COUNTRY:
Italy - Residency Programs
Individuals that spend more than 183 days a year by default are deemed to have establish tax residency in Italy. If you spend fewer than 183 days a calendar year, you are considered a non-resident. To establish residency in Italy, you must register yourself in your local municipality. This allows you and the authorities to keep an exact record of the time you stayed in the country.
Residents are taxed on their worldwide income and non-residents on income earned in Italy only. However, there are certain benefits and exemptions for expatriates and non-Italian domiciled individuals worth exploring. If you’re a non-resident for tax purposes in Italy, you will only be taxed on income earned in Italy.
The Italian income tax rates, or Imposta sul Reddito delle persone Fisiche, range between 23% to 43%. National income tax is levied at progressive tax rate on all income reported below:
Regional tax ranges from 0.9% to 1.4% and a minor, local tax ranges from 0.1% to 0.8% of gross income. There is no personal allowance below which you don’t have to pay income tax. There are allowances for dependant family members (dependant partner and/or children) whilst tax credits can be granted on mortgage interests, educational expenses and medical bills.
The general rule is that your foreign pension is taxed in the county of residence, subject to double taxation agreements.
Italy offers a 7% flat tax incentive for retirees moving to Southern Italy.
To qualify, you must officially transfer your tax residency in a municipality with a population less than 20,000 that’s located in a region of Southern Italy (Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise and Puglia).
Under this regime, pensioners with a foreign-sourced income are taxed at a flat rate of 7% for the first 9 years of residency.
You will also be exempt from tax on property and financial assets, provided that you haven’t been a tax resident in the past 5 years and come from a country that has a Tax Information Exchange Agreement, Double Taxation agreement, or Foreign Account Tax Compliance Agreement with Italy. Fortunately, the UK, USA, Canada and most other countries are valid.
In 2017, Italy introduced a special tax regime for higher net-worth foreigners willing to relocate to Italy. This regime allows Italian non-domiciled residents to pay a flat rate of €100,000 per year on all foreign income for a maximum of fifteen years.
You are entitled to this benefit if:
- You have transferred your tax residence in Italy. This favourable tax regime can be enjoyed for a maximum of fifteen years, and you may revoke it at any time.
- You have not been a tax resident for 9 of the previous 10 years prior to the introduction or application of the bill.
- Italian Tax Authorities formally approve your request.
Income from certain countries may not be valid for the entitlement of these grants. Any income from these countries is subject to standard Italian taxation up to 43%.
The annual flat tax will replace the income tax, and local and wealth taxes.
Finally, you may extend these benefits to family members for an additional €25k, per person, per year. Laws that define “family members” are extremely vague and therefore are not limited to spouses or children.
- Land registry tax: Around €100-200 depending on whether you are buying from a private seller or a company.
- VAT: There is no VAT if buying from a private seller. If buying from a company, you might pay from 4% to 22% in VAT. For a main residence, it is 4%, for a second home – 10%, and for a luxury home – 22%.
- Italian regular property tax: This tax is not payable if you are a resident in Italy and the property is your main residence. Otherwise, this tax is payable. This may vary from municipality to municipality and the calculation can be complex, so it’s best to consult an accountant.
Italian residents are subject to tax on foreign held assets better known as IVAFE which stands at 0.2% and 0.76% (tax on foreign real estate). Every person deemed to be a tax resident of Italy who owns assets overseas is required to disclose the value on
December 31st of each year via the tax return submission.
If you own assets overseas you are then required to disclose as well as pay Wealth tax to the tax office.
Inheritance tax is levied on the person who inherits the estate and or assets from the deceased person and it payable to the state. The tax rates adopted are fairly limited and subject to generous allowances, so with careful planning, one could mitigate this tax significantly.
Italian inheritance tax – which is a patrimonial tax – is calculated at three different rates (4%, 6% and 8%). The rate payable depends on the degree of kinship between the decedent and the beneficiary. See the table below.
A spouse, parents and/or children, pay 4% on amounts exceeding €1,000,000 for each individual beneficiary, below this amount, there is no inheritance tax liability.
Siblings pay 6% tax but are entitled to an allowance of €100,000. Also, in this case the allowance is calculated on each individual heir or beneficiary per subject.
Other relatives up to the fourth degree, relatives by marriage in a direct kinship, and collateral relatives by marriage up to the third degree pay 6%, without any allowance. These beneficiaries pay inheritance tax on all the amount received.
This category includes nieces, nephews, grandnieces, grandnephews (descendants of your brothers), aunts, uncles, great-aunts, great-uncles, first cousins, children-in-law, parents-in-law and siblings-in-law.
All other beneficiaries and heirs such as the most distant relatives, pay the inheritance tax rate of 8%, irrespective of the amount they inherit.
Taxes are filed electronically in Italy, but there are two different tax returns depending on your situation. Tax residents that have lived in the country for two consecutive years are entitled to use the 730 form, a simplified form that comes with most of your details already completed. The deadline for filing is the 23rd of July.
The other form is ‘Modello Redditi’, which will include employment income, tax withheld, capital gains, foreign income and other sources of income of the resident. This form should be submitted by the 30th of November of the current year for the previous year. The Modello Redditi is preferred by people who hold non-Italian investments, bank accounts or non-Italian payrolls.
The Italian Golden Visa – Non EU Nationals
The Italian Golden Visa is issued qualified applicants from the countries outside the European Union. The foreign applicant shall have obtained the investment capital in a lawful way and he or she shall be prepared to contribute to the development of the Italian economy.
Some of the associated benefits of acquiring the Golden Visa in Italy include:
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Investment Options: There are different investment options available to qualify for the Italian Golden Visa. These include:
- Capital Investment in an Italian Company: Investing a minimum of €500k in an Italian limited liability company (S.p.A.).
- Government Bonds: Investing a minimum of €2 million in Italian government bonds.
- Philanthropic Donations: Donating at least €1 million to a public-interest project in the fields of culture, education, immigration, scientific research, or preservation of cultural heritage.
- Innovative SMEs: Investing a minimum of €250,000 in a certified innovative start up.
- Applicants must demonstrate financial stability, legitimacy of funds, and undergo the usual compliance and documentation requirements.
- Valid health insurance coverage in Italy.
- No criminal convictions or be involved in activities that may pose a threat to public order and security.
- Spend at least 6 months per year in Italy to maintain their residency status.
Following investment and ten years of tax residency it is possible to apply for Italian citizenship.
It’s important to note that the requirements and investment thresholds may be subject to change, so it’s advisable to consult with the Italian authorities or seek professional assistance for the most up-to-date information before applying for the Italian Golden Visa.
