Italy – Taxation

How does the tax system in Italy work?

The Agenzia delle Entrate — Italy’s Revenue Agency — serves as the central authority overseeing the country’s tax affairs. Italy structures its income tax across three distinct layers: national, regional, and municipal. Because each layer adds to the total charge, working out your true tax position requires accounting for all three, rather than focusing solely on the headline national rate.

The primary income tax is IRPEF (Imposta sul Reddito delle Persone Fisiche), which operates on a progressive scale running from 23% to 43%. Regional taxes (Addizionale Regionale) and municipal taxes (Addizionale Comunale) are then applied on top of IRPEF. Unlike a uniform national system, Italy’s layered approach means your overall tax liability will vary according to your place of residence. Always verify current rates with the Agenzia delle Entrate.

From January 2025, the three IRPEF bands are: 23% on income up to €28,000; 35% on income between €28,001 and €50,000; and 43% on income exceeding €50,000. This three-bracket structure was confirmed as a permanent feature under the 2025 Budget Law (Law No. 207 of 30 December 2024).

IRPEF applies progressively to all Italy-sourced income for non-residents, and to worldwide income for those who are tax resident. This principle of global taxation is a critical consideration for anyone relocating to Italy: once tax residency is established, income arising anywhere in the world — including overseas rental income, dividends, pensions, and capital gains — may become taxable in Italy.

Tax residency is assessed independently of immigration status. Under the Italian Tax Code, residency is established by satisfying one or more of four criteria: habitual residence (the place where an individual spends the majority of their time); domicile (the location where an individual’s primary personal and family relationships are concentrated); enrolment in the Anagrafe (the civil population registry, now treated as a rebuttable presumption); or physical presence in Italy for more than 183 days within the calendar year.

These rules, which took effect from 1 January 2024, introduced an updated framework for determining tax residence, placing greater emphasis on physical presence alongside domicile and registry enrolment. Domicile is now expressly defined as the place where an individual’s most significant personal and family ties are centred, and the previously absolute presumption of tax residency for those registered in the civil registry has been softened to a rebuttable presumption — meaning taxpayers may produce evidence to contest their deemed resident status.

Spending fewer than 183 days in Italy does not automatically provide shelter from Italian tax residency; the domicile and habitual abode tests require thorough analysis and thoughtful planning. Individuals working remotely from Italy on behalf of foreign employers may now be regarded as tax residents purely on the basis of their physical presence, potentially bringing their entire worldwide income within the scope of Italian taxation.

Does Italy have double taxation agreements, and how do they affect expats?

Italy maintains a broad network of double taxation agreements (DTAs) with countries across the globe. These treaties are intended to ensure that the same income is not taxed twice — both in Italy and in the country from which it originates or in another country where the taxpayer has financial interests. The complete list of treaties is held by the Italian Ministry of Economy and Finance (Ministero dell’Economia e delle Finanze — MEF) and can be found under “Convenzioni contro le doppie imposizioni” on the MEF website.

The underlying logic of these treaties is that primary tax liability rests with the country in which verified tax residency exists, with tie-breaker provisions resolving any ambiguity about which jurisdiction takes precedence. In practical terms, where the same income is subject to tax in both Italy and another country, the applicable DTA will specify which state holds primary taxing rights and how relief or a credit should be calculated and applied.

Where a taxpayer is resident in a country that has a DTA with Italy, tie-breaker clauses within that treaty determine the definitive country of tax residence. This is particularly relevant for individuals who divide their year between two countries, or who continue to receive income — such as pensions, rental proceeds, or investment returns — from their home country after relocating to Italy.

Italy has agreements with the United States covering income taxes, social security, and gift, estate, and inheritance taxes. DTAs also exist with the vast majority of EU member states, the United Kingdom, Canada, Australia, Japan, and numerous other countries. For the most up-to-date list of treaty partners and the text of individual agreements, consult the Agenzia delle Entrate or the MEF treaty database, as both the treaty list and specific provisions are subject to periodic revision.

In practice, expats should examine the applicable DTA before assuming that a particular income stream — such as a government pension, a private pension, or rental income — will be taxed exclusively in Italy. Certain treaty provisions allocate taxing rights on specific income categories to the source country rather than the country of residence. A qualified cross-border tax adviser can clarify how the relevant provisions apply to your personal circumstances.

