Relocating to Italy, with its warm climate, rich cultural heritage, and vibrant lifestyle, is a dream for many expatriates, young professionals, and digital nomads from all around the world. Whether you’re a family seeking a charming home or a remote worker establishing a new base, Italy’s welcoming environment makes it an ideal destination for people of any age. However, moving to Italy or buying property involves navigating a complex tax landscape. This guide, created for the Tax4Expats blog, explains key tax considerations for expatriates and property buyers, covering tax residency, obligations connected to the relocation, and some general Italian tax principles. With practical insights, this article helps you have a better understanding of the tax implications while settling into Italy’s sunny embrace. At Tax4Expats, we specialize in helping expatriates navigate Italy’s tax system with tailored support

Understanding Tax Residency in Italy

Your tax obligations in Italy depend on whether you’re classified as a tax resident*. This status determines whether you’re taxed on worldwide income or only on Italian-sourced income, impacting both property owners and those relocating for work or lifestyle.

• Criteria for Tax Residency: You’re considered a tax resident if, for more than 183 days per year, you meet one of these conditions:
  • Registered Residence: Enrolled in an Italian municipality’s resident population register (anagrafe)
  • Civil residence: Your habitual abode is in Italy;
  • Domicile: Your primary personal or economic ties (e.g., family, main job) are in Italy.
  • Physical Presence: You spend over 183 days in Italy, even without formal registration.
• Implications: Tax residents report all worldwide income (e.g., salaries, freelance earnings, investments) at Italy’s progressive tax rates (23% to 43%). Non-residents only pay taxes on Italian-sourced income, such as rental income from a property.

Example: A digital nomad from Northern Europe buys a €150,000 home in Italy and spends 200 days there annually, working remotely. By spending the majority of the fiscal year in Italy, she becomes an Italian tax resident and must report her €50,000 global income in Italy. Note: in case of double taxation a tax relief could be available in Italy, subject to Double tax treaties.

*You can read this article on our blog for a more in depth analysis on what implications your tax residency status triggers in Italy.

Obligations When Moving to Italy

Relocating to Italy involves several administrative and tax-related steps, especially if you’re buying a property as a home base. Completing these ensures compliance and access to tax benefits, making your transition to Italy’s warm and cultural environment smoother.

• Tax Code (Codice Fiscale): Obtain this unique identifier from the Italian Revenue Agency (Agenzia delle Entrate) or a consulate abroad. It’s required for property purchases, contracts, and tax return filings.
• Register of resident population Enrollment (Anagrafe): If staying in Italy for over 3 months, register with the municipality’s resident population register. This is mandatory for tax residency and prima casa* benefits.
• National Health Service (SSN): Register for healthcare access, even more essential for families with young children relocating to Italy.
• VAT Number: If self-employed (e.g., digital nomads), register for a VAT number to manage freelance or business income.

Example: A family from a Northern European country relocates to Italy, buying a €200,000 home. They obtain tax codes, register in the local municipality, and enroll in the SSN to access healthcare for their children, ensuring compliance and eligibility for tax benefits.

*You can read this article on our blog for a more in depth analysis of tax benefits linked to the purchase of an house in Italy.

Tax Regime: Residents vs. Non-Residents

Your tax residency status shapes how your income and property are taxed. Here’s a comparison tailored for expatriates and property buyers:

• Residents:
  • Worldwide employment income taxed at progressive IRPEF rates (23–43%) plus local additional taxes (3–4%).
  • Access to deductions (e.g., for children, education, or property renovations).
  • Flat-rate regime for self-employed (5% or 15% for freelancers with revenue up to €85,000).
  • Pay wealth taxes: 0.2% on foreign financial assets (IVAFE), 0.76% on Italian and/or foreign real estate (IMU* for non-prima casa), and €34 stamp tax on bank accounts.
• Non-Residents:
  • Taxed only on Italian-sourced income (e.g., rental income) at IRPEF rates or flat rates (e.g., 21% cedolare secca for rentals).
  • Limited or no access to deductions.
  • Pay IMU on Italian properties but no IVAFE or bank account stamp taxes.

