For tax purposes, anyone staying in Italy for more than 183 days during a tax year (which coincides with the calendar year) is considered a resident. The 183 days need not be consecutive.
Residents may be liable for taxes on income, capital gains and inheritance. Like many bureaucratic areas of Italian life, the taxation system is extremely complex, and it is essential to take expert advice from a commercialista.
In order to pay tax you will firstly need a 'Codice Fiscale.” This is a tax reference code, that is assigned to you and you can complete this process by visiting the local office of the Agenzia delle Entrate with a suitable means of identification, which for foreigners means a passport or permesso di soggiorno (residence permit).
Anyone thinking of buying a property in Italy should examine their tax status carefully. By doing so, they may well be able to save money in the future and if you are planning to rent out your property in Italy, don't forget that you will have to pay taxes on any rental income that you earn.
Income tax in Italy is called IRPEF (Imposta sul Reddito delle Persone Fisiche) and even if you are not a resident within Italy you are liable to pay and must declare annual tax on any income derived from renting properties within Italy. You can off-set some of the expenses of maintaining the property against the income total such as management expenses, maintenance and upkeep, repairs, communal expenses, etc. They normally account for about 15% of the total gross income, meaning you would only be taxed on about 85% of your total gross income.
There are different price brackets, according to how much revenue you make. They are as follows:
The income tax rate (IRPEF) is progressive up to 39%:
| In euros | Rate |
| 0 - 26,000 | 23% |
| 26,001 - 33,500 | 33% |
| 33,501 - 100,000 | 39% |
Also, if you are a resident in the UK, this income is also taxable under UK law. There are agreements between both countries that will allow you to avoid double taxation meaning that you pay your tax owed in either the UK or Italy, but not both.
Non-residents may be liable for taxes on income, capital gains and inheritance. Obviously, these vary from individual to individual, and it's important to take professional advice. There is no wealth tax in Italy.
The authorities are only concerned with Italian-sourced income. This includes interest on funds deposited with an Italian bank and income from letting a property in Italy. In the case of the latter, it is possible to offset expenses (including repairs to the property, management costs and so on) against income. The residue is taxed at between 19 and 46 per cent, depending on the amount. Most property owners will pay around 30 per cent.
Read our guide to buying a property in Italy or search properties for sale in Italy