What taxes do expats need to pay in Italy?

Expats who establish tax residency in Italy face a set of obligations that extends well beyond IRPEF. A clear understanding of each tax type — together with its applicable rates and thresholds — is indispensable for sound financial planning.

Income Tax (IRPEF)

From 2025, IRPEF is charged at 23% on income up to €28,000; 35% on income from €28,001 to €50,000; and 43% on income above €50,000. Regional income tax is levied in addition, ranging from 1.23% to 3.33% depending on the region of residence, and a further municipal surcharge is imposed by the local authority. These municipal surcharges are typically up to 0.9% and are structured progressively in line with the national income tax brackets.

Capital Gains Tax

Capital gains arising from the disposal of financial assets — including shares, bonds, and investment funds — are generally subject to a substitute tax (imposta sostitutiva) of 26% in Italy (as of 2025). Gains from the sale of a primary residence held for more than five years may qualify for exemption. The applicable rates and rules vary depending on the nature of the asset and whether a qualifying participation is involved. Always confirm the current position with the Agenzia delle Entrate or a local tax adviser, as rates are subject to change.

Wealth Taxes on Foreign Assets (IVIE and IVAFE)

As of 2024, IVIE (Imposta sul Valore degli Immobili all’Estero) — the tax on real property held abroad by Italian tax residents — is levied at 1.06%, with an exemption where the resulting charge falls below €200. IVAFE (Imposta sul Valore delle Attività Finanziarie all’Estero) applies to financial investments held outside Italy by tax residents, calculated on the value of holdings as at 31 December each year, at a rate of 0.2% — which may rise to 0.4% where assets are held in jurisdictions classified as tax havens. Certain overseas assets, such as foreign bank accounts, are taxed at a flat rate of €34.20 per account, though this charge does not apply where the average annual balance falls below €5,000.

Property Tax (IMU)

IMU (Imposta Municipale Unica) is an annual property tax collected by local municipalities from property owners. Rates vary by municipality and property category, but the base rate for residential properties is typically around 0.76%, with local authorities permitted to adjust this within bounds set by national legislation. Primary residences (excluding those classified as luxury properties) are generally exempt from IMU. Always verify the rate for your specific municipality, as these are set at the local level.

Inheritance and Gift Tax

Italy imposes inheritance and gift tax (imposta sulle successioni e donazioni). As of 2025, rates range from 4% for transfers to spouses and direct descendants — with a €1 million allowance per beneficiary — to 6% for siblings and other relatives, and 8% for unrelated recipients. An allowance of €1.5 million applies per disabled beneficiary. These thresholds are subject to legislative change; confirm the current figures with the Agenzia delle Entrate.

Social Security Contributions

Employees in Italy pay social security contributions (Contributi Previdenziali) of 9.19% of gross salary, with employers contributing a considerably larger share. These contributions fund the Italian pension system (INPS), unemployment benefits, and other social programmes. Contributions are compulsory for all employees and are deducted from gross pay before income tax is calculated. Self-employed individuals make contributions to INPS at rates that vary by category; consult the INPS website for current figures.

VAT (IVA)

Italy applies VAT (Imposta sul Valore Aggiunto, or IVA) to goods and services. The standard rate stands at 22% (as of 2025), with reduced rates of 10% and 4% covering certain categories such as foodstuffs, books, and medicines. This is broadly in line with VAT frameworks applied across other EU member states.

Are there any tax breaks or special regimes for expats in Italy?

Italy has put in place several preferential tax frameworks aimed at attracting new residents, skilled professionals, retirees, and high-net-worth individuals. Identifying the regime that fits your profile — and making the necessary election at the right moment — can yield a very significant reduction in your overall tax liability.

The Inbound Workers (Impatriates) Regime

The inbound tax regime is a fiscal incentive created by the Italian government to encourage highly qualified individuals to relocate to Italy. The revised framework, established under Legislative Decree No. 209/2023, applies to individuals who transfer their tax residence to Italy from 1 January 2024 onwards.

The incentive takes the form of a partial IRPEF exemption: 50% of Italian-sourced income is excluded from taxation; where the beneficiary has at least one minor or adopted child who is tax resident in Italy, this exemption increases to 60%. The benefit runs for five years and is subject to an annual income ceiling of €600,000.

