Expatriate tax - Italy

Non-EU nationals are required to apply for a work permit and report to the police in their place of residence in Italy. Similarly, their spouses and children are required to apply for the relevant visas.

Where the expatriate is an EU, EEA or a Swiss national the above is not required. An EU national that intends to reside and to work in Italy for more than 90 days must register with the Anagrafe, i.e. the Register of the Italian Resident Population.

The tax year in Italy coincides with the calendar year (January 1 -December 31).

The annual tax return is filled in via the ordinary form 'Modello Redditi Persone Fisiche' or via the simplified form 'Modello 730'.

The Income tax return (Modello Redditi PF) for the year must be filed by October 31 of the following year (e.g. the tax return for FY2024 is due by October 31, 2025). Married individuals cannot file joint returns except for the simplified tax return under certain conditions (Modello 730).

Taxes are due by June 30 (or by July 31 with a 0.4% surcharge) for income earned in the previous calendar year. Advance payment for the current year is due as well: these are equal to 100% of the previous year’s tax liability and are paid in two instalments (40% by the end of June with the balance for the previous year and the remaining 60% by November 30).

Most Italian employees working in Italy pay their tax through payroll withholding and are not required to file any tax return (exceptions apply). However, inbounds assigned to Italy may have a more complicated tax position and may be required to file an Italian tax return even if their taxes are being paid by their domestic employer.

Income tax rates and State tax brackets (IRPEF) are the following for FY2024:

Income from (euro)            Income up to (euro)                  Tax rate
      -                                            28,000                                         23%
28,001                                        50,000                                        35%
50,001                                            -                                                43%

On top of income tax, Additional Regional Tax (ranging between 0.7% and 3.33%) and Municipal Tax (ranging between 0% and 0.9%) are due.

Please note that the tax brackets and rates reported above refer to FY 2024 and 2025. These are currently under review by the Italian legislator and may be subject to changes.

                                                                                                        euro amount
Employment income                                                                          70,000
Benefits provided                                                                               9,500
 
Less 
Social security contribution (employee charge – 9.19%)             -7,306
 
Gross income                                                                                      72,194
 
Less 
Deductions (e.g.: charity, complementary pension fund,

cadastral value of principal abode, etc.)                                       -1,500
 
Taxable income                                                                                   70,694
 
Total gross income tax                                                                    23,037
Less 
Tax allowance (e.g. medical expenses, interests on mortgage)   -500
 
Total income tax due                                                                           22,537

Individuals’ taxation in Italy is determined by their tax residency status.

Tax resident individuals are subject to income taxes on their worldwide income. In this case, the taxable income is computed by adding all the income, regardless of where it is produced, i.e. both in Italy and abroad, then deducting personal allowances and credits. Ordinary Income is included in the taxable base and is subject to progressive tax rates.

Non-tax resident individuals are subject to tax in Italy only on income produced in Italy.

Pursuant to Article 2, paragraph 2 of the Italian Income Tax Code (TUIR), an individual is deemed to be tax resident in Italy for a given tax year if, for more than 183 days (or 184 days in a leap year), at least one of the following conditions is met:

• the individual is resident in Italy pursuant to the Italian Civil Code;
• the individual has their domicile in Italy, defined as the place where their personal and family relationships are primarily centered;
• the individual is physically present in Italy.

In the absence of evidence to the contrary, individuals who are registered with the Italian Register of the Resident Population (Anagrafe della Popolazione Residente) for most of the tax year are also presumed to be tax resident.

This statutory definition serves as a general framework to determine tax residency. However, the Italian tax authorities apply a fact-specific approach, considering the overall circumstances of each case. Factors typically examined include, inter alia, the acquisition of a permanent home, relocation of family members, and the establishment of social and economic connections within the Italian territory.

Employment income includes salary, wages, bonuses, commissions, gratuities, allowances, shares, gifts and in general, any compensations received in connections with the employment relationship (paid in cash or in-kind). Specific rules apply for the determination of the taxable value of benefits in kind.