Example: An expat residing abroad owns a second home in Italy, renting it out for €12,000 annually. As a non-resident, they might need to pay annually €2,520 (21% cedolare secca, note that a lower tax rate could be applied under certain conditions) on rental income and a certain amount of IMU with no obligation to report any foreign-sourced income.

*IMU is an annual municipal property tax that is levied on the property’s cadastral income. The rate varies depending on the municipality where the real estate is located, it typically ranges from 0.4% to 1.06%.

Financial Monitoring for Tax Residents

Tax residents in Italy must report foreign assets through Form RW in their annual tax return, even if those assets generate no income. This is crucial for expatriates and digital nomads with international income or investments.

• Assets to Report (as an example but not limited to):
  • Foreign bank accounts and deposits;
  • Corporate holdings or shares;
  • Cryptocurrencies;
  • Real estate abroad;
• Related Taxes:
  • IVAFE: 0.2% on the value of foreign financial assets (e.g., €200 on a €100,000 foreign investment account).
  • IVIE: 0.76% on the value of foreign real estate (e.g., €760 on a €100,000 property abroad. Taxes paid in the home Country could be eventually offset italian wealth tax).
• Penalties: Failure to file Form RW can lead to fines (3–15% of undeclared assets), even for non-income-generating assets. Regularization is possible via ravvedimento operoso (voluntary correction).

Example: A professional from Northern Europe, tax resident in Italy, holds a €50,000 bank account abroad. They report it in Form RW and pay €34 euro IVAFE (stamp tax), avoiding penalties.

Tax Regime for Impatriate Workers

Italy’s impatriate workers’ regime offers tax incentives for professionals relocating to Italy, perfect for young professionals or digital nomads seeking to enjoy Italy’s warm climate and rich culture.

• Requirements:
  • Non-resident for at least 3 years (or 6–7 years for intra-group transfers).
  • Work mainly in Italy (e.g., remote work for Italian clients or local employment).
  • Possess high qualifications (e.g., degree, specialized skills).
  • Commit to staying in Italy for at least 4 years.
• Benefits:
  • 50% exemption on taxable income (60% if you have children), up to €600,000 annually.
  • Valid for 5 years.
• How to Apply:
  • Employees: Notify your employer via an ad-hoc form;
  • Self-employed: Applied directly in your annual tax return.

Example: A tech engineer relocates from a colder climate, earning €60,000 annually as an employee of an Italian company. Under the impatriate regime, 50% of his taxable income is exempt, so he would end up earning approx 50,000 Euro net per year, ie saving approximately €13.000 annually compared to standard rates.

Practical Tips for Expatriates and Property Buyers

To navigate Italy’s tax system effectively:

• Plan Your Residency: Decide whether tax residency suits your situation. Staying under 183 days keeps you non-resident, limiting taxes to Italian-sourced income only.
• Leverage Prima Casa: Buy your property as a primary residence to save on registration tax and IMU, making homeownership more affordable*.
• Apply for Impatriate Benefits: If eligible, notify your employer or client early to maximize tax exemptions.
• Monitor Foreign Assets: Use accounting tools to track foreign accounts and file Form RW accurately to avoid penalties.
• Consult a Tax Advisor: A professional can help with residency, treaties, and deductions, ensuring compliance and savings.

*You can read this article on our blog for a more in depth analysis on how benefits linked to the purchase of the prima case works in Italy.

Next Steps: Settle in Italy with Confidence

Navigating Italy’s tax rules is key to making your relocation financially sound. Whether you’re a young professional, a family, or a digital nomad drawn to Italy’s vibrant culture and pleasant climate, understanding these rules ensures you maximize benefits and avoid pitfalls. Contact Tax4Expats through our website’s contact form to access ad-hoc, tailor-made support from our expert advisors, helping you settle into Italy with confidence.

Disclaimer: This article provides general information on Italy’s tax residency rules for expatriates. For tailored advice specific to your situation, we recommend contacting Tax4Expats via our contact form to schedule a consultation with our professional tax advisors.