Yes, Italy taxes both individuals and businesses across a wide range of activities. Personal income tax rates run from 23 to 43 percent across three brackets for 2026, corporate profits are taxed at 24 percent, and the standard value-added tax on goods and services is 22 percent.1Ministry of Economy and Finance. Fiscal Agencies On top of those headline rates, Italy layers regional and municipal surcharges, property taxes, wealth taxes on foreign holdings, and separate rules for inheritance, capital gains, and cryptocurrency. The Agenzia delle Entrate, under the Ministry of Economy and Finance, administers the system.
Who Owes Italian Tax
Your exposure to Italian tax depends on residency. You are a tax resident if, for more than 183 days in a calendar year (184 in a leap year), you are physically present in Italy, keep your habitual home there, or maintain your primary center of social interests in the country.2Agenzia delle Entrate. Residence for Tax Purposes Being registered in the Anagrafe, Italy’s resident population registry, for most of the tax year also creates a presumption of residency unless you prove you actually live elsewhere.
Residents owe Italian tax on worldwide income. Non-residents pay only on income sourced within Italy. That single line changes the calculation for anyone splitting time between countries or holding investments abroad.
Personal Income Tax Rates (IRPEF)
Personal income tax, known as IRPEF, is progressive. The 2026 Budget Law (Law No. 199/2025) collapsed the previous brackets into three tiers:3Agenzia delle Entrate. Personal Income Tax Rates and Calculation
- Up to €28,000: 23 percent
- €28,001 to €50,000: 33 percent
- Above €50,000: 43 percent
The rates are marginal. Someone earning €60,000 pays 23 percent on the first €28,000, 33 percent on the next €22,000, and 43 percent on the remaining €10,000. For taxpayers with total income above €200,000, a clawback mechanism neutralizes the benefit of the reduced middle-bracket rate.3Agenzia delle Entrate. Personal Income Tax Rates and Calculation
Taxable income includes wages, self-employment earnings, pensions, rental income, investment returns, and capital gains. Residents report all of it, even income earned abroad.
Regional and Municipal Surcharges
Two local surcharges apply on top of IRPEF, using the same taxable income. The addizionale regionale, authorized by Legislative Decree 446 of 1997, generally falls between roughly 1.23 and 3.33 percent depending on the region. The addizionale comunale is set by your city or town council and is capped at 0.8 percent in most municipalities. Both fund local administration and regional health services. Employees usually see these amounts withheld from payroll; self-employed taxpayers settle them at annual reconciliation.
Value Added Tax (IVA)
IVA, Italy’s consumption tax, follows the EU VAT framework and is regulated by Presidential Decree 633 of 1972.4European Commission. Italy VAT Rules Four rates apply depending on the product or service:
- 22 percent standard rate on most goods and services
- 10 percent on pharmaceutical products, certain tourism and hospitality services, and some food products
- 5 percent on select categories including certain herbs and spices and sales of artworks and antiques
- 4 percent super-reduced on basic necessities such as staple food items, newspapers, and certain medical devices
Businesses collect IVA at each stage of the supply chain and remit the net amount. The final consumer bears the full cost.
Corporate and Business Taxes
Companies operating in Italy face two separate levies. IRES, the national corporate income tax, applies at a flat 24 percent on net profits after allowable deductions for business expenses and depreciation.5Agenzia delle Entrate. Corporate Income Tax – IRES
IRAP, the regional production tax established by Legislative Decree 446 of 1997, is calculated on the value of production rather than net profit. The standard rate is 3.9 percent, and regional governments can adjust it by roughly 0.92 percentage points in either direction. Because IRAP is based on production value (essentially revenue minus certain costs, but before labor costs), a company can owe IRAP in a year it operates at a loss.
Flat-Rate Scheme for Freelancers and Small Businesses
Self-employed professionals and sole proprietors whose prior-year revenues stay under €85,000 can elect the Regime Forfettario. It replaces IRPEF, the regional and municipal surcharges, and IVA obligations with a single substitute tax.6Agenzia delle Entrate. Flat-Rate Scheme
The standard rate is 15 percent of taxable income, calculated by applying a profitability coefficient (which varies by business activity) to gross revenues. New businesses meeting additional conditions, including not having carried out a similar activity in the previous three years, pay 5 percent for their first five years.6Agenzia delle Entrate. Flat-Rate Scheme
Property Taxes
Owning real estate in Italy triggers two municipal taxes. IMU, the Imposta Municipale Propria, is the main one. Under Law 160 of 2019, IMU is waived on your primary residence unless the property falls into a luxury cadastral category (A/1, A/8, or A/9, covering stately homes, villas, and castles). Second homes, commercial properties, and buildable land are subject to IMU at rates set by each municipality, typically between 0.76 and 1.06 percent of the property’s cadastral value, an administrative figure usually well below market value.
TARI, the waste collection tax, is calculated from the property’s square footage and the number of occupants. Both IMU and TARI are generally paid in two installments during the calendar year.