A general rule provides for the taxation of the remuneration received for any work performed in Italy. An individual that is considered as a non-tax resident is taxed only on employment income deriving from employment activities performed in Italy and pensions paid by the State or by an Italian-resident entity.

In this regard, the regulation of double tax treaties between Italy and other countries may apply accordingly.

Under Article 51 of the Italian Income Tax Code (TUIR), fringe benefits (non-cash compensations provided by employers to employees) are generally considered part of taxable employment income. These benefits encompass a wide range of goods and services, including company vehicles for mixed personal and professional use, accommodation, subsidised loans, and reimbursements for utilities or housing expenses.

The 2025 Budget Law (Law No. 207/2024) introduced several significant changes to the taxation of fringe benefits:

Increased Exemption Thresholds: For FY 2025 through 2027, the exemption thresholds for fringe benefits have been raised:

• euro 1,000 for all employees.
• euro 2,000 for employees with dependent children, provided that the employee declares to be eligible and provides the tax codes of the dependents.

Starting from 2012, Italy introduced a wealth tax on financial investments held abroad (IVAFE) by individuals who are tax residents in Italy. The tax base is the value of the financial assets at the end of the year or at any other intermediate date when dismissed during the year.

The tax rate is 0.2% on a yearly basis on the amount at the end of the period; 0.4 % for blacklisted countries.

Bank accounts held outside of Italy are charged a stamp duty of euro 34.20 (on a yearly basis) for accounts with an average balance higher than euro 5,000.

The Italian law provides for a tax on real estate held abroad (IVIE) by Italian tax residents. The tax base is equal to the purchasing costs or, if absent, to the market value. Specific rules apply to real estate located within the EU. The rate is in general equal to 0.76%.

As of FY 2025, Italian tax residents who own real estate in the United Kingdom are subject to the IVIE at a rate of 1.06% of the property's value. This rate was increased starting from FY 2024, as stipulated by Law No. 213 of 30 December 2023 (2024 Budget Law).

Inheritance and gift taxes apply in Italy with the following tax rates:

• 4%, for transfers made in favour of spouses or relatives in a direct line (ascendants and descendants) to be applied on the total net value exceeding, for each beneficiary, 1 million euro
• 6%, for transfers in favour of brothers or sisters to be applied to the total net value exceeding, for each beneficiary, 100,000 euro
• 6%, for transfers in favour of other relatives up to the fourth degree of collateral relatives up to the third degree, to be applied on the total net value transferred, without application of any exemption
• 8%, for transfers in favour of all other persons to be applied on the total net value transferred, without application of any exemption.

For transfers in favour of disabled persons with intensive support needs (Article 3.3, Law 104/1992), there is an exemption of 1.5 million euro, i.e. the tax is applied only to the value exceeding that amount (Article 7.2, Legislative Decree 346/1990).

Inheritance and donation tax do not apply in case of ‘family agreements’ and in case of transfers of businesses where the counterparts are members of the same family, including the transfers of participations implying the acquisition of a controlling interest in the company. The exemption applies only if the business activity is carried on during the five years following the transfer.

When immovable properties located in Italy are inherited or given as a gift, cadastral and mortgage taxes apply; the applicable tax rate is usually 9% for registration tax, 2% for cadastral tax and 1% for mortgage tax. Discounted rates are applicable in case the property qualifies as the primary house of the heir/receiver.

Inheritance tax in Italy applies to the transfer of assets upon death, with rates and exemption thresholds depending on the relationship between the deceased and the beneficiary.

As clarified by Circular Letter No. 29/E (October 19, 2023), the “coacervo successorio”— i.e. the aggregation of lifetime gifts with the estate to determine tax rates and thresholds—has been deemed implicitly repealed. 

This means:

• Only the value of the estate at the time of death is considered.
• Exemption thresholds (franchigie) are no longer reduced by prior gifts, unless those gifts were made when the inheritance and gift tax was in force and a portion of the exemption was used.

