Overview of Income Tax in Italy
Italy offers a progressive tax system administered by the Italian Revenue Agency under the auspices of the Ministry of Economy and Finance. This system encompasses income from various sources including employment, pensions, and investments. Understanding the nuances of this system is crucial for anyone living or planning to live in Italy.
Registration and Tax Identification
To be eligible to pay taxes in Italy, obtaining a tax identification number (codice fiscale) is mandatory. EU citizens can acquire this from any tax office using a simple identification process, while non-EU citizens need to visit specific tax offices or police headquarters. Additionally, Italian embassies abroad can issue this number to those outside Italy.
Who is Required to Pay Income Tax?
Income tax liability in Italy depends on your residency status. If you reside in Italy for more than 183 days a year, you’re considered a resident for tax purposes and must declare your global income. Those who stay for shorter periods are only taxed on income earned within Italy. To prevent double taxation, Italy has established agreements with numerous countries.
Applicable Taxes on Various Income Types
Employment Income
Earnings from employment are taxed progressively across various brackets, with rates ranging from 23% to 43%.
Self-Employment and Business Income
Self-employed individuals may choose between standard tax rates or a reduced flat rate. Businesses are subject to corporate tax, currently pegged at 24%.
Investment Income
Wealth tax is applicable to financial investments based on their value each year, with a standard rate of 0.2%. Cryptocurrency gains starting in 2023 will be taxed at 26% on profits exceeding €2,000.
Rental Income
Landlords have the option to be taxed at standard rates with a 5% deduction for expenses or opt for a flat-rate tax of 21% under the cedolare secca scheme, which does not allow for deductions.
Filing Income Tax Returns in Italy
All residents and non-residents earning in Italy should file tax returns annually, with specific exceptions provided for low-income earners and those whose tax is fully withheld at the source by employers.
There are two primary forms: Form 730 for employed or retired individuals, and Redditi PF for self-employed people and non-residents. Online submissions must be made using the Public Digital Identity System (SPID).
Income Tax Rates and Deadlines
Income tax rates for 2023 are set as follows:
- Up to €15,000: 23%
- €15,001–28,000: 25%
- €28,001–50,000: 35%
- €50,001 and above: 43%
Important deadlines include 30 September for Form 730 and 30 November for Redditi PF.
Special Tax Regimes and Reliefs
Relocation Schemes
New residents can benefit from substantial tax reductions for up to five years under the workers relocating to Italy scheme. Furthermore, high-net-worth individuals may opt for a flat-tax regime, significantly simplifying their tax responsibilities.
Retirees
Retirees moving to Italy can enjoy a flat tax rate of 7% on foreign-sourced income for up to ten years, contingent on settling in specific regions and municipalities.
Tax Fines, Disputes, and Refunds
Failure to comply with tax obligations can lead to hefty fines and penalties. However, taxpayers have rights to dispute assessments through the Court of Tax Justice. Detailed guidance is available from the Italian Revenue Agency.
Seeking Professional Tax Advice
While the Italian tax system can be navigated independently for straightforward cases, professional advice is recommended for complex situations. Qualified tax professionals in Italy are registered with the National Council of Chartered Accountants and Accounting Experts.
Useful Resources
- Italian Revenue Agency
- Information on obtaining a tax identification number
- Guidelines on filing tax returns