Guide to the Italian Tax System for Foreign Nationals

Getting to grips with the Italian tax regime is key for any expat either planning a move, already living in Italy, or intending to become a tax resident. While the system appears fairly similar to that in the UK, it incorporates multiple contrasts, including wealth taxes, passive income tax and taxes split between federal, regional and municipal charges.

It’s common for expats to focus primarily on income tax, but this could mean they overlook significant obligations associated with assets owned outside of Italy, or budget for income tax without factoring in the need to pay social security contributions.

Here we run through the basics as an introduction to taxes in Italy for expats. Still, as always, we’d advise getting in touch with our seasoned wealth managers and advisers for more personalised guidance based on your circumstances.

Understanding Your Tax Residency Position in Italy

Tax residency is a frequent stumbling block for expats who don’t realise they’re still subject to certain UK-based taxes, or assume they become full tax residents immediately, which may not be the case.

Italian tax law generally considers any foreign national a tax resident if:

• They spend 183 days or more in the country each year
• The person holds a registration with the Anagrafe as an Italian resident
• The expat has been domiciled in Italy for six months or longer

It is common for new expats to find they’re technically categorised as tax residents in two countries, which means they need to spend the requisite time reviewing their circumstances and ensuring they have full oversight of their tax status and liabilities.

Once you become a tax resident, any assets or income worldwide are subject to Italian taxation. In contrast, non-residents pay tax only on assets or earnings that originate within Italy, including property taxes like the Imposta Municipale Unica (IMU) against real estate ownership.

The Italian Neo-Domiciliary Tax Regime

Expats who transfer their tax residency from overseas to Italy may be able to elect to pay a flat rate of taxation, based on a contribution of €100,000 for 2024 and €200,000 for 2025. This system is beneficial for expats with larger foreign-sourced incomes and offers the option to pay a flat rate value if the alternative obligation would be substantially higher.

Family members relocating and becoming Italian tax residents pay a separate flat-rate €25,000 tax contribution, which supersedes tax charges against foreign investments and wealth tax on non-Italian assets.

However, if this regime proves advantageous, expats must apply in advance to the Italian tax authorities to verify their eligibility for the programme. They must meet several requirements, such as not having held Italian tax residency for at least nine of the last 10 years.

Paying Personal Income Tax and Regional Taxes as an Italian Resident

Income tax in Italy is called the Imposta sul Reddito delle Persone Fisiche (IRPEF). The tax is progressive and applies to all Italian earnings for non-residents or to worldwide incomes for tax residents. Rates for 2025 are as follows:

Regional income tax applies in addition, ranging from 1.23% to 3.33% depending on where you live, alongside a municipal tax levied by the local province. These are typically up to 0.9% and are progressive localised taxes which align with the national income tax brackets.

The Importance of Double Tax Treaties Between Italy and the UK

Double tax treaties can be meaningful for expats who technically are treated as UK tax residents, or who attract UK tax obligations for the same incomes or assets that they are also taxed on in Italy.

The basic premise is that double tax treaties mean your primary tax obligations exist in the country where you are a verified tax resident, with tie-breaker tests used if there is any uncertainty about which jurisdiction you should pay tax within.

In some scenarios, the UK, as your country of origin, may levy a tax charge that you are required to pay. Provided you claim double tax treaties correctly, you will normally receive a credit against the duplicate tax charge, in effect offsetting the double tax burdens against each other.

How to Declare Foreign Income and Assets in Italy

Foreign asset declarations are mandatory for expats living in Italy as tax residents, with a form attached to the annual income tax return called the RW. Foreign national residents must disclose all of the following, including assets which they are the end beneficiary of, even if the asset isn’t in their name, such as a trust:

• Stock options, investments and overseas bonds
• Bank accounts and cryptocurrency holdings
• Life insurance policies and pension schemes
• Company shares and private shareholdings

We’ll explain the varied wealth taxes shortly. Still, the RW form is important since it is used to calculate obligations to pay Imposta sul Valore degli Immobili Situati all’Estero (IVIE), a tax on overseas property ownership, and Imposta sul Valore delle Attivita Finanziarie Detenute all’Estero (IVAFE), a tax on financial assets held in another country.

Failure to declare overseas assets on your tax return can have considerable penalties, with fines that range from 3% up to 15% of the value of the asset, per tax year.

Italian Capital Gains Tax and Wealth Taxation

Foreign assets and overall wealth are taxed in varied ways, depending on the nature of assets owned, the value of your wealth, and your tax residency position:

• Passive foreign incomes, including interest, capital gains and dividends, are generally taxed at a flat 26% rate.
• IVIE applies to properties outside of Italy owned by Italian tax residents, either calculated against the cadastral value or the purchase cost. From 2024, IVIE rates are 1.06%, although taxpayers are exempt if the tax charge is below €200.
• IVAFE is a tax on financial investments owned outside Italy, held by tax residents, based on the value of those holdings on 31^st December, charged at 0.2%. However, that charge can increase to 0.4% if assets are deemed to be held in jurisdictions considered tax havens.

Certain overseas assets, such as foreign bank accounts, are taxed slightly differently, with a flat tax rate of €34.20 per account, although this tax is not payable if the average annual balance falls below €5,000.

As we’ve seen, Italian taxation is far from simple. There are numerous considerations, from foreign asset declarations to tax treaties and ensuring you comply with the regulations both in the UK and Italy as your new home.

More details about the Italian tax system and your obligations as an expat resident are available by downloading the Chase Buchanan Private Wealth Management complimentary Expats Guide to Taxes in Italy, or by arranging a convenient time to speak with one of our experienced wealth management advisers.

All investments carry risk, including the potential loss of capital. You should carefully consider whether investing is suitable for you, taking into account your personal circumstances, financial situation, and risk tolerance.

*Information correct as at August 2025