To be eligible, applicants must generally hold at least a degree-level qualification (or a recognised equivalent professional qualification of at least three years), must have been tax resident outside Italy for the three preceding tax years, and must commit to maintaining Italian tax residency for a minimum of four years. The regime is available to employees, the self-employed, and entrepreneurs, and applies regardless of nationality provided all conditions are satisfied.

The 7% Flat Tax for Foreign Retirees

A dedicated regime allows qualifying foreign retirees to pay a flat rate of 7% on all income sourced outside Italy, with the standard duration of the regime being ten years from the year in which Italian tax residency is first established. The regime covers pension income as well as employment or self-employment income, business income, capital income, and rental income of foreign origin.

To qualify, you must not have been an Italian tax resident at any point during the preceding five tax years, and you must transfer your official registered address to an eligible municipality — specifically, a town with a population of fewer than 20,000 inhabitants situated in one of the approved southern regions: Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia, or Sicily. The regime was designed to encourage economic activity and demographic renewal in smaller southern communities. Unlike the HNWI flat-tax scheme described below, this option is targeted specifically at individuals receiving foreign pension income.

The High-Net-Worth Individual (HNWI) Flat Tax Regime

The new residents’ regime is directed at individuals relocating to Italy and provides for a substitute tax on foreign-sourced income. Its purpose is to attract wealthy individuals and stimulate inward investment.

Under changes introduced by the 2026 Italian Budget Law, individuals who transfer their legal residency to Italy from 1 January 2026 pay a flat tax of €300,000 per year on all foreign-sourced income. Those who opted into the regime during the 2024 tax period may continue at €100,000; those who entered during the 2025 tax period continue at €200,000. Each dependent family member who joins the scheme is subject to an additional charge of €50,000 per year (as of 2026).

The flat tax is an annual lump-sum payment covering all foreign-sourced income for a maximum of 15 years. It replaces the standard progressive IRPEF rates on foreign income and exempts participants from wealth taxes, inheritance tax, and foreign asset reporting obligations in Italy. Income arising from Italian sources remains subject to standard IRPEF rates.

To be eligible, applicants must not have held Italian tax residency during at least nine of the ten years immediately preceding their application. Eligibility can be confirmed through an advance ruling submitted to the Agenzia delle Entrate prior to taking up the regime, or by opting in directly when filing the first Italian income tax return.

This regime is conceptually comparable to Portugal’s former Non-Habitual Residency (NHR) scheme or Malta’s Global Residence Programme in that it provides a capped or fixed tax charge on foreign income for new residents — though the specific structure, costs, and eligibility criteria differ considerably. Given the substantial increase in the flat tax amount in recent years, prospective applicants should carefully model the total tax saving against their actual foreign income before committing.

How and when do expats file a tax return in Italy?

The Italian tax year runs with the calendar year, aligning with most continental European systems and differing, for example, from the United Kingdom’s April-to-April tax year. All income received between 1 January and 31 December must be reported in the return submitted the following year.

Italian tax returns are generally due by the end of September of the year following the tax year in question — meaning the return for the 2025 tax year would ordinarily be due by 30 September 2026. Any tax owed is typically also payable by that deadline, so expats need to manage their cash flow accordingly. Always check the precise current deadlines on the Agenzia delle Entrate website, as these may be modified each year.

The process for filing a tax return as an expat in Italy involves the following steps:

1. Obtain your Codice Fiscale. Any Italian Embassy, Consulate, or Agenzia delle Entrate local office can issue a Codice Fiscale based on personal information including name, date and place of birth, citizenship, and domicile — you will need to show a valid ID document. This is Italy’s equivalent of a national tax identification number and is needed for virtually all official and financial transactions.
2. Register with the Anagrafe (civil registry). Once you are physically settled in Italy, register your residence with your local Comune (municipality). This triggers formal recognition of your presence and starts the clock for tax residency purposes.
3. Assess your tax residency status. Determine whether you meet the 183-day or other criteria for Italian tax residency in the relevant calendar year. If in doubt, seek professional advice before filing.
4. Choose the correct tax return form. The Modello Redditi PF (formerly Modello Unico) is used by self-employed individuals and those with complex tax situations to report all types of income, and is also where applicable deductions and tax credits are claimed. The Modello 730 is a simplified return used mainly by employees and pensioners; it can often be processed directly by employers or pension providers.
5. File electronically. The Italian income tax return must be filed electronically. You can file via the Agenzia delle Entrate’s online portal (accessible at agenziaentrate.gov.it), through a CAF (Centro di Assistenza Fiscale — a licensed tax assistance centre), or via a qualified commercialista (Italian accountant).
6. Pay any outstanding tax. If your return shows tax due beyond any withholdings already made, settle the balance by the deadline. Advance payments (acconti) for the following year may also be required.

