Italian relocation tax incentives

Question: What are the tax incentives to relocate to Italy?

Answer: Italy offers some tax programs to make it more tax attractive to relocate to Italy and also some tax incentives to people who already live in Italy.

Between tax programs for new residents and other tax incentives boosted by the current government, low Italian taxes might be an additional incentive to move to a country that already appeals to many for its lifestyle, culture, landscape, and food.

More than 52,000 people took advantage of Italian relocation tax incentives that made Italy an unexpected tax haven.

Ordinary personal income tax rates (IRPEF)

In Italy there is a worldwide income taxation system based on your residency: if you are an Italian tax resident, you are expected to report all your income worldwide and also the assets you own worldwide.

If your income is subject to Italian ordinary income tax (IRPEF), the tax rates are progressive, i.e., based on the amount of income you earn, as follows:

• income from €0 to €28,000: 23%
• income above €28,000 to 50,000: 33%
• income above €50,000: 43%

In addition to the national income tax rates above, municipal and regional income taxes apply. Rates vary across Italy. However, you can conservatively ballpark 1%, 2%, and 3% respectively to the 1st, 2nd, and 3rd brackets above: total 24%, 35%, and 46%. Therefore, for example, if your taxable income is €55,000, your tax estimate would look something like this:

24% on €28,000 = €6,720

35% on €22,000 = €7,700

46% on €5,000 = €2,300

Approximate total income taxes on a €55,000 income: €16,720 (including estimated national, regional, and municipal income taxes).

Bear also in mind a key factor of the Italian tax system that is different from what happens in some other countries: in Italy married couples prepare and file their tax return individually. It is not possible to file a joint tax return. Therefore, the brackets and tax rates above apply individually. This is particularly important to put in place efficient tax planning strategies prior to moving to Italy.

Find below some examples of relocation and small business tax incentives.

Employee and Self-Employed workers: “Impatriati” regime

“Impatriati” could be translated as “Inbound expatriates”. If you established your registered residency in Italy prior to 2024, 70% or 90% of your employment income, as an employee or self-employed worker (e.g., freelancers, consultants, entrepreneurs) would be tax free. The income tax exclusion rate depends on where you established you live. In this article we address this Italian relocation tax program with more details.

For people who register(ed) their residency in Italy after 2023, the “Impatriati” relocation tax incentive is more limited, but they will still enjoy a 50% to 60% employment income tax exclusion, although limited to the first EUR 600,000 taxable income. Employment income in excess of EUR 600,000 would be subject to the ordinary tax rates above.

For example, the total employment income taxable basis of a person entitled to a 50% income exclusion and earning EUR 700,000 would be EUR 400,000. If you have a minor child, your employment income tax exclusion is 60%.

Your citizenship or immigration status is not relevant for the application of this tax incentive. Also, it is not relevant if you work as an employee on payroll, working for an Italian or a non-Italian employer, or if you are a self-employed worker, e.g., a consultant or a freelancer.

Important requirements to bear in mind for the new “impatriati” tax incentive are:

1. you must not have been an Italian tax resident for at least the 3 years prior to starting the “Impatriati” regime (the for longer in certain cases);
2. you must become an Italian tax resident;
3. most of your employment work must happen in Italy (it does not matter if your employer or clients are outside of Italy);
4. you must commit to keep your Italian tax residency for at least 4 tax years;
5. the tax authorities claim that there is a maximum tax savings amount allowed during a period of three tax years for self-employed workers, equal to EUR 300,000 (formerly EUR 200,000). No maximum savings amount is set for employees. Several legal scholars have criticized the savings amount limitation, arguing that no savings restriction should apply to either employees or self-employed workers.

If you already filed your Italian tax return and paid taxes on all your employment income because you did not know about these tax exclusions, you might be entitled to tax refund with respect to overpaid taxes within the past 48 months.

Freelancers and small businesses: “Forfetario” regime (aka, “Forfettario”)

If you are self-employed and your total annual sales do not exceed EUR 85,000 you can opt for your employment income to be taxed at 5% for five years, if you start a new activity in Italy, or 15%, if you continue the work you were doing before. Municipal and regional income taxes do not apply to this income. And you are also entitled to deduct a flat amount for expenses, between approximately 20%-30% of your sales, depending on your business industry, without the requirement to provide any evidence of actual expenses. Additionally, you can deduct social security payments. Therefore, the effective tax rate on your total sales might go down respectively to 3% or 9% after all applicable flat deductions.

This program (“Forfetario” regime) is applicable also if you have a job or collect a pension. However, you are not entitled to it if, during the previous tax year, you earned pension or payroll employment income exceeding EUR 35,000 (in the event of payroll income, you can still opt for the “forfetario” if in the same tax year your payroll employment terminated). Other exceptions apply.