The current thresholds remain:

• euro 1,000,000 for spouses and direct descendants;
• euro 100,000 for siblings;
• No exemption for others.

The Italian tax law grants different special tax regimes addressed to inbound individuals meeting certain conditions. Each Special Tax Regime provided by the Italian tax law grants different benefits to the taxpayer.

Special tax regime for inbounds

The Italian tax regime for inbound workers, known as "Regime Impatriati," provides for the application of ordinary income tax rates (IRPEF) on a reduced portion of employment income produced in Italy. The regime is applicable for five tax years: the year in which the individual becomes an Italian tax resident and the subsequent four years.

To qualify for the regime, the following conditions must be met:

• The individual must not have been tax resident in Italy for the three tax periods preceding the transfer.
• The individual must commit to reside in Italy for at least four years, qualifying as a tax resident under Article 2 of the Italian Income Tax Code (TUIR).
• The individual must perform their work activity predominantly in Italy (i.e., for more than 183 days per year).
• The individual must possess high qualifications or specialisation, as defined by Legislative Decrees No. 108/2012 and No. 206/2007.

Tax Benefits

• The regime provides for the application of ordinary personal income tax rates (IRPEF) to 50% of the employment income produced in Italy.
• The regime applies to an income capped at euro 600.000 per year.
• For self-employed professionals, an EU de minimis limit of euro 300.000 over three years applies.

Please note where annual income exceeds the previously mentioned threshold (e.g., euro 630.000), the favourable tax treatment applies only to the first euro 600.000. The exceeding amount will be subject to ordinary taxation.

Transitional Provisions

Individuals who transferred their tax residence to Italy by 31 December 2023 remain eligible for the previous regime under Article 16 of Legislative Decree No. 147/2015 ¹.

( ¹ 70% of employment or self-employment income derived in Italy was exempt from Italian personal income tax (IRPEF); the exemption was increased to 90% for individuals relocating to certain southern regions of Italy (e.g., Sicily, Calabria, Campania, Puglia); the benefit was available for a period of 5 years, with the possibility of a 5-year extension under specific conditions (e.g., dependent children or property ownership); there was no cap on the amount of income eligible for the exemption. )

Special tax regime for High-Net-Worth Individuals (HNWI)

The Italian tax system offers a special regime for High-Net-Worth Individuals (HNWIs) who transfer their tax residence to Italy. This regime was introduced by Article 24-bis of the Italian Income Tax Code (TUIR), as amended by Law No. 232 of 11 December 2016 (Budget Law 2017).

Key Features:

• Flat Tax on Foreign Income: Eligible individuals can opt to pay a substitute flat tax of euro 200.000 per year on all foreign-source income, regardless of the amount earned. Those who became tax residents before August 10, 2024, will continue to benefit from the previous euro 100,000 flat tax rate for the entire duration of the regime.
• Duration: The regime applies for a maximum of 15 consecutive years.

Please Note: The flat tax regime can be terminated at any time without incurring in exit taxes or penalties. In other words, there is any obligation to stay in the regime for a certain number of years. However, once terminated, it cannot be reinstated. Upon termination, the worldwide income becomes subject to Italy’s standard progressive tax rates, and all standard reporting obligations, including the filing of the RW form to report assets held abroad. Applicable wealth taxes (IVIE and IVAFE) on foreign holdings will also become due.

Eligibility Criteria:

• The individual must become an Italian tax resident under Article 2 paragraph 2 of the TUIR.
• The individual must not have been tax resident (with relevant proof) in Italy for at least 9 of the 10 years preceding the transfer.

Extension to Family Members: The flat tax can be extended to family members, each subject to an additional annual flat tax of euro 25,000.