Filing a return late carries financial penalties in Italy. Minor delays may attract a reduced surcharge if the return is submitted within 90 days of the deadline, but penalties escalate the longer the filing is overdue. Interest on unpaid tax begins accruing from the due date. For current penalty rates, consult the Agenzia delle Entrate. Engaging a commercialista with experience handling expat and cross-border situations is strongly recommended, particularly during your first years of Italian tax residency.

What are the tax implications of leaving Italy?

If you have established Italian tax residency and subsequently decide to move abroad, there are several important steps to take and potential obligations to address before and after your departure. Italy’s tax authority has intensified its scrutiny of departing residents in recent years, particularly where significant wealth or unrealised capital gains are at stake.

Italy does apply an exit tax to individuals who hold substantial qualifying shareholdings (generally above 25%) in companies at the point they cease to be tax resident. This tax is calculated on unrealised capital gains as at the date of departure. The applicable rules are technical and depend on both the size of the shareholding and the destination country. If you are planning to dispose of assets or restructure investments around the time you leave, specialist advice should be sought well in advance.

An anti-abuse provision stipulates that Italian citizens who relocate to jurisdictions classified as ‘tax havens’ (as identified by a Decree of the Ministry of Finance) are presumed to remain Italian tax residents even after deregistering from the civil population records, unless they can demonstrate otherwise. This reversal of the burden of proof is a significant risk for anyone intending to move to a low-tax country.

To formally end Italian tax residency, you must cancel your registration in the Anagrafe at your local Comune and, where applicable, enrol in the Anagrafe degli Italiani Residenti all’Estero (AIRE) registry. The Italian tax authority monitors the residence status of Italian citizens who move abroad through the AIRE registry. Non-Italian nationals departing Italy permanently should cancel their residency registration with the relevant Comune.

A final Italian income tax return covering the period of Italian residency in your last year of residency must also be submitted. If you retain Italian property, investments, or business interests after leaving, you may continue to have Italian tax obligations as a non-resident on any Italy-sourced income. The IVIE and IVAFE foreign asset reporting requirements fall away once you are no longer an Italian tax resident, but Italian-sourced income remains taxable in Italy regardless of where you are subsequently based.

The year of departure is often among the most complex in terms of tax compliance. Consulting a commercialista experienced in cross-border matters before you leave will help ensure that your departure is fully compliant and minimise the risk of future enquiries from the Agenzia delle Entrate.

Practical tips for managing taxes as an expat in Italy

• Keep meticulous records of your time in Italy. Under Italian rules, any portion of a day counts as a full day — so both arrival and departure days are included, and the days need not be consecutive. Maintain a contemporaneous log of your travel into and out of Italy, backed up by passport stamps, boarding passes, and accommodation records.
• Don’t delay elections into special regimes. Many of Italy’s preferential tax frameworks — including the inbound workers relief and the HNWI flat tax — must be elected either before or at the time of filing your first Italian return. Failing to act within the available window may result in permanently forfeiting substantial benefits.
• Obtain your Codice Fiscale before relocating. This can often be arranged through an Italian consulate in your home country before you move. Having it ready in advance accelerates the process of opening a bank account, signing a tenancy agreement, and registering for healthcare once you arrive in Italy.
• Be thorough about declaring worldwide income. Once you become tax resident, your obligation to report all global income — covering foreign pensions, rental receipts, investment returns, and capital gains — is comprehensive. Failing to disclose foreign assets and income can attract substantial financial penalties.
• Engage with your DTA before filing season. Rather than leaving treaty considerations until you file your return, review how the applicable DTA affects your position as early as possible. Some treaty provisions are time-sensitive or require action — such as obtaining a certificate of residence — to secure the benefits they provide.
• Take specialist advice before disposing of assets. Selling a significant shareholding, property, or business either shortly before or after becoming an Italian tax resident can generate unexpected tax liabilities. Always model the tax consequences in advance with a specialist adviser.
• Work with a commercialista who handles cross-border matters. Always consult with a qualified Italian tax adviser (commercialista) or visit the Agenzia delle Entrate website for the most current rates and personalised guidance for your specific region and municipality. Cases involving foreign income, DTAs, and preferential regimes are genuinely complex, and professional support is a worthwhile investment.
• Don’t overlook obligations in your previous country of residence. Moving to Italy does not automatically extinguish your tax responsibilities elsewhere. Some countries tax on the basis of citizenship rather than residency, and others impose exit charges. Coordinate your planning across both jurisdictions before making any move.

