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Paying Taxes In Italy

Paying Taxes in Italy as a Foreigner

Your relocation to Italy won’t be all sipping wine as you immerse in Italian culture, responsibilities will still exist, like taxes! Luckily, the Italian Ministry of Finance has introduced some progressive tax regimes for expats as a means to stimulate the economy, attract foreign investment and encourage new fiscal residents. Although, the Italian tax system can seem complex and you will need to understand how to navigate.

This article is meant to provide insight on your fiscal duties, so you will feel more prepared about what comes after your big move.

Who Needs to Pay Taxes in Italy?

If you spend more than six months a year in Italy, or if Italy is the center of your personal or professional interests, you must file your taxes in Italy.

If you are a resident in Italy for 183 days (about 6 months) in a year, you will likely need to file Italian taxes. There are exceptions, and it is important to consult a qualified professional to determine your tax-liability in Italy.

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Taxes in Italy are assessed at the national, regional and municipal levels and are overseen by the Agenzia delle Entrate. Personal income tax (Irpef) is tax payable by natural persons in receipt of the following types of income:

  • Real estate, i.e. buildings and land
  • Capital gains
  • Salaried and employed work (including income from subordinate employment and retirement income)
  • Self employed work
  • Business earnings and distributions
  • Other income (listed under Article 67 of the Consolidated Income Tax Ac t(IT) ).

Tax Incentives for Foreigners in Italy

With an increasing number of foreigners attracted to living, working and retiring on its shores, the Italian government is progressively incentivizing relocation. The introduction an Investor Visa Program as well as a more favourable tax regime for foreign residents means now may be a great time to make your move to Italy.

Employees and freelancers who transfer their residence to Italy receive attractive tax incentives under a “lavoratori impatriati” scheme (workers relocating to Italy).

This tax break ensures tax-free income on up to 70% of the income generated while residing in Italy. (Effective April 30, 2019, income from employment and self-employment generated in Italy by workers who move their tax residence to Italy, pursuant to Article 2 of the TUIR.)

For example, if the new resident earns €100,000 while legally residing in Italy, Italy will assess taxes on an income of just €30,000. Tax-free income increases to 90% for those who return to Italy to reestablish their residency. This incentive applies for five years with the possibility of an additional five-year extension. A supplemental tax credit of 50% can be applied for minor children who reside with you, or if you purchase real estate within one year of moving to Italy. The benefit begins the year in which residence for tax purposes is acquired and continues for the following four years.

Under the principle of global taxation, individuals must report worldwide income and file taxes in the country of residence (where they live more than 183 days per year), or where they maintain ties (such as family and property).

Digital nomads who work remotely for clients must file their tax returns with the tax authorities in their country of citizenship as well as in their country of residence.

However, under the principle of no double taxation, taxes assessed outside of your country of citizenship on income produced abroad may often be deducted from domestic tax liabilities.

Get Help Paying Your Taxes in Italy

Unless you are a global tax expert, navigating taxes in your own country, let alone cross-border is complicated. With an increasing number of foreigners attracted to living, working and retiring on its shores, the Italian government is progressively incentivizing relocation. Being able to take advantage of these incentives and fully understand what you tax-exposure will be is important for anyone considering becoming a resident.

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