Many people who live between two or more countries have questions about when, or at what point, they need to start pay income tax in Italy. After all, what are the rules that determine this tax obligation?
READER QUESTION: I have Italian citizenship and we rent an apartment in Italy. Since we pay taxes in Brazil, we are unsure if we can apply for an Italian driver's license or health insurance card, or if we can request residency permits. My question is: what would necessitate filing a tax return in Italy?
As the Italian tax agency, known as Inland Revenue, the obligation to pay income tax in Italy is triggered when you become a “tax resident” in the country.
The revenue agency's website states that you are considered a tax resident in Italy if, for at least 183 days a year, you:
- Is registered with the Italian national population registration office (known as Registry office);
- Have your “place of residence or habitual residence” in Italy.
Basically, spending more than six months a year in Italy means that the Italian tax authorities can consider Italy as your main place of residence.
If you have chosen to officially move to Italy, have met any visa requirements and are now successfully registered as a resident in your local municipality, then it is quite simple: you will need to be prepared to pay taxes in Italy on all income earned in any part of the world.
The tax requirement probably won't apply if you spend less than half your time in a second home in Italy. This should be the case if you are a non-EU national subject to the 90 day rule when visiting Italy and other European countries.
But if you live in Italy most of the time, or if Italy is where you have most of your business or other interests, you can also be considered an Italian tax resident, even if you are not legally registered as a resident with the Ufficio Anagrafe.
And, even if you are not considered an Italian tax resident, be aware that you may still have to pay Italian taxes on any income generated in Italy.
Those who purchase property in Italy are also responsible for certain local taxes, regardless of their professional status of residence.
It is important to note that many countries, including Brazil, have double taxation treaties with Italy that establish the rules about which country must levy certain taxes. These treaties are designed to prevent you from being taxed twice on the same income.
Become a tax resident
Tax obligations will be one of the most important considerations when deciding whether or not to acquire Italian residency.
The main thing you need to be aware of is that when you officially become a resident, you will need to file annual tax returns with the Italian authorities, even if all of your income comes from your home country or elsewhere.
After becoming a taxpayer in Italy, you will have the right to register with the Italian healthcare system. However, depending on your circumstances, this may not be free.
For more details on how Italian tax rules may apply to your circumstances, please seek independent advice from a qualified tax professional.
You can also find more information about Italian income taxes on the Agenzia delle Entrate website (in Italian, English and German): www.agenziaentrate.gov.it
The Lion's Bite in Italy: Understanding the Progressive Tax Burden
Italy, renowned for its rich cultural heritage and stunning landscapes, is a dream destination for expats across the world. However, when it comes to taxes, the country is often nicknamed “Lion” due to its high tax burden, one of the highest in the world.
Much of the Italian government's revenue comes from taxes on people's income, and the country's tax system is designed with progressiveness, meaning that tax rates increase as a taxpayer's income grows.
Income Tax Bands in Italy:
1st Income Tier (0-15.000 euros): In this range, the Personal Income Tax rate (IRPEF) is 23%. This means that, for example, for an annual income of 15.000 euros, a taxpayer would be subject to a tax of 3.450 euros, resulting in a net income of 11.550 euros. Translating into monthly values, if someone earned 1.250 euros per month, the net income would be 962,50 euros.
2st Income Tier (15.001-28.000 euros): In the second income bracket, with income between 15.001 and 28.000 euros, the IRPEF rate is 25%. To illustrate, a monthly income of 2.333 euros would result in a net income of 1.749,75 euros.
3st Income Tier (28.001-50.000 euros): For income between 28.001 and 50.000 euros, the IRPEF rate rises to 35%. For example, someone earning €4.166 per month would have €2.707,90 after taxes.
4th Income Band (above 50.000 euros): The highest income bracket, with earnings exceeding 50.000 euros, is taxed at an IRPEF rate of 43%. If someone is in this bracket and earns, for example, 5.000 euros per month, they would have a net income of 2.850 euros after paying taxes. (Photo: Depositphotos)
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