If you are planning to move to Italy, understanding your tax obligations is essential. If you live in Italy for more than 183 days in a calendar year, you are generally considered an Italian tax resident and must declare your worldwide income, not just income earned in Italy.
Here is a general overview of the main tax considerations:
1. Income Tax in Italy (IRPEF)
As a tax resident, Italy taxes global income, including salaries, pensions, rental income, dividends, and self-employment earnings.
Current income tax brackets:
• Up to €28,000 – 23%
• €28,001 to €50,000 – 35%
• Over €50,000 – 43%
Regional and municipal surcharges may also apply (approximately 1%–3%).
2. Foreign-Source Income
If you become an Italian tax resident, income earned abroad—such as foreign pensions, dividends, rental income, or business profits—must generally be declared in Italy.
Italy has signed double taxation treaties with many countries, which help prevent being taxed twice on the same income. Taxes paid abroad may often be credited against Italian tax liabilities, depending on the treaty and income type.
3. Special Tax Regimes for New Residents
Italy offers tax incentives for certain new residents, including:
• Flat Tax Regime – A €100,000 annual substitute tax on foreign income (plus €25,000 per dependent), subject to eligibility.
• Impatriate Regime – 70%–90% exemption on employment or self-employment income for qualifying individuals who transfer their tax residence to Italy.
These regimes have specific conditions and require careful planning.
4. Property Taxes
If you purchase property in Italy, you may face:
• IMU (Municipal Property Tax) – Generally applies to second homes.
• Registration Tax or VAT – Depends on whether you purchase from a private seller or a developer.
• Stamp Duty – Applied during property transactions.
5. Capital Gains Tax
• Selling property within five years of purchase (if not your primary residence) may trigger capital gains tax.
• Capital gains on financial assets (such as shares) are typically taxed at 26%.
6. Social Security Contributions (INPS)
If you work in Italy:
• Employees – Contributions are shared between employer and employee (approximately 30%–35% in total).
• Self-employed – Contributions generally range between 25%–30%, depending on profession and income.
Passive income is not subject to social security contributions.
7. VAT (IVA)
VAT is included in the price of most goods and services:
• Standard rate – 22%
• Reduced rates – 10%, 5%, and 4% for specific goods and essential items
8. Inheritance and Gift Tax
Italy applies inheritance and gift taxes, with lower rates for close family members:
• Spouses and children – 4% above €1 million per heir
• Siblings – 6% above €100,000
• Other beneficiaries – 6%–8%, depending on relationship
Bottom Line
Your tax position in Italy depends on your residency status, the type of income you receive, your assets, and whether you qualify for special tax regimes. While Italy offers attractive incentives and a high quality of life, proper cross-border tax planning is essential to ensure compliance and avoid unexpected liabilities.