Pensioners

If you collect a pension outside of Italy and if you move to certain areas of Italy, all your foreign income taxable in Italy can be taxed at 7% instead of the ordinary income taxes above. And municipal and regional income tax would not apply. For the U.S., distributions from deferred tax payment retirement accounts (e.g., from 401K or IRA) that are tax classified in Italy as pension income, would qualify for the application of the eligibility to the 7% tax program. In this article there are more details regarding the 7% tax program. Italian tax returns filed in 2025 for 2024 tax year show that 933 individuals are under this tax program.

Bonus incentive

In most cases, thanks to treaties against double taxation between Italy and most countries (including the U.S.), the three categories of income above would not be taxable in the country of origin once you move to Italy.

High Net Worth Individuals (HNWI): EUR 200,000 and EUR 300,000

If you have large foreign sourced income and have not been a resident of Italy for at least 9 of the past 10 tax years, you can apply for a flat tax regime under which you pay a flat EUR 200,000 tax per year or €300,000 (formerly EUR 100,000) and you are exempted from paying any other Italian taxes with respect to any income earned (sourced) outside of Italy, regardless of the income amount in question.

Under this program, there is also an exemption with respect to wealth (estate) tax on foreign assets. A person opting for this system can extend its tax incentives to his/her spouse with an additional payment of EUR 25,000 or EUR 50,000 per year. For a person who became an Italian resident by December 31, 2025 the lower amounts apply (EUR 200,000 and EUR 25,000). For a person who becomes an Italian resident starting from January 1, 2026 the higher amounts apply (EUR 300,000 and EUR 50,000 for spouse or family member).

This tax regime is advantageous when the fixed substitute tax is lower than the combined ordinary income tax and wealth taxes, on foreign real estate – IVIE – and foreign financial investments – IVAFE, which would otherwise apply.

Determining whether this tax program is beneficial for a person or a family depends on several factors, including the type of foreign income, applicable deductions, and tax credits under Italian law and bilateral treaties. As a result, the income threshold that might make this tax regime beneficial might range from about €400,000 to €3 million or more, depending on the taxpayer’s profile, income types and assets composition.

Examples considering the EUR 200,000 flat tax (for people who registered had Italian residency prior to January 1, 2026):

• For pension income taxable in Italy under ordinary progressive rates, the flat tax might be advantageous if the total amount exceeds €400,000 per year.
• For capital gains and dividends (normally taxed in Italy at 26%), the threshold rises significantly. Considering treaty-based credits, effective Italian tax may be around 11%, making the flat tax preferable only if annual dividends and capital gains exceed €1.8 million.
• For foreign real estate income, deductions abroad (e.g., in the U.S.) can reduce taxable income to 20% of gross, pushing the threshold beyond €2 million.
• For very high pensions, if taxable in Italy, the flat tax competes with the 7% regime available in certain municipalities, with effective advantage only above €2.9 million.

Wealth taxes (IVIE/IVAFE) slightly lower these thresholds. Clients also value the regime’s simplicity and confidentiality, sometimes opting for it even when ordinary tax would be lower, to secure future eligibility and ease compliance. Italian tax returns filed in 2025 for 2024 tax year show that 1,631 individuals are under this tax program.

Sicily offers up to 60% personal income tax refund

A Sicilian regional tax incentive has been recently introduced aimed at attracting new residents by offering a significant refund on Italian personal income tax (IRPEF). Individuals who relocate to Sicily between 2026 and 2028 and meet certain conditions, such as establishing tax residency and investing in local real estate, may benefit from a refund of 50%, increasing to 60% for smaller municipalities, with a cap of €100,000 per year.

The measure is particularly relevant for employees, retirees, and consultants seeking tax efficiency, and may potentially be combined with other Italian tax incentives. Read more about it here.

Plan, Plan, Plan

In most cases a person has several types of income. It is important to review the individual tax profile, applicable tax treaty, Italian approach to the interpretation of the specific dynamic of the treaty in question and then consider tax effective estate planning and investment restructuring options. The key is to plan properly before moving to Italy, possibly two or three years before becoming an Italian tax resident.

Time it correctly, take into consideration tax and/or estate plan strategies to maximize any available tax incentive and check your strategy across all the legal implications that might apply because of moving to another country, including the bureaucracy involved in the immigration process.

To pursue the highest tax efficiency, we recommend starting the planning process 12 or (better) 24 months prior to moving to Italy. More time gives access to more tax-efficient options and cost-effective opportunities.

Our team of experienced consultants include English speaking immigration lawyers, estate lawyers, tax lawyers and Italian certified “commercialista” (accountants) with many years of experience in planning tax efficient relocation strategies and preparing tax returns for Italian tax residents with income and assets in other countries. Connect with us. We will be happy to learn more about your specific case circumstances and advise you about immigration, estate planning and tax aspects of such an important step in your life.

Related information:

• Italian taxes
• Italian tax incentives for employees working for foreign companies
• Italian prima casa tax reductions
• Tax implications of renting your Italian property