Rental Income and the Cedolare Secca
Rental income from residential property is normally added to your IRPEF calculation and taxed at your marginal rate. Landlords can instead elect the cedolare secca, an optional flat tax that replaces IRPEF and the local surcharges on that rental income. The standard cedolare secca rate is 21 percent. A reduced 10 percent rate applies to regulated low-rent agreements (canone concordato) in municipalities with housing shortages. Electing the flat rate means you cannot deduct rental expenses, but it often lowers the overall bill for landlords in higher IRPEF brackets.
Inheritance and Gift Taxes
Italy taxes transfers by inheritance and gift according to the relationship between the parties. Legislative Decree 139 of 2024, effective January 1, 2025, sets the current rates and thresholds:
- Spouses and direct-line relatives (children, parents, grandchildren): 4 percent on value above €1,000,000 per beneficiary
- Siblings: 6 percent on value above €100,000 per beneficiary
- Other relatives up to the fourth degree and in-laws up to the third degree: 6 percent with no exemption
- All other recipients: 8 percent with no exemption
Beneficiaries with qualifying disabilities receive a higher exemption threshold of €1,500,000 regardless of their relationship to the deceased or donor. Real estate transferred through inheritance or gift also carries mortgage and cadastral registration taxes.
Wealth Taxes on Foreign Assets
Italian tax residents who hold financial assets or real estate outside Italy owe separate wealth taxes. IVAFE applies to foreign financial assets such as brokerage accounts and investment portfolios at 0.2 percent of their value. Foreign bank accounts are handled differently: a flat €34.20 per account per year, with no tax owed if the average annual balance stays below €5,000. The IVAFE rate doubles to 0.4 percent for assets held in jurisdictions Italy classifies as having privileged taxation.
IVIE applies to foreign real estate at 1.06 percent of the property’s value. Both taxes were introduced by Decree-Law 201/2011.
Foreign financial assets and real estate must be disclosed on the Quadro RW section of your Italian tax return, even in years when the assets produced no income. Failure to report can lead to penalties and, in serious cases, a presumption that unreported assets represent undeclared taxable income.
Capital Gains and Cryptocurrency
Capital gains from selling financial investments are generally taxed at a 26 percent substitute rate. That covers stocks, bonds, and most other financial instruments. Gains from selling real estate held fewer than five years, other than a primary residence, are taxed as ordinary IRPEF income unless a substitute rate is available.
Cryptocurrency has its own trajectory. For the 2025 tax year, crypto capital gains are taxed at 26 percent, and a previously available small-gains exemption has been removed. Starting January 1, 2026, the rate rises to 33 percent. Crypto holdings must also be reported on Quadro RW.
Tax Incentives for People Moving to Italy
Two regimes reduce the tax burden for new residents, and which one fits depends on your situation.
Lump-Sum Tax on Foreign Income
High-net-worth individuals who transfer their tax residency to Italy can elect a substitute flat tax on all foreign-sourced income in place of progressive IRPEF on those earnings. For residency transfers starting January 1, 2026, the annual flat tax is €300,000, up from €200,000 for 2025 arrivals and €100,000 for those who opted in during 2024. Family members who also transfer residency pay €50,000 each.
Eligibility requires having been a tax resident outside Italy for at least nine of the ten fiscal years before the move. The regime also covers IVAFE and IVIE on foreign investments and exempts you from Quadro RW reporting. Election happens through the annual tax return, and requesting an advance ruling from the tax authorities is advisable to confirm eligibility.
Relief for Returning and Relocating Workers
The lavoratori impatriati regime, restructured by Legislative Decree 209/2023, cuts the taxable base for qualifying workers who move to Italy. Under the standard benefit, only 50 percent of Italian-source employment or self-employment income (up to €600,000) counts toward IRPEF. If you move with a minor child or have a child born or adopted during the incentive period, the exemption rises to 60 percent.
You must not have been an Italian tax resident for the three years before the move, must commit to remaining a resident for at least four years, and must hold high qualifications or specialization as defined by Italian law. Breaking the four-year commitment means repaying the benefits with interest.
Filing Deadlines and Penalties
Two personal tax return forms cover most individuals. The Modello 730 is the simpler form for employees and retirees, due September 30 of the year following the tax year. The Redditi PF covers more complex situations, including self-employment and foreign income, and must be filed electronically by October 31.7Agenzia delle Entrate. How and When to File a Tax Return Non-residents unable to file electronically may send the Redditi PF by registered post by November 30.
Corporate returns must be filed electronically no later than the last day of the tenth month after the tax period ends, which is October 31 for companies on a calendar-year basis.8Agenzia delle Entrate. When the Corporate Income Tax Return Must Be Filed
Failing to file a return at all triggers a penalty of 120 percent of the taxes owed, set under the 2024 reform of Italy’s penalty system (Legislative Decree 87/2024). The previous range was 120 to 240 percent, so the reform brought some relief, but ignoring an Italian filing obligation still carries steep consequences. Inaccurate corporate reporting leads to administrative fines, and deliberate fraud can result in criminal prosecution.