Tax Guide for Individuals Transferring Their Residence to Italy

1. INTRODUCTION: THE CONCEPT OF TAX RESIDENCE

1.1 Criteria for Determining Tax Residence

For income tax purposes, tax residence in Italy is governed by Article 2(2) of the TUIR (Consolidated Income Tax Act), according to which individuals are considered resident if, for most of the tax period (at least 183 days, including fractions of a day):

• they are registered in the registry of the resident population; or

• they have their residence in the territory of the State under the Civil Code; or

• they have their domicile in the territory of the State; or

• they are physically present there.

These criteria are alternative: meeting just one of them is sufficient to be considered tax resident in Italy.

1.2 The Concept of Tax Domicile

Following the reform introduced by Legislative Decree No. 209/2023, applicable from 1 January 2024, Article 2(2) of the TUIR provides an autonomous definition of tax domicile: “the place where the individual’s personal and family relationships are primarily developed.”

For tax periods prior to 2024, consolidated case law clarified that tax domicile coincides with the centre of a person’s business and vital interests, giving priority to the place where such interests are habitually managed in a manner recognisable by third parties (Supreme Court Nos. 19982/2024 and 20041/2024).

Affective and family relationships do not play a primary role but are relevant only together with other criteria that unequivocally indicate the place with which the individual has the closest connection, particularly regarding economic and property interests.

1.3 Presumption for Transfers to Low-Tax Jurisdictions

Article 2(2-bis) of the TUIR provides a rebuttable legal presumption of tax residence in Italy for Italian citizens removed from the registry of the resident population and transferred to States or territories with privileged tax regimes (“black list”). In such cases, the taxpayer bears the burden of proving actual residence abroad.

1.4 Consequences of Tax Residence

Under Article 3 of the TUIR, residents are taxed in Italy on all income earned, wherever produced (“worldwide taxation”), while non-residents are taxed only on income produced within the territory of the State.

2. EMPLOYMENT INCOME

2.1 Determination of Income

Employment income is governed by Article 51 of the Italian Income Tax Code (TUIR) and consists of all amounts and benefits of any kind received during the tax year, for any reason, including gifts, insofar as they relate to the employment relationship.

Amounts and benefits paid by employers up to 12 January of the following tax year are also considered as received in the relevant tax year.

In 2026, the IRPEF (personal income tax) brackets are as follows: 23% up to €28,000, 35% from €28,001 to €50,000, and 43% on income exceeding €50,000. However, employment-related tax credits apply, which vary according to total income and reduce the net tax due.

2.2 Non-Taxable Components

The following, among others, do not form part of taxable income:

• Mandatory social security and welfare contributions

• Health insurance contributions up to €3,615.20

• Meals provided in company canteens or electronic meal vouchers up to €8 per day (€4 for paper vouchers)

• Public transport passes for the employee and dependent family members

• Goods and services offered to all employees up to €258.23 per year (limit modified from 2024)

• Fringe benefits for education and childcare services for family members

  
  

2.3 Special Regime for Workers Transferring Residence to Italy

Article 5 of Decree-Law No. 34/2019 provides a favourable tax regime for employees and self-employed workers transferring their residence to Italy, provided that:

• they were not tax resident in Italy in the two tax periods preceding the transfer

• they commit to residing in Italy for at least two years

• their work activity is carried out mainly in Italy

Basic benefit: only 30% of income contributes to taxable income for the year of transfer and the following five years.

Enhanced benefits:

• 10% taxable income for those transferring residence to Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia or Sicily

• Extension for an additional 5 years at 50% taxable income for those with at least one minor or dependent child, or who purchase a residential property in Italy

• Extension for an additional 5 years at 10% taxable income for those with at least three minor or dependent children

  
  

2.4 Special Regime for Professors and Researchers

Article 44 of Decree-Law No. 78/2010 provides that professors and researchers transferring residence to Italy, after documented research or teaching activity abroad for at least two consecutive years, benefit from a 90% exclusion of income from taxation for the year of transfer and the following five years, with possible extension up to 13 years in the presence of children or property purchase.

