, of any kind, is considered personal income.
Individuals who generate financial income through Italian banks and financial institutions generally do not disclose anything in their tax return, as taxes are already paid by the bank itself (as withholding taxes or ‘imposta di bollo’).
If you have any passive financial income (such as interests, dividends, and/or capital gains) earned abroad you must disclose it in your tax return and pay the capital gain and wealth taxes (income and wealth taxes).
The general rate for passive income is a flat tax of 26%.
The majority of the payments take place by using the F24 form.
By using this form, you can offset tax credits and tax debits, as well as identify every single tax you pay with a different tax code given by the office. You pay to any bank and post office.
Italy offers several special tax regimes designed to attract foreign residents, skilled workers and retirees. These regimes can significantly reduce the tax burden for eligible individuals during their first years of living in the country.
However, eligibility conditions can be strict and the rules have changed several times in recent years. Anyone considering these regimes should ensure they fully understand the requirements before relying on them in relocation planning.
Below are three of the most commonly discussed regimes.
Italy introduced a flat tax regime to attract wealthy individuals relocating from abroad. Under this system, qualifying new residents can choose to pay a fixed annual tax on foreign income rather than the standard Italian income tax rates.
From 2026, the annual charge for new entrants is €300,000 per year, covering most foreign-source income regardless of the amount earned. Existing participants who joined the regime earlier may continue to pay the previous €100,000 annual charge.
Additional family members can also be included in the regime for an extra €25,000 or €50,000 per person depending on the applicable rules at the time of entry.
Key points of the regime include:
This regime is often used by individuals with substantial international investments who wish to relocate to Italy without exposing their global income to Italian progressive tax rates.
Italy also offers a tax incentive designed to attract skilled workers and professionals relocating to the country.
Under the impatriate regime, a portion of employment or self-employment income earned in Italy may be excluded from taxation for a limited period.
In many cases, 50% of employment income may be exempt from Italian income tax, although the precise percentage and eligibility conditions can vary depending on when the regime was accessed and whether the individual meets certain criteria, such as relocating with family or purchasing property.
The regime typically applies for five years, with potential extensions in some circumstances.
This incentive has historically been popular with professionals moving to Italy for work, as it can substantially reduce the effective tax rate during the initial relocation period.
Italy also offers a 7% flat tax regime for certain retirees relocating to smaller municipalities, particularly in southern regions.
Under this scheme, qualifying individuals may pay a 7% flat tax on foreign-source income for up to ten years.
To qualify, individuals generally must:
The regime has been designed to encourage economic development in smaller towns and rural areas, particularly in regions such as Calabria, Sicily and parts of southern Italy.
While these regimes can offer attractive tax outcomes, they also come with complex eligibility rules and reporting requirements. In addition, they do not always remove tax obligations in other countries where an individual may still have reporting requirements or tax exposure.
Because international tax rules, residency status and double tax treaties can interact in unexpected ways, many people relocating to Italy seek advice before relying on these regimes as part of their relocation planning.
If you become tax resident in Italy, you may be required to declare certain foreign financial assets and property to the Italian tax authorities. This disclosure is normally made through the RW section of the Italian tax return and is used to assess whether wealth taxes apply.
Italy applies wealth taxes to some assets held outside the country, particularly financial investments and foreign real estate.
Examples of assets that may need to be reported include:
Two main taxes apply to foreign assets.
IVAFE is the wealth tax on foreign financial assets. In most cases the rate is 0.2% of the asset value each year.
For foreign bank accounts, a fixed annual charge of approximately €34.20 per account generally applies instead of the percentage-based tax.
IVIE applies to foreign real estate owned by Italian tax residents. The rate is typically around 1.06% of the property value, although the exact calculation can depend on the valuation method used.
Certain assets may be excluded or treated differently. For example, some public or government pension schemes are typically outside the scope of these wealth taxes.
Failing to disclose foreign assets can lead to significant penalties. These can generally range from 3% to 15% of the undeclared asset value for each year of non-reporting, with higher penalties possible in some circumstances.
Because reporting requirements can apply even when assets are already taxed in another country, many new residents are surprised by the scope of these disclosure rules.
Every house requires renovation or restoration from time to time. The Italian government has set up a series of tax incentives to facilitate house renovations, seismic structural improvements, and energy efficient investments in general.
Those who can benefit from such deductions are usually:
It is very common for an expat in Italy to have ownership of foreign located real estate property or land, and this can create more than one tax consequences while living in Italy.
First of all, you must declare the ownership (and its percentage) and pay property tax in your return.
The tax is VIE and goes with the 0.76% of the property value shown in the tax return (taken between cadastral value, acquisition value and market value).
Generally speaking, you can deduct the property taxes paid abroad.
Recently, Italy introduced a massive expat tax relief known as the “Decree of Growth”, a bill seeking to help workers, regardless of skill level, willing to relocate to Italy. This bill is in force up to December 31st 2023.
Under this law, during the first five years of employment in Italy, only 30% of your income is taxable, leaving 70% of your gross income as yours to keep.
This bill increases the untaxed income bracket to 90% if you seek to relocate to southern Italy or the islands of Sicily or Sardinia, which are southern islands under the Italian domain.
Furthermore, house ownership/mortgage or dependent children will extend this grant for an extra five years, with taxable income remaining at 50% for those extra five years. However, if three or more children are dependent on you, the five-year extra grant will stay at 90%.
When buying a property in Italy, you will have to pay 2% – 9% of the cadastral value of the house.
If you are a tax resident and the property will be your main residence, you will pay 2%. Non-residents or second-home buyers, however, will pay 9%.
Whether you are a resident or non-resident, the tax will never be less than €1000 regardless of the value of the property.
Land registry tax: €50-200 depending on whether you are buying from a private seller or a company.
VAT: you pay no VAT if buying from a private seller. If buying from a company, you might pay from 4% to 22% in VAT. For a main residence, it is 4%. For a second home – 10%, and for a luxury home – 22%.
IMU or Italian regular property tax: you don’t pay this tax if you are a resident in Italy and the house is your main residence and not classified as luxury. Otherwise, you pay this tax. The calculations are complicated and vary from municipality to municipality, so it’s best to consult an accountant.
To benefit from the main residency tax reduction, the buyer is required to move his/her residency to the same municipality in which the property is located within 18 months of the date on the purchase deed.
As a buyer, you are not required to move to the property you purchased, for the simple fact that your property might require renovations that take longer than 18 months.
Failure to move your residency within 18 months of the purchase deed will make you liable to pay the difference between the taxes paid and the taxes payable on top of a fine amounting to 30% of any tax due.
Italy offers a 7% flat tax incentive for retirees moving to Southern Italy.
To qualify, you must officially transfer your tax residency to a municipality with a population of less than 20,000 that’s located in a region of Southern Italy (Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, and Puglia).
Under this regime, pensioners with a foreign-sourced income are taxed at a flat rate of 7% for the first nine years of residency.
You will also be exempt from tax on property and financial assets, provided that you haven’t been a tax resident in the past five years and come from a country that has a Tax Information Exchange Agreement, Double Taxation Agreement, or Foreign Account Tax Compliance Agreement with Italy.
