Last updated on August 16th, 2024 at 03:32 pm
Italy, with its rich culture, stunning landscapes, and mouthwatering cuisine, is a top destination for expatriates from around the world. On top of its obvious charms, the Italian tax regime offers a host of advantages for foreigners.
At Remitly, we know that living in another country can raise a lot of financial questions. From banking advice to tax tips, you’ll find plenty of useful information on our blog. Let’s dive into the tax deductions available to foreigners living in Italy.
Who can benefit from income tax deductions and other tax incentives in Italy?
Your tax residence status has a great impact on the tax incentives you are eligible for:
- Non-residents, generally including those who spend less than 183 days a year in Italy, do not have to pay tax on any income made outside of Italy, which means they avoid double taxation.
- Under a special tax regime, expatriates who moved to Italy between 2019 and 2023 (known as impatriates) were eligible for a generous tax exemption, with 70-90% of their personal income tax-exempt for the first five years, depending on their municipality.
- Under the new rules of the Impatriates Regime (or “lavoratori impatriati”), expats who become Italian tax residents in 2024 only pay taxes on 50% of their taxable income during their initial five-year period in the country.
- Italy’s 7% flat-rate tax regime for retirees allows recipients of a foreign pension to transfer their tax residence to specific municipalities in southern Italy (municipalities with fewer than 20,000 inhabitants in Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise or Puglia). They then pay a tax rate of just 7% on all foreign income rather than paying the IRPEF progressive tax rate.
Tax benefits available for employees and self-employed foreigners in Italy
Under the Italian tax regime, the INPS (the Italian Social Security Institute) offers various tax relief deductions for employees, self-employed workers, pensioners, and those with dependent family members.
Here is a breakdown of common deductions you can claim:
- Social security and pension contributions: Mandatory payments to the Italian government during the current tax year are fully deductible.
- Business expenses: Expenses related to work activity can be reported in your tax return. If you are self-employed, filing the VAT return may mean a partial refund of VAT paid throughout the year.
- Medical expenses: Medical purchases made within the Italian territory are automatically deducted.
- Education expenses, including fees for primary through university education, are deductible up to a certain amount.
- Deductions and benefits are available for dependent family members, including spouses and dependent children, with varying maximum amounts based on the dependent’s age and total income. The 2024 Budget Law increased the non-taxable income threshold to 2,000 euros for those with dependent children.
- Housing deductions: These include mortgage interest for primary residential properties, specific deductions for rent, and various bonuses for property renovations, such as solar panel installation and insulation upgrades, if you own real estate.
- Charity contributions: Donations to a charity, non-profit organization, or religious institution are tax-deductible expenses.
How can I claim income tax deductions as a foreigner in Italy?
Claiming income tax deductions in Italy is streamlined thanks to the pre-completed form available online, provided by the Agenzia delle Entrate (the Italian revenue agency). This form simplifies the filing process by including potential deductions and exemptions you’re eligible for under the Italian tax code.
Key deadlines for claiming deductions in Italy
Meeting deadlines for filing tax returns in Italy is crucial to avoid penalties for late filing. Here are the dates you need to know:
- Form 730: If filing online, the submission deadline is 30 September of the year following the tax year.
- Form Redditi PF: The deadline for submission is 15 October of the year following the tax year. If you’re filing by mail, you must send your paper form between 2 May and 30 June.
- Non-residents abroad: Non-residents who are abroad at the time of the tax return filing and are unable to send the tax return electronically have until 30 November of the year following the tax year to submit the Redditi PF form by registered post or equivalent.
Tips for maximizing tax deductions in Italy
Here are some tips to make the most of your tax deductions:
- Stay informed about all possible tax benefits and deduction strategies.
- Regularly review the latest updates in the tax regime to be aware of all tax-saving tips.
- Organize and keep all necessary documentation throughout the tax year to support your claims.
- Planning ahead can help you take full advantage of the available tax benefits, optimizing your tax deductions and potentially reducing your overall tax liability.
Common mistakes to avoid when claiming tax deductions
One of the most common errors in tax filing in Italy includes missing the submission deadlines, which can lead to penalties. Another common pitfall is including incorrect information on your tax return, which can trigger audits or lead to the denial of valid deductions.
Where to get help with tax deductions in Italy
If you need assistance with your tax return, Italy offers a variety of resources.
- Tax consultants and qualified professionals can provide personalized guidance tailored to your specific circumstances.
- The official website of the Italian Tax Authority, the Agenzia delle Entrate, contains detailed information on all tax-related matters.
- Government helplines and online tax support resources are readily available to offer help and answer questions about the tax process. Call the Agenzia delle Entrate from Italy on 800 90 96 96 (toll-free from a landline) or 06 97617689 (from a mobile); or +39 06 96668907 from abroad.
Understanding the Italian tax system
The Italian government uses a progressive personal income tax scheme known as the IRPEF. This means your income tax rate depends on your total employment income (23% on the first 28,000 EUR; 35% on 28,000 to 50,000 EUR; and 43% above 50,000 EUR, as of 2024).
In general, EU citizens and non-EU tax residents in Italy are subject to the same tax regulations and benefits as Italian citizens.
There are various tax deductions available for immigrants in Italy. If in doubt, contact the relevant tax authorities or consult a tax advisor for assistance.
Frequently Asked Questions
Q: What are the eligibility criteria for tax deductions in Italy?
A: Eligibility for tax deductions varies; however, Italy’s tax rules generally outline that both residents and non-residents can claim deductions. This includes EU and non-EU citizens. It also includes Italian citizens who live abroad and are considered non-residents for tax purposes. In this case, they must register with the AIRE (Anagrafe degli Italiani Residenti all’Estero), the registry for Italian nationals living abroad.
Q: How do I claim education expenses as tax deductions in Italy?
A: You can claim education tax deductions for dependent children by submitting tuition fee receipts along with the tax return, under the section for education expenses.
Q: What documents do I need to claim healthcare deductions?
A: Required documents for healthcare deductions typically include medical bills and proof of payment, which you must attach to the tax return.
Q: When is the deadline for filing tax deductions in Italy?
A: The tax filing deadline is October 15 for online filing or June 30 for paper filing.
Q: Can I claim home office expenses on my taxes in Italy?
A: Yes, home office deductions are available for taxpayers who work from home. You must provide documentation in order to claim office costs for the applicable tax period.
Q: What are common mistakes to avoid when filing for tax deductions?
A: Common mistakes include inaccurate claims, late filings, and inadequate documentation. Remember to also check whether your home country has a tax treaty with Italy that can help lower your taxable income.
Q: Can I file my Italian taxes in English?
A: No, forms are only available in Italian. There are some resources and information in English.
Q: Do I have to report income I earned in other countries?
A: Yes, you must report all worldwide income. However, only income from Italian sources is subject to taxation.