3. SELF-EMPLOYMENT INCOME

3.1 Determination of Income

Self-employment income is governed by Articles 53 and 54 of the Italian Income Tax Code (TUIR) and is determined according to the cash basis principle: taxable income is calculated based on the compensation actually received and the expenses actually paid during the tax year, regardless of the invoice date (Italian Supreme Court, No. 24996/2022).

The IRPEF tax brackets are the same as those applied to employment income and are levied on net profits, i.e., income received minus deductible expenses.

As a general rule, self-employed individuals must apply value-added tax (VAT) at 22% on services rendered or goods sold, unless they fall under special VAT regimes.

3.2 Preferential Regime for Self-Employed Workers Returning to Italy

Self-employed individuals may also benefit from the preferential tax regime provided by Article 5 of Decree-Law No. 34/2019, under the same conditions and with the same reduced taxable percentages applicable to employees.

3.3 Flat-Rate Regime for Small Taxpayers

Individuals carrying out business activities, arts or professions may opt for the flat-rate regime (Law No. 190/2014) if their annual revenues/fees do not exceed €85,000. This regime provides:

• a 15% substitute tax (reduced to 5% for the first five years if certain conditions are met),

• simplified accounting obligations,

• and exemption from applying VAT on services rendered or goods sold.

4. INVESTMENT INCOME

4.1 Categories of Investment Income

Article 44 of the TUIR identifies the following categories of investment income:

• Interest and income from loans, deposits and bank accounts

• Interest and income from bonds and similar securities

• Dividends from participation in the capital or assets of companies and entities subject to corporate income tax

• Income from collective investment schemes (UCITS/AIFs)

• Income from life insurance and capitalisation contracts

  
  

4.2 Taxation of Dividends from Italian Companies

For qualified shareholdings (over 2% voting rights or 5% capital for listed companies; over 20% voting rights or 25% capital for unlisted companies):

• 58.14% of dividends contributes to taxable income (Article 47 TUIR)

• Taxed at progressive IRPEF rates

For non-qualified shareholdings:

• A 26% withholding tax applies as a final tax (Legislative Decree No. 33/2025)

• Dividends do not contribute to taxable income

4.3 Taxation of Dividends from Foreign Companies

Rules vary depending on the country of residence of the distributing company:

• EU/EEA white-list States: same rules as Italian-source dividends, with possible foreign tax credit

• Low-tax jurisdictions: dividends are fully taxable unless the taxpayer proves actual economic activity (Article 47(4) TUIR)

  
  

4.4 Interest and Other Investment Income

Interest and other investment income are generally subject to a 26% withholding tax, with exceptions for Italian government bonds and equivalent securities (12.5% rate).

5. REAL ESTATE INCOME

5.1 Definition and Categories

Article 25 of the TUIR defines real estate income as income relating to land and buildings located in Italy that are or must be registered in the land or building registry with an assigned cadastral value.

Real estate income includes:

• Land ownership income

• Agricultural income

• Building income

  
  

5.2 Attribution of Real Estate Income

Under Article 26 of the TUIR, real estate income contributes to taxable income for individuals holding the property as owner, emphyteuta, usufructuary or other real right, regardless of actual receipt.

Case law clarifies that taxation is based on the existence of a real right, not mere physical availability (Supreme Court No. 33097/2024).

5.3 Determination of Building Income

Building income is determined using cadastral values (Article 37 TUIR), regardless of actual rental income.

Exception: if the contractual rent, reduced by 5%, exceeds the cadastral value, taxable income equals the rent net of the reduction.

5.4 Properties Located Abroad

Article 70(2) TUIR provides that income from foreign land and buildings contributes to taxable income:

• if subject to income tax abroad: based on the net amount determined abroad

• if not subject to tax abroad: based on market value reduced by 15% as a lump-sum deduction

Case law clarifies that what matters is the abstract taxability abroad, not actual payment (Supreme Court No. 30006/2021).

