Taxation in Italy 🇮🇹
Italy's taxation system, overseen by the Italian Revenue Agency (Agenzia delle Entrate), comprises various national, regional, and municipal taxes for both individuals and corporations.
The tax year aligns with the calendar year (January 1 to December 31).
Key Taxes for Individuals
Tax residents in Italy are taxed on their worldwide income, while non-residents are only taxed on income generated within Italy.
Personal Income Tax (IRPEF): This is a progressive national tax with rates from 23% to 43%.
Up to €28,000: 23%
From €28,001 to €50,000: 35%
Over €50,000: 43%
Regional and Municipal Surcharges: In addition to the national IRPEF, residents pay regional surcharges (1.23% to 3.33%) and municipal surcharges (up to 0.9%), which vary by location.
Capital Gains Tax: Generally, a flat tax of 26% applies to capital gains from financial assets, dividends, and interest. Capital gains from the sale of real estate are typically exempt if the property was owned for more than five years or inherited.
Social Security Contributions: Employees contribute around 9–10% of their gross salary, while employers pay an additional 23–24%. Self-employed individuals generally pay a higher rate of around 26%.
Inheritance and Gift Tax: Rates are relatively low and depend on the relationship to the deceased/donor, with significant tax-free thresholds for immediate family members:
Spouses and direct descendants/ascendants: 4% on value exceeding €1 million (per beneficiary).
Siblings: 6% on value exceeding €100,000 (per beneficiary).
Other relatives: 6% on the entire value.
Non-relatives: 8% on the entire value.
Key Taxes for Businesses
Corporate Income Tax (IRES): The standard national rate is a flat 24% on net profits.
Regional Production Tax (IRAP): This applies to the net value of production and has a standard rate of 3.9%, though regions can adjust it.
Value Added Tax (VAT/IVA): The standard rate is 22%. Reduced rates apply to specific goods and services, such as 10% for tourism and restaurants, 5% for certain social services, and 4% for basic food items, books, and medical devices.
Special Tax Regimes
Italy offers several incentives to attract foreign workers and high-net-worth individuals:
New Residents Flat Tax: Eligible high-net-worth individuals can opt to pay a flat substitute tax of €200,000 per year on all foreign-sourced income for up to 15 years.
Inbound Workers Regime: Highly qualified workers moving to Italy may be eligible for a significant income tax exemption (e.g., 50% of income is exempt, or 60% if they have dependent children) for five years.
Retiree Flat Tax: Retirees with foreign pension income who move to a small municipality in Southern Italy can benefit from a flat tax of 7% on all foreign income for 10 years.
The tax year aligns with the calendar year (January 1 to December 31).
Key Taxes for Individuals
Tax residents in Italy are taxed on their worldwide income, while non-residents are only taxed on income generated within Italy.
Personal Income Tax (IRPEF): This is a progressive national tax with rates from 23% to 43%.
Up to €28,000: 23%
From €28,001 to €50,000: 35%
Over €50,000: 43%
Regional and Municipal Surcharges: In addition to the national IRPEF, residents pay regional surcharges (1.23% to 3.33%) and municipal surcharges (up to 0.9%), which vary by location.
Capital Gains Tax: Generally, a flat tax of 26% applies to capital gains from financial assets, dividends, and interest. Capital gains from the sale of real estate are typically exempt if the property was owned for more than five years or inherited.
Social Security Contributions: Employees contribute around 9–10% of their gross salary, while employers pay an additional 23–24%. Self-employed individuals generally pay a higher rate of around 26%.
Inheritance and Gift Tax: Rates are relatively low and depend on the relationship to the deceased/donor, with significant tax-free thresholds for immediate family members:
Spouses and direct descendants/ascendants: 4% on value exceeding €1 million (per beneficiary).
Siblings: 6% on value exceeding €100,000 (per beneficiary).
Other relatives: 6% on the entire value.
Non-relatives: 8% on the entire value.
Key Taxes for Businesses
Corporate Income Tax (IRES): The standard national rate is a flat 24% on net profits.
Regional Production Tax (IRAP): This applies to the net value of production and has a standard rate of 3.9%, though regions can adjust it.
Value Added Tax (VAT/IVA): The standard rate is 22%. Reduced rates apply to specific goods and services, such as 10% for tourism and restaurants, 5% for certain social services, and 4% for basic food items, books, and medical devices.
Special Tax Regimes
Italy offers several incentives to attract foreign workers and high-net-worth individuals:
New Residents Flat Tax: Eligible high-net-worth individuals can opt to pay a flat substitute tax of €200,000 per year on all foreign-sourced income for up to 15 years.
Inbound Workers Regime: Highly qualified workers moving to Italy may be eligible for a significant income tax exemption (e.g., 50% of income is exempt, or 60% if they have dependent children) for five years.
Retiree Flat Tax: Retirees with foreign pension income who move to a small municipality in Southern Italy can benefit from a flat tax of 7% on all foreign income for 10 years.
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