Frequently Asked Questions: Taxation in Italy for Expats

When do I become a tax resident of Italy?

You are treated as an Italian tax resident for any calendar year in which you satisfy at least one of four criteria for more than 183 days: you are registered in the Anagrafe (civil registry); your domicile — meaning the principal location of your personal and family relationships — is in Italy; your habitual abode is in Italy; or you are physically present in Italy for the greater part of the year, even if not on consecutive days. In any year where none of these criteria is met, you are not an Italian tax resident for that year.

Does Italy tax my worldwide income?

As a general rule, if you are tax resident in Italy, you are liable to Italian tax on your worldwide income, though an applicable double taxation treaty may alter this position depending on the category of income involved. Non-residents are taxed solely on income that arises within Italy. Once you become a resident, it is essential to disclose all foreign income sources to the Agenzia delle Entrate.

How is my foreign pension taxed in Italy?

The tax treatment of a foreign pension is governed by the DTA between Italy and the country from which the pension is paid, as well as the nature of the pension — whether it is a government service pension, a private pension, or a social security payment. In general, private pensions paid from abroad are taxable in Italy once you are resident there. However, the 7% flat tax regime for retirees — available to those moving to qualifying municipalities in Italy’s south — allows eligible foreign retirees to pay a flat 7% on all foreign-sourced income in place of the standard progressive rates. The position should always be verified under the specific treaty relevant to your circumstances.

What is the filing deadline for Italian income tax returns?

Italian tax returns are generally due by the end of September of the year following the tax year — meaning the return for the 2025 tax year would normally be due by 30 September 2026. Check the Agenzia delle Entrate for the confirmed deadline each year, as it can be adjusted by decree.

Can I be taxed in both Italy and my home country on the same income?

Double taxation agreements between Italy and most major countries are specifically designed to prevent this outcome. The fundamental principle is that primary tax liability rests with the country in which verified tax residency exists, with tie-breaker tests resolving any uncertainty about the applicable jurisdiction. In practice, you should claim the appropriate relief — whether an exemption or a foreign tax credit — on whichever return requires it. A cross-border tax adviser can help you structure this correctly.

What is the Inbound Workers (Impatriates) regime, and who qualifies?

The regime confers a 50% IRPEF exemption on Italian-sourced income — rising to 60% where the beneficiary has at least one minor or adopted child who is tax resident in Italy — for a period of five years, subject to an annual income ceiling of €600,000. To be eligible, applicants must generally hold at least a degree-level qualification, must have been tax resident outside Italy for the three preceding tax years, and must commit to maintaining Italian tax residency for at least four years. The regime is open to employees, the self-employed, and entrepreneurs of any nationality.

Are there wealth taxes in Italy on assets I hold outside the country?

As of 2024, IVIE — applied to real estate held abroad by Italian tax residents — is charged at 1.06% of the property’s value, with an exemption where the resulting liability falls below €200. IVAFE — applied to financial investments held outside Italy by tax residents — is levied at 0.2% of the value of holdings as at 31 December each year. Both taxes are annual obligations for Italian tax residents with overseas assets and must be declared in your Italian tax return. Check the Agenzia delle Entrate for current rates, as these are subject to change.

What happens to my Italian tax obligations if I leave Italy?

You should formally cancel your residency registration at your local Comune and, where applicable, enrol in the AIRE registry. A final Italian income tax return covering the year of departure must be submitted. If you hold significant company shareholdings, an exit tax on unrealised gains may be triggered. Italian-sourced income — such as rental receipts from Italian property — remains taxable in Italy even after you are no longer a resident. Seek professional advice both before and after your departure to ensure that you leave on a fully compliant basis.