6. CORPORATE AND PARTICIPATION INCOME

6.1 Partnerships

For partnerships (SNC, SAS, simple partnerships) resident in Italy, the transparency principle applies (Article 5 TUIR): income is attributed to partners proportionally, regardless of distribution.

6.2 Companies

As noted in section 4.2, dividends are taxed differently depending on whether the shareholding is qualified or non-qualified.

Case law clarifies that income from mere participation in companies, without work activity, constitutes investment income, not business income (Supreme Court Nos. 22901/2024 and 7272/2025).

6.3 Controlled Foreign Companies (CFCs)

Article 167 TUIR governs the regime for controlled foreign companies. If an Italian-resident individual controls non-resident companies located in low-tax jurisdictions, the income of such companies may be attributed to the resident shareholder unless actual economic activity is proven.

7. OTHER RELEVANT INCOME

7.1 Miscellaneous Income

Article 67 TUIR identifies a residual category of “miscellaneous income,” including:

• Real estate capital gains: sale of properties purchased or built within 5 years (10 years for properties subject to Superbonus)

• Financial capital gains: sale of shares, securities, currencies, crypto-assets

• Rental/subletting income when not classified as real estate income

• Income from commercial or self-employment activities not carried out habitually

7.2 Special Regimes for New Residents

High-Net-Worth Individuals (Article 24-bis TUIR)

Article 24-bis TUIR provides an optional regime for individuals transferring residence to Italy, provided they were not tax resident in Italy for at least 9 of the previous 10 tax periods:

• Lump-sum substitute tax of €300,000 per year on foreign-source income (€50,000 for each family member)

• Duration: up to 15 years

• Italian-source income taxed ordinarily

  
  

Pensioners Moving to Southern Italy (Article 24-ter TUIR)

Article 24-ter TUIR provides a favourable regime for foreign pensioners transferring residence to municipalities in Southern Italy with fewer than 20,000 inhabitants:

• 7% substitute tax on all foreign-source income

• Duration: 9 years

• Requirement: not resident in Italy in the previous 5 years

8. FOREIGN TAX CREDIT

Article 165 TUIR grants a foreign tax credit for taxes definitively paid abroad on foreign-source income, up to the amount of Italian tax due on such income.

The credit applies even where double tax treaties exist, which generally provide specific rules for allocating taxing rights between States.

9. TAX RETURNS AND FOREIGN ASSET REPORTING

9.1 Tax Return

Residents must file an annual tax return (Form “Redditi PF”), reporting all income earned worldwide.

9.2 Foreign Asset Reporting (Form RW)

Residents holding foreign investments or financial assets must complete Form RW, indicating:

• value and amount of foreign investments and assets

• inflows and outflows to/from abroad

Failure to file or incorrect filing results in administrative penalties.

9.3 Tax on Foreign Real Estate (IVIE)

Residents owning real estate abroad must pay IVIE (Tax on the Value of Real Estate Located Abroad), equal to 0.76% of the property value.

9.4 Tax on Foreign Financial Assets (IVAFE)

Residents holding foreign financial assets must pay IVAFE (Tax on the Value of Financial Assets Held Abroad), equal to 0.2% of the asset value.

10. FINAL CONSIDERATIONS

Transferring tax residence to Italy entails worldwide taxation. However, the Italian system provides numerous incentives to encourage the return of workers, professionals, professors, researchers and pensioners, as well as to attract high-net-worth individuals.

It is essential to carefully assess:

• correct determination of tax residence under Article 2 TUIR

• applicability of double tax treaties

• eligibility for favourable regimes

• tax return and reporting obligations

Professional advice is recommended for personalised tax planning. Studio Legale Lanzi assists foreign citizens in Italy, also in English and French, with contractual, real estate, tax and relocation matters.

Main legislative references:

• Presidential Decree 22 December 1986, No. 917 (TUIR)

• Presidential Decree 29 September 1973, No. 600

• Decree-Law 31 May 2010, No. 78, Article 44

• Decree-Law 30 April 2019, No. 34, Article 5

• Legislative Decree 24 March 2025, No. 33