2014-07-03 09:42:45

Our expat guide to income tax in Italy, including income tax brackets, income tax reduction and credits, and how to pay income tax if you are self-employed

If you live in Italy, it is a legal requirement to pay imposta sul reddito or IRPEF (income tax), in addition to corporate tax (if relevant), VAT, and Tax on services. Anybody living in Italy is obliged by law to pay their worldwide income. If you have lived in Italy for less than 183 consecutive days over a 12 month period, you only pay tax on the income you earned in Italy. The fiscal year runs from January to December.

 Good to know:

Income tax is deducted at the source and varies according to your job’s nature and field, your employment contract, and other factors such as your marital status.

Married couples have to fill in their tax declaration forms individually, with any revenue from your property divided into two equal shares.

How much will you need to pay?

In general, income tax varies depending on:

  • Real estate income (redditi fondari)
  • Capital income (redditi di capitale)
  • Work income (redditi di lavoro dipendente)
  • Independent work income (redditi di lavoro autonomo)
  • Commercial income (redditi di impresa)
  • Capital gains income (redditi diversi)
  • Insurance income

Your tax deductions will vary according to which bracket (1-5) you fall in to. These are:

  • Tax bracket one (0 - €15 000) will pay 23% tax
  • Tax bracket two (€15 001 - 28 000) will pay 27% tax
  • Tax bracket three (€28 001 - €55 000) will pay 38%
  • Tax bracket four (€55 001-€75 000) will pay 41%
  • Tax bracket five (over €75 001) will pay 43%

In addition to this, you will need to pay a municipal tax which amounts to between 0.7% and 0.9% as well as a regional tax of up to 3.33%, which is set by the region and municipality.

If you earn more than €300 000 per annum, you will also need to pay an additional 3% solidarity tax.

Deductions and credits

You may be eligible for tax deductions in the following instances:

  • If you have donated at least €1,032.91 per year to a university, research institutions or religious organisation, or €70,000 per year to any other non-profit organisation
  • if you have medical expenses, for instance supporting a person with a disability
  • if you are contributing a maximum of €5,164.57 per year to a voluntary pension fund in Italy
  • if you are contributing €3,615.20 per year to a health insurance

You may be eligible for tax credits if you reside in Italy and you have:

  • purchased real estate property – the tax credit amounts to €4,000 euros at a 19% interest rate
  • if you have done renovation work – the tax credit amounts to a maximum of €36,000 at a 36% rate on expenses. The credit can be extended from 5 to 10 years.
  • If you have made donations to legal culture and research foundations or other public institutions, the credit amounts to 19% of the whole amount
  • if you have a child dependent: €900 if the latter is less than 3 years old (€800 if the child is more than 3 years old), plus additional €220 if the child has a disability, and additional €200 euros if you have more than 3 children
  • if you have an unemployed spouse who will be considered as a dependent – €800 if your income is less than €15,000, and €690 if your income is between €40,001 and €80,000. You will be entitled to €690 euros tax credit if your income is between €15,001 and €40,000.

Self-employed

If you are self-employed, the same tax brackets apply, but you will need to file your tax return electronically or through a professional intermediary, such as an accountant. You can find the tax return forms on the Italian Revenue Agency website.

 Important:

Tax returns should be filed online by 2 October, or in paper between 2 May and 30 June.

Double taxation

You may face double taxation if you have moved to Italy. Thus, you will have to pay tax both in Italy and in your home country. You are then advised to check if your home country has signed any non-double taxation agreement with Italy. 

 Useful links:

Italian Taxation Agency
Italian Ministry of Economy and Finance
Double taxation convention
Miojob – Income tax calculation tool 

We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.