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The Italian Tax System in 2023-2024: A Comprehensive Overview

In this article, we are going to delve into the various aspects of the Italian tax system, including income tax, corporate tax, VAT, and social security contributions. Discuss how these taxes are calculated, collected, and utilized by the government.

On December 29, 2022, the Italian government approved the new Legge di Bilancio (Budget Law). Effective as of January 1, 2023, the law introduces specific provisions that are bound to directly affect resident and non-resident individuals, foreign investors, and corporations. These include amendments regarding personal income and capital gains taxes, plus an entirely new set of rules concerning the taxation of crypto assets. 

This article provides an overview of the Italian tax system and a rundown of a few significant recent changes.

Types of income in Italy 

The Italian tax system provides for different types of income, including company revenue, self-employment income, real estate income, investment income, employment income, and capital gains.

Tax identification in Italy: codice fiscale and partita IVA 

All individuals who intend to enter any type of legal relationship or business activity in Italy are required to obtain a codice fiscale, i.e. an Italian fiscal code. This code is used to identify individuals in their dealings with Italian entities and public bodies. Likewise, all who plan to establish a business or pursue professional activities that involve trade, agriculture, or the arts on a regular basis must register for VAT, that is to say, get a partita IVA

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Personal income tax 

All individuals who produce income in Italy are subject to payment of the Italian personal income tax, IRPEF (Imposta sul reddito delle persone fisiche). This tax comprises national, regional, and municipal income taxes, all of which are calculated on progressive rates that range from 23% to 43%. Both residents and non-residents are subject to the payment of IRPEF, but there are different rules for the two categories. Residents are subject to payment of tax rates wherever their income is produced, which means they’re liable for foreign income, interest, and dividends, whereas non-residents pay IRPEF only on income produced within the borders of the Italian state. 

Pursuant to Article 2 of the Italian income tax code, a person is considered a “resident in Italy for tax purposes” if and when: 

  • she/he is inscribed in the Italian Anagrafe records 
  • she/he habitually lives in Italy (is a certified resident) 
  • she/he is “domiciled” in Italy (meaning Italy is her/his main place of business or of social interest, for instance if her/his family resides there) 

Flat tax regimes in Italy: what’s new

Standing Italian legislation provides exceptions to the above, among which flat tax regimes reserved for certain individuals. Two main categories benefit from these: expats, i.e. those who transfer their residence to Italy from abroad, and resident taxpayers who have a gross income lower than the thresholds established per type of business (regime forfettario). As concerns expats, all foreign nationals who choose to make Italy their home can apply for a substitute flat tax equal to €100,000. Regarding Italian tax residents, on the other hand, the 2023 Budget Law has increased the maximum income threshold from €65,000 to €85,000, which allows for more widespread eligibility. 

This is one of the recently introduced measures most likely to meet the needs of many Italian taxpayers.

Corporate tax in Italy

In Italy, corporate entities are subject to two taxes: IRES, Imposta sul reddito delle società, and IRAP, Imposta regionale sulle attività produttive.  

The standard rates are 24% for the IRES and 3.9% for the IRAP. IRAP is levied regionally, and each Italian region has the faculty to vary the rate slightly, by increasing or decreasing it up to a maximum of 0.92%.

Corporate taxation is based on the same principles that govern personal income taxation: Italian corporate entities are subject to the payment of IRES on their worldwide income, whereas foreign non-resident corporations are liable only for the income produced in Italy.

The 2023 Budget Law and foreign investors: new provisions for capital gains tax

The 2023 Budget Law introduces new measures on capital gains tax. In Italy, capital gains tax is currently regulated by Law No. 66 issued on April 24, 2014, which raised the rates on capital gains and interest from 20% to 26%. The gain (or loss) on transactions is calculated by subtracting the purchase price, including commissions, from the sale price net of commissions. 

Capital gains on government bonds (Italian BOTs, BTPs, CCTs, and CTZs), bonds issued by public entities such as regions, provinces, and municipalities, bonds issued by international bodies such as the World Bank and the EIB, and bonds issued by “white list” foreign states, are all subject to a different rate: 12.5%. 

The above-mentioned law maintains that the sale of a real estate asset is subject to taxation as per the established progressive rates or, if certain conditions apply, to a substitute flat tax. 