Exemptions and Benefits:

• Foreign Assets Reporting: Exemption from the obligation to report foreign assets and investments in the RW Form.
• Wealth Taxes: Exemption from the payment of IVIE (tax on foreign real estate) and IVAFE (tax on foreign financial assets).
• Inheritance and Gift Tax: Exemption from inheritance and gift tax on assets located abroad.
• Italian-Source Income: Income generated within Italy remains subject to ordinary Italian taxation and is not covered by the flat tax regime.
• Capital Gains on Qualified Shareholdings: Capital gains realized from the disposal of qualified shareholdings in foreign companies during the first five years of the regime are excluded from the flat tax and are subject to ordinary taxation in Italy.

Please Note: Under the flat tax regime, capital gains derived from the sale of non-qualified shareholdings in foreign companies are generally covered by the substitute flat tax in Italy.

Ruling Procedure:

While not mandatory, it is advisable for individuals to apply for a ruling from the Italian tax authorities to confirm full eligibility and the correct application of the regime.

This special tax regime aims to attract high-net-worth individuals to Italy by offering a simplified and favourable tax treatment of foreign income, while maintaining standard taxation on Italian-sourced income.

Special Tax Regime for Retired Individuals

The Italian tax system offers a favorable regime for retired individuals who transfer their tax residence to certain municipalities of Italy. This regime was introduced by Article 24-ter of the Italian Income Tax Code (TUIR), as added by Law No. 145 of 30 December 2018 (Budget Law 2019), and remains in effect as of May 2025.

To benefit from this regime, individuals must transfer their tax residence to a municipality with a population not exceeding 20,000 inhabitants in one of the following regions:

Southern Italy:

• • Abruzzo
  • Basilicata
  • Calabria
  • Campania
  • Molise
  • Puglia
  • Sardinia
  • Sicily

Additionally, following the enactment of Law Decree No. 4 of 28 January 2019 (Sostegni-ter Decree), the regime has been extended to include municipalities in Central Italy affected by seismic events, specifically in the regions of:

Central Italy (Seismic Areas):

• • Lazio
  • Marche
  • Umbria

For these seismic areas, the population limit of 20,000 inhabitants has been lifted, allowing all municipalities listed in the relevant annexes of the decree to qualify, regardless of their population size.

Key Features:

Flat Tax on Foreign Income: Eligible retirees can opt to pay a 7% substitute flat tax on all foreign-sourced income, including pensions, rental income, dividends, and other income earned outside Italy.

Duration: The regime applies for a maximum of 10 consecutive years.

Eligibility Criteria:

• The individual must receive a foreign pension.
• The individual must not have been tax resident in Italy for at least 5 of the 10 years preceding the transfer.
• The individual must transfer their tax residence to a qualifying municipality as specified above.
• The individual's previous country of residence must have an administrative cooperation agreement with Italy.

Exemptions and Benefits:

Foreign Assets Reporting: Exemption from the obligation to report foreign assets and investments in the RW Form.

Wealth Taxes: Exemption from the payment of IVIE (tax on foreign real estate) and IVAFE (tax on foreign financial assets).

Inheritance and Gift Tax: No exemption; these taxes apply according to general rules.

Italian-Sourced Income: Income generated within Italy remains subject to ordinary Italian taxation and is not covered by the flat tax regime.

The Italian Tax Law provides for a tax credit for taxes paid abroad on income subject to double taxation. A relief can be obtained once the foreign taxes can be considered as definitively paid (no reimbursement is available, and no further payments are due for the same tax year).

Tax deductions are provided for costs with a particular social relevance such as those paid for health reasons, for interests on house mortgages, or for education. The main ones are:

• life insurance premiums within specific limit
• medical expenses
• tuition fees and expenses
• mortgage interests
• life insurance
• house renovations and energy efficiency interventions

In general, capital gains or losses are equal to the difference between the sales proceeds and the purchase costs. A 26% flat tax usually applies on capital gains.

If losses exceed gains, the difference can be carried forward up to five years against future gains; however, these losses cannot be deducted against other sources of income in the relevant year.

Dividends and interest income are taxable in Italy on a cash basis (i.e. when received).

Dividends are usually subject to a 26% flat tax.

Dividends from companies located in tax havens are generally subject to progressive taxation.

