Managing tax compliance as an individual in Italy means understanding which income must be declared, including income from assets and investments held abroad, when tax returns must be filed and which taxes must be paid. The basic rule of the Italian tax system is straightforward: individuals who are tax-resident in Italy must declare all income received, regardless of where it is earned worldwide (the principle of worldwide taxation), while non-residents are taxed only on income sourced in Italy.
This practical guide explains the key rules for navigating taxes, foreign asset reporting, tax relief schemes and payment procedures.
Tax Residence: How Does Taxation Differ Between Residents and Non-Residents?
The first essential step in determining your tax obligations is to establish your tax residence.
Italian tax residents: They are subject to taxation on all income earned both in Italy and abroad. They must also comply with tax reporting requirements for financial assets and property held overseas.
Non-Italian tax residents: They are required to declare and pay tax in Italy exclusively on income sourced within Italian territory, such as rental income from a property located in Italy or employment income relating to work performed in Italy.
Practical example: An individual who is tax-resident in Italy and owns a property in France or receives dividends from a foreign company must include the relevant income in their Italian tax return, taking into account any applicable double taxation treaties.
What Are the Main Personal Income Taxes in Italy?
The main tax levied on individuals’ income is IRPEF (Imposta sui Redditi delle Persone Fisiche), Italy’s personal income tax, supplemented by regional and municipal surcharges.
The main personal taxes to consider are:
- National IRPEF: Applied to an individual’s overall taxable income.
- Regional surcharge: Calculated according to the region of residence.
- Municipal surcharge: Calculated according to the municipality of residence.
Foreign Asset Reporting and Section RW: What Must Be Declared?
Individuals who are tax-resident in Italy are generally required to report financial assets and property held abroad through Section RW of the Italian tax return, which is used for foreign asset monitoring.
Assets subject to foreign asset reporting include:
- Foreign bank accounts and deposits (e.g. Revolut and foreign bank accounts): these must be reported if the average annual balance exceeds €5,000 or if the account balance exceeded €15,000 at any point during the year.
- Shares, equity interests and financial instruments.
- Foreign pension funds.
- Real estate located abroad.
- Cryptocurrencies and other digital assets.
Two specific wealth taxes may apply to assets held abroad:
- IVIE: Tax on the value of real estate located abroad.
- IVAFE: Tax on the value of financial assets held abroad.
Tax Relief Schemes: How Does the New Inbound Workers Regime Work?
To encourage workers and professionals to return to Italy or relocate there, the Italian tax system provides preferential tax regimes.
From the 2024 tax year, the new Inbound Workers Regime, introduced under Article 5 of Legislative Decree No. 209/2023, provides for:
- A 50% reduction in the taxable income base for qualifying employment and self-employment income produced in Italy, up to a maximum annual amount of €600,000, for a period of five years.
- An increased reduction of up to 60% (an additional 10 percentage points) for eligible individuals with dependent minor children.
Tax Deadlines and Payment Procedures: When and How Are Taxes Paid?
The Italian tax year coincides with the calendar year, running from 1 January to 31 December.
When Must Tax Returns Be Filed and Taxes Paid?
Tax return filing: Electronic filing for Form 730 or the Individual Income Tax Return (Modello Redditi PF) generally opens between May and June of the year following the relevant tax year.
Tax payments: Payments are generally made in two main instalments: the first by the end of June, covering the balance due and the first advance payment, and the second by the end of November, covering the second advance payment, in the year following the relevant tax year.
How Are Tax Payments Made?
Personal income tax and social security contributions are paid using Form F24.
For Italian tax residents, electronic submission of Form F24 is the standard method for ensuring that payments are allocated to the correct tax codes and for offsetting any available tax credits, where permitted.
Frequently Asked Questions (FAQs)
1. If I have a foreign bank account, must I declare it?
No. The obligation to report bank accounts in Section RW generally applies when the average annual balance exceeds €5,000 or when the account balance exceeds €15,000, even for just one day during the year.
2. How is tax paid on properties owned abroad?
Individuals who are tax-resident in Italy must generally report foreign real estate in Section RW and calculate the applicable IVIE.
For properties located in EU countries, the cadastral value can often be used to determine the taxable base, subject to the applicable rules.
If the property generates income abroad, that income must also be declared. Foreign taxes definitively paid may be eligible for a tax credit against the Italian tax due, subject to the applicable conditions.
3. What are the consequences of failing to meet tax filing obligations?
Failure to file a tax return or comply with foreign asset reporting requirements may result in administrative penalties imposed by the Italian Revenue Agency (Agenzia delle Entrate).
Manage Your Tax Obligations with Confidence
Managing personal taxation, particularly where foreign income or complex assets are involved, requires accuracy and ongoing attention to legislative changes to avoid penalties and take advantage of all available lawful tax-saving opportunities.
Do you need assistance with your tax return or with reporting foreign assets in Section RW?
Contact Studio Barbara Antonini to request personalised tax advice and receive step-by-step guidance in meeting your tax obligations.