In this regard, the 2023 Budget Law sets the framework for a novel scenario. According to the new rules, which were inspired by the provisions of the OECD Commentary (paragraph 4 of Article 13), capital gains derived from the sale of foreign companies that own real estate in Italy or of foreign entities that own participation in Italian companies that hold real estate assets are now subject to taxation.  

Social security in Italy

The Italian social security system is financed by Italian employers and employees alike and provides coverage for old age, invalidity, sickness, unemployment, family, maternity, and work-related disease and injuries. All Italian workers are covered by mandatory insurance (AGO, Assicurazione Globale Obbligatoria), and all who work and provide work in Italy are subject to payment of INPS (Istituto Nazionale della Previdenza Sociale, the Italian social security entity) contributions.

On a general basis, contributions are based on the following percentages:

30% due by the employer;

10% due by the employee;

Executives are also subject to additional compulsory contributions for specific pension and medical care funds. Rates vary depending on the field of business. 

Self-employed individuals who are not covered by a pension fund are also required to register with the INPS in a position called “Gestione Separata”, separate regime.

Avoiding double taxation

Double taxation is a risk that no taxpayer or company wants to take, and that countries strive to prevent. Italy holds DTAs, double tax agreements, and DTTs, double tax treaties, with many countries worldwide. These allow the Agenzia delle Entrate (Italian Internal Revenue Agency), and the other state’s counterpart, to correctly allocate taxing rights and avoid double taxation, while also exchanging information and reducing evasion. 

Many of the existing double tax agreements, including the most recent US – Italy tax treaty, which was signed by the two countries in 1999 and ratified by the Italian government in March 2009, are based on the OECD model. 

The US-Italy tax treaty, specifically, provides significant measures designed to provide taxpayers and companies with tax relief. These include provisions regarding dividends, branch profit taxes, interest, and royalties. According to standing Italian law and the existing DTTs, taxpayers are entitled to claim a refund of any tax levied which exceeds the limit established in the treaty, or, alternatively, immediate application of the conditions specified in the treaty itself.  

Are US pensions taxed in Italy?

One issue expats are often concerned about is pension taxation. The rules governing income tax in Italy clearly stipulate that foreign nationals resident in Italy are required to pay taxes on their entire income, including the percentage that is produced or originated abroad. An American citizen who chooses to retire in Italy, for instance, will be liable to pay taxes on her/his US pension.

Buying a house in Italy

Foreign nationals who intend to relocate to Italy, or elect it as their primary residence, are often equally concerned about property taxes and levies due on purchase. 

As of today, the main taxes due for buying a house in Italy are:

  • Registration tax
  • VAT
  • Cadastral (land registry) tax
  • Mortgage tax
  • Stamp duty

However, there are a few variables that strongly affect the amounts a buyer will have to pay, specifically whether the seller is an individual or a company and whether the property in question is to be one’s main residence, or a “second home”.

Typically, the registration tax due for the purchase of real estate in Italy is equal to 9% of the property’s cadastral value (defined as the value assessed by the authorities in charge), plus a mortgage tax and a cadastral tax. The buyer is also liable to pay VAT if the property was restored/built within the last 5 years, or if it is classified as social housing or as a luxury property. Assets classified as luxury properties are subject to 22% VAT, plus a €90 mortgage tax and a €230 stamp duty.

The purchase of property destined to become one’s main residence and sold by a private individual is taxed as follows:

  • 2% registration tax
  • Mortgage tax, €50 
  • Cadastral tax, €50

If the seller is a company (and as such subject to payment of VAT), rates are:

  • 4% VAT 
  • Registration tax, €200 
  • Cadastral tax, €200
  • Mortgage tax, €200

Annual property tax in Italy

As regards annual property taxes, that is to say levies applied to ownership, standing Italian law provides for two basic types: IMU (Imposta Municipale Unica), equivalent to property tax, and TARI (Tassa sui Rifiuti), waste collection tax. Both are municipal taxes, hence payable to the municipality where the property is located. 

The amounts due for the TARI are calculated based on the size and characteristics of the property itself and vary from region to region and town to town. The TARI tax is due once a year but many municipalities allow payment in installments. 