Interest paid non-resident entities are subject to a 26% final flat tax.

Interests paid by Governmental bonds (Italian) are subject to a 12.5% flat tax.

Royalties generated in Italy and received by resident taxpayers are subject to tax at the ordinary rates.

Royalties produced in Italy and received by a non-resident individual are subject to a 30% withholding tax. 

Municipal Property Tax (IMU)

The Imposta Municipale Unica (IMU) is an annual municipal tax levied on the ownership of properties in Italy. The taxable base is determined by revaluating the cadastral value of the property by 5% and then applying a rate based on the property's category (e.g. 160 for residential properties).

• Primary Residences: IMU does not apply to primary residences unless they are classified as luxury properties (categories A/1, A/8, and A/9).
• Tax Rates: The standard IMU rate is 0.86%, but municipalities have the authority to adjust this rate within a range, typically up to 1.06%, through a specific municipal resolution.

Taxation on Rental Income

Income derived from renting out real estate located in Italy is generally subject to progressive income tax rates (IRPEF), ranging from 23% to 43%.

However, taxpayers may opt for a substitute flat tax regime known as Cedolare Secca, which simplifies taxation and exempts the rental income from additional regional and municipal surcharges, as well as from registration and stamp duties on the lease agreement.

Under the Cedolare Secca regime, the following flat tax rates are applicable:

10% Rate:

• Applies to lease agreements with agreed-upon rent (contratti a canone concordato) in municipalities with high housing demand or those affected by natural disasters.
• Also applicable to leases for university students and temporary contracts regulated by Law No. 431/1998.

21% Rate:

• Applies to standard residential lease agreements without rent restrictions.
• Also applicable to the first property rented out under short-term lease agreements (i.e., rentals not exceeding 30 days).

26% Rate:

• Introduced by the 2024 Budget Law (Law No. 213/2023) and effective from 2024 onwards.
• Applies to income from short-term rentals (leases not exceeding 30 days) when a taxpayer rents out more than one property under this regime.
• Specifically, the 21% rate applies to the first property, while the 26% rate applies to the second to fourth properties rented out under short-term leases.
• If a taxpayer rents out more than four properties under short-term leases, the activity is presumed to be a business, requiring VAT registration and subjecting the income to standard business taxation rules.

Individuals employed in Italy are required to contribute to the National Institute for Social Security fund (INPS) or to other mandatory funds provided for specific industries. 

Social security contributions (SSC) are calculated on the gross salary of the employee. Social security contributions paid by the employee range between 9% and 10%, whereas social security contributions paid by the employer ranges from 27% to 30% depending on the employee’s level and on the employers’ industry (e.g.: trade, credit, manufacturing, transport, etc.). 

Contributions to complementary pension funds may be due as well, depending on the employer’s industry and employee’s qualification. 

Employees without a record of social security contributions (SSC) prior to 31 December 1995 are subject to SSCs on the gross employment income up to a specified annual threshold. For the year 2025, this threshold has been set at euro 120,607, as determined by the INPS (Italian Social Security Authority) and adjusted annually in line with inflation. Income exceeding this threshold is not subject to further employee SSC. However, employers may still be liable for minor contributions on amounts above the ceiling. Conversely, individuals with a record of SSC prior to 31 December 1995 are required to pay SSCs on their full employment income, without any applicable ceiling. Different rates could be applied for SSCs due by self-employed and executives.

Expatriates may qualify for exemption from SSCs due in Italy if they are eligible to opt to pay SSC in their country of origin, provided that this has a Social Security Agreement in place with Italy. Usually, this requires the filing of a certificate of coverage with the Italian authorities (e.g. A1).

Stock options are subject to income tax upon their exercise on the excess of the normal value (as defined under Italian law) of the shares received over the price paid by the employee. The income generated from stock options qualifies as employment income.

Income deriving from stock option plans is taxable as employment income upon exercise but exempted from Italian social security contributions under certain conditions established by INPS Circular Letter.