Complete Guide to Tax in Italy for Expats

Italy is a land full of culture and history. Millions of tourists flock there every year to immerse themselves in the varied environments the country offers. Some fall in love with it so much that they decide to live there, and it’s easy to see why. Not only are the sights, the food, the fashion, and more all extremely alluring, but tax in Italy for expats is a little more favourable than elsewhere on the continent.

The economy in Italy has at times, been on a bit of a rollercoaster ride, but right now, it proudly sits as the 8th largest in the world and the 4th largest in Europe for GDP. Almost 33% of this GDP comes from taxes, and for each individual, there can be a host of taxes to pay. The tax that applies to an expat, however, depends on their status as a resident, and it’s this that we will dive into a little further down the page.

If you work or own a business in Italy, you must pay taxes on income and profits. The amount you owe will be determined by the amount of money left after social security payments and any allowable tax deductions. However, this rule only applies to those deemed as residents of Italy for tax reasons.

In Italy, to be a tax resident, you must fulfil at least one of two conditions for 183 days a year or more. When this happens, you’ll be expected to pay income tax on anything you earn both in Italy and abroad. It should be noted that the tax year in Italy runs from 1st January to 31st December, so you’ll be considered a resident for the entire year if you meet the criteria.

You’ll be classed as a tax resident if:

• You are registered with the Registry of the Italian Resident Population
• Italy is the base for your professional or personal interests
• Your main residence is in Italy, and you aim to live there for the foreseeable future

You’ll be classed as a non-resident if you don’t meet these criteria and will instead pay tax only on income generated in Italy. However, should you be a non-resident yet own property in the country, you may still be liable for property taxes.

Both residents and foreign workers in Italy must pay federal personal income tax. This tax, known as Imposta sui redditi delle persone fisiche or IRPEF, takes all forms of income into account and increases as the income does. So, the less you earn, the lower the tax. Rates for 2025 remain the same as in 2024 and are currently as follows:

In addition to the IRPEF, each individual must also pay regional tax and municipal taxes. The amounts for these vary from place to place, with the regional income tax typically ranging from 1.23%–3.33%, and the municipal income tax starting as low as 0% and reaching 0.9%.

Your income tax can, in fact, be paid in two instalments should the amount owed exceed €257.52. Forty percent of your total tax should be paid by 30th June, with the balance being required by 30th November.

You can, if you are eligible. For example, certain expenses can be used to reduce taxable income. Costs such as childcare, interest payments on a mortgage, education, and energy-saving improvements to the home can all help bring the bill down.

For those expats who have recently moved to Italy and have a high net worth, it is possible to reduce the tax they owe by being part of the Special Tax Regime. This sees new residents pay €200,000 on foreign income regardless of how much they earn. There are strict rules, however. Applicants must not have lived in Italy for the previous nine years and can only maintain this tax status for fifteen years from the year they become a tax resident.

As in every other country, tax is attached to a lot of things our money is spent on. Of course, without it, the country would not be able to support itself in a variety of ways. In Italy, individuals will pay their national, regional, and municipal income taxes along with the following:

Just like National Insurance in England, payments are deducted from income to help cover a variety of costs we can all benefit from, such as healthcare. Those registered as residents and working in Italy will pay approximately 10% of their earnings to cover social security payments. It’s a little different if you are self-employed, though. Rates are significantly higher. Should you be self-employed and covered by a mandatory pension fund, you’ll pay 24% social security. If you are self-employed, have a VAT number, and are registered in a separate social security scheme, you’ll pay 26%.

In Italy, you’ll pay capital gains tax on a wide range of items. If you sell one of these items at a higher value than you paid for it, a 26% CGT will be applied. This will apply to property, vehicles, jewellery, stocks, and bonds. Should property be inherited or already owned for more than 5 years, no CGT will be due.

Inheritance tax in Italy can be a little confusing, but it’s one of the lowest IHT rates in Europe. Much depends on your relation to the deceased. For spouses or children, IHT is calculated at 4% of the estate, with the tax-free allowance set at €1 million per heir. Brothers and sisters then pay 6%, with a tax-free allowance set at €100,000 per heir. Further family members must pay between 6% and 8% on their inheritance, regardless of its value. An additional 3% is added to any IHT should property be inherited.

Cars are a big passion in Italy, but they aren’t exempt from tax. You’ll pay this tax, known as bollo auto, annually on any vehicle you have registered in Italy, regardless of whether you use it or not. How much you pay will be determined by the horsepower of the vehicle, where it is registered in the country, and what EU emissions grade it has.

At the time of writing, you’ll find cheaper vehicle tax in the southern regions, with costlier tax charged in the north. Using a handy bollo auto generator, you can see what your tax is likely to be for the area in Italy where you reside.

Some vehicles are exempt, such as those over 30 years old, but others face additional charges. The super bollo applies to vehicles with more than 185kW. This is charged at a national rate of €20 for every kW above 185.

Should you now be an Italian resident but have property and investments overseas, you’ll pay a rate calculated at 0.76% of the cadastral value (we’ll cover this shortly!) and it doesn’t apply should the property be classed as a main residence or a marital home assigned to a spouse. Should the amount owed equate to less than €200, no tax will be due.

When you purchase that first home in Italy as an expat, or any home in Italy for that matter, various taxes will be applied. How much you owe will depend on whether the home was purchased from a company or an individual.

Property registration is charged at 2% or 9% of the cadastral value, but it cannot be under €1,000. A rate of 2% applies if it is a main home, or 9% when it is a second home.

The mortgage tax is a set fee across the country and is set at €50 if the home is purchased from a private seller or €200 if being bought from a company.

The cadastral tax is set in exactly the same way as the mortgage tax, resulting in a payment of €50 or €200 depending on how you purchased the home.

If the home was purchased from a company, VAT can be added to this total, with VAT rates ranging from 4%–22%.

If you are buying your first home, you might be pleased to know that cadastral, mortgage, and registration taxes will not apply!

Now you’ve paid your taxes for the house you bought in Italy, you’ll still have to pay some to live there. These are the IMU, TASI, and TARI.

IMU is a municipal property tax but will only apply to second homes and main residences if they are classed as luxury homes. It varies by property type and cadastral value, so it is much easier to use a calculator if this tax applies to you.

TASI is the tax for local services and will vary by region. It ranges from 0.1% to 0.25% and is paid twice a year.

TARI is the tax for waste collection and is charged just once a year. This is again dependent on location but also on the size of the property and how many people live in it.

As you can see, tax can be complex in Italy, but you could find yourself better off than in your current home country. With incentives for retirees such as 7% rates on passive income from outside of the country, the special tax regime for wealthy individuals, and special visas for those investing in the country, there are options for all. Just remember to secure your expatriate medical insurance and travel insurance to ensure you get the best possible care during your time in Italy. Contact us today to get a free quote for affordable, comprehensive coverage.