IMU is only charged when:

  • the property is not the owner’s main residence (i.e. it is one’s “second home”);
  • the property is classified as a “luxury property” (independently of it being a main residence or second home);
  • the property’s non-resident owner rents it out to a third party;

All proprietors who allocate the property they buy to be their main residence, and correctly file the due paperwork with the local authorities within 18 months of purchase, are exempt from IMU. 

Buying a house in Italy: new provisions and bonuses

Alongside the above-discussed tax measures, the 2023 Budget Law also extends the validity of a series of provisions devised to boost the real estate market. Among these are measures that facilitate young buyers and those who choose energy-efficient buildings. Specifically, Italian tax residents under 36 years old who purchase their first home by December 31, 2023, will be exempt from stamp duty and other cadastral taxes including those on deeds of transfer, use, or dwelling. And all individuals who buy energy-efficient properties (homes classified as class A or B) can apply for an income tax deduction equal to 50% of the VAT paid for the purchase.

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  20. Whatever you call it, it is a simple game where the player bets whether the next card in the deck will be higher or lower than the current card. The odds are roughly commensurate with the probability of winning. Oficina de Arduino inspira meninas a entrar no mundo da tecnologia You can effortlessly navigate the website, hi lo game online NetEnt. The first legal poker site, hi lo game online and Playtech. So, a bonus wont come to your account balance by itself. This part tells you about the games in which luck predominates. Players mostly rely on their fortune. You cannot predict such activities as Roulette or Slots, or Bingo with a real level of precision. The number of possible outcomes increases intensively in sports betting, too. If you planned everything perfectly, there would always be the chance of unexpected event (a sudden rain during the football match, for example).
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    Unlike all islands in the Strait of Georgia to the south and west, Texada Island is not part of the Islands Trust. Limestone mining has been the lifeblood of the Texada Island community, providing employment for generations and resources to provide the public services that the community depends on. She said the application is in an area designated resource and mining is a common activity on Texada Island. This property is situated on the extreme northern end of Texada Island, extending across its entire width.  info@mscsteel The Marble Bay orebodies contain predominantly chalcopyrite, bornite and native silver within extensive, steeply dipping, skarn- altered fracture zones that cut brecciated limestone. The skarn mineralogy is dominated by garnet, diopside, tremolite and calcite; considerable amounts of epidote occurs locally with garnet and diopside. Minor amounts of molybdenite occur throughout the mine. Rare tetrahedrite and native gold have also been reported. Pyrite and pyrrhotite occur in the intrusive rocks in small quantities.

  21. Whatever you call it, it is a simple game where the player bets whether the next card in the deck will be higher or lower than the current card. The odds are roughly commensurate with the probability of winning. Oficina de Arduino inspira meninas a entrar no mundo da tecnologia You can effortlessly navigate the website, hi lo game online NetEnt. The first legal poker site, hi lo game online and Playtech. So, a bonus wont come to your account balance by itself. This part tells you about the games in which luck predominates. Players mostly rely on their fortune. You cannot predict such activities as Roulette or Slots, or Bingo with a real level of precision. The number of possible outcomes increases intensively in sports betting, too. If you planned everything perfectly, there would always be the chance of unexpected event (a sudden rain during the football match, for example).
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    Unlike all islands in the Strait of Georgia to the south and west, Texada Island is not part of the Islands Trust. Limestone mining has been the lifeblood of the Texada Island community, providing employment for generations and resources to provide the public services that the community depends on. She said the application is in an area designated resource and mining is a common activity on Texada Island. This property is situated on the extreme northern end of Texada Island, extending across its entire width.  info@mscsteel The Marble Bay orebodies contain predominantly chalcopyrite, bornite and native silver within extensive, steeply dipping, skarn- altered fracture zones that cut brecciated limestone. The skarn mineralogy is dominated by garnet, diopside, tremolite and calcite; considerable amounts of epidote occurs locally with garnet and diopside. Minor amounts of molybdenite occur throughout the mine. Rare tetrahedrite and native gold have also been reported. Pyrite and pyrrhotite occur in the intrusive rocks in small quantities.

  22. Very nice info and straight to the point. I am not sure if this is actually the best place to ask but do you people have any thoughts on where to hire some professional writers? Thanks in advance 🙂

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