Italy has a comprehensive and often complex tax system that applies to both residents and non-residents. For expats moving to Italy, understanding this system is essential for compliance and for making the most of any available deductions and exemptions.
While tax rates may appear high compared to other countries, Italy also offers numerous allowances and deductions. These can benefit expats if managed correctly, especially those with foreign income or property holdings.
Residency and Tax Obligations in Italy
The first step in determining your tax status in Italy is identifying whether you are considered a tax resident. A person is deemed tax resident in Italy if they meet at least one of these criteria: they are registered in the Italian resident population registry, their main place of business or economic interest is in Italy, or they spend more than 183 days in Italy during a calendar year.
Being a tax resident means your worldwide income is subject to Italian tax laws. Non-residents, on the other hand, are only taxed on income earned within Italy, such as rent from Italian property or local employment income.
Income Tax Rates and Allowances
Italian income tax is progressive. As of 2025, the individual income tax (IRPEF) rates range from 23 percent to 43 percent, depending on income level. In addition to national taxes, regional and municipal surcharges may apply, adding another 1 to 3 percent to your tax bill depending on where you live.
Taxpayers can reduce their taxable income through deductions for dependent family members, healthcare expenses, education costs, and specific types of insurance. Many expats can also deduct foreign taxes paid through the double taxation treaties Italy holds with more than 100 countries.
Special Tax Regimes for New Residents
Italy has introduced several favourable tax regimes aimed at attracting new residents, retirees, and high-net-worth individuals. For example, the "impatriate regime" allows expats to exclude up to 70 percent of their employment income from taxation for five years, extendable to ten years under certain conditions.
Another popular option is the "flat tax" for new residents. High-net-worth individuals who transfer their tax residence to Italy can opt to pay a flat €100,000 per year on foreign income, regardless of the amount. Their family members can join under the same scheme for an additional €25,000 each.
Taxation of Foreign Income and Pensions
Foreign income is taxable in Italy for residents unless covered by a bilateral tax treaty that assigns taxing rights to another country. This includes pensions, rental income, dividends, and capital gains earned abroad.
Public pensions from foreign governments are usually exempt from Italian taxation if the treaty specifies it. Private pensions are generally taxed as income in Italy but may benefit from partial exemptions or foreign tax credits.
Filing Requirements and Deadlines
Expats living in Italy must file an annual income tax return if they receive income not subject to final withholding tax. The tax year runs from January 1 to December 31, and tax returns are typically due between May and November of the following year, depending on whether you file electronically or through a tax advisor.
The return is filed using the "Modello Redditi" or "730" form. Most expats use the Modello Redditi due to the complexity of their income sources. Italy has moved much of the process online, though local support may still be helpful for newcomers.
Social Security and Contributions
Italy’s social security contributions are relatively high and apply to both employees and the self-employed. Employers contribute around 30 percent of an employee's gross salary, while employees contribute approximately 10 percent. Self-employed individuals must pay both parts, totaling about 25 to 33 percent.
If you are working in Italy temporarily, EU regulations or bilateral agreements may allow you to stay in your home country’s social security system. In such cases, the A1 certificate or equivalent documentation is essential to avoid double payments.
Value-Added Tax (VAT) in Italy
Italy’s standard VAT rate is 22 percent, which applies to most goods and services. Reduced rates of 10 percent or 5 percent are used for specific items like food, public transport, and cultural activities. A super-reduced rate of 4 percent is available for basic necessities such as books and some medical supplies.
VAT is charged at the point of sale and is included in the price you pay as a consumer. If you operate a business in Italy or engage in freelancing, you must register for VAT and file periodic VAT returns based on turnover and sector.
Property Ownership and Taxes in Italy
Owning property in Italy comes with several tax obligations. The primary taxes are IMU (municipal property tax), TASI (a now largely phased-out tax on indivisible services), and TARI (waste collection tax). IMU applies mainly to second homes, as the primary residence is generally exempt.
IMU rates vary depending on the municipality and property category. Foreigners who own holiday homes in Italy should budget for annual IMU payments, as well as income tax if the property is rented out. Rental income from Italian properties is taxable regardless of residency status.
Wealth and Inheritance Taxes
Italy does not levy a general wealth tax, but it does impose small taxes on foreign-held financial assets and real estate, known as IVAFE and IVIE respectively. These taxes apply only to residents and are calculated annually on the asset’s value.
Inheritance and gift taxes exist in Italy but are relatively low by international standards. Rates range from 4 percent to 8 percent depending on the relationship to the deceased and the value of the inheritance. Spouses and children enjoy high exemption thresholds.
Double Tax Treaties and Avoiding Double Taxation
Italy has a broad network of double taxation agreements designed to prevent income from being taxed twice. These treaties cover employment income, pensions, business profits, interest, dividends, and capital gains. Understanding the treaty provisions is crucial for expats with income from more than one country.
To benefit from these treaties, residents must often submit documentation such as certificates of tax residence or specific treaty forms. Proper paperwork and planning can significantly reduce the overall tax burden.
Practical Advice and Professional Help
While it is possible to navigate the Italian tax system independently, most expats benefit from consulting a commercialista, the Italian equivalent of a chartered accountant. These professionals are familiar with local rules, tax software, and deduction eligibility, making compliance much easier.
Language barriers and frequent legal updates can make the process confusing. Having expert assistance not only ensures accuracy but also helps you take advantage of deductions and incentives you might otherwise miss.
Final Thoughts for Expats in Italy
Living in Italy offers countless lifestyle advantages, but it also requires attention to financial and legal responsibilities. Understanding your tax obligations is a key part of building a successful life in the country.
With proper planning, awareness of residency rules, and timely filings, expats can manage their Italian tax affairs effectively. The benefits of life in Italy far outweigh the paperwork required to enjoy them.
