Italy Tax System: Updated Guide for Individuals and Companies in 2026

Individuals who work, run a business, carry out professional activities, or receive income in Italy typically pay Italian taxes. The tax base is generally calculated after social security contributions and allowable deductions.

Before looking at Italian taxes in detail, it is important to understand who is liable to pay taxes in Italy. 

Individuals

An individual is considered tax resident in Italy if, for at least 183 days a year one or more of the following conditions applies:

• they have their habitual abode in Italy;
• they have their domicile in Italy, meaning the place where their main personal and family relations are centred;
• they are physically present in Italy;
• they are registered in the Italian resident population register^{[3]Source: Italian Revenue Agency. Residence for tax purposes}.

Unless at least one of these conditions is met, a person is treated as a non-resident. Italian tax residents pay tax on their worldwide income. Non-residents are generally taxed only on Italian-source income.

Companies

A company or entity is considered tax resident in Italy if, for most of the tax period, it has in Italy its registered office, place of effective management, or principal ordinary management. Resident companies are taxed on their worldwide income. Non-resident companies are generally taxed only on Italian-source income^{[4]Source: Italian Revenue Agency. How to calculate the tax base}.

Opening a company in Italy or purchasing shares in a local business might make one eligible for the Italy Golden Visa — an investment programme that allows obtaining a residence permit in 4 months.

Individuals in Italy may pay different taxes depending on their income, assets, residence status, and personal circumstances. The main taxes include personal income tax, social security contributions, capital gains tax, inheritance and gift tax, and vehicle tax.

Personal income tax

Federal tax. Italian residents and foreigners who earn money in the country have to pay personal income tax, IRPEF. It is applied to the overall income, which includes capital income, employment, self-employment, entrepreneurial activity, and land income.

Individuals with tax resident status pay tax on income earned both in Italy and overseas. Non-residents pay the tax only on income earned in Italy.

IRPEF is progressive, which means that the tax rate increases with the income amount. The tax rate varies from 23 to 43%.

Italy’s personal income tax rates in 2026 are:

• up to €28,000 — 23%;
• €28,001 to 50,000 — 33%;
• €50,001 and more — 43%.

Regional and municipal surcharges. In addition to the income tax, individuals in Italy pay a regional income tax of 1.23—3.33% and a municipal tax of up to 0.9%^{[5]Source: Italian Ministry of Economy and Finance. Regional additional IRPEF rates decree}. Each region and municipality in Italy can change the tax rate for its residents. Wealthier areas usually pay higher rates.

Personal income tax in Italy is paid once a year. It’s also possible to pay it in two installments if the payment is €257.52 or more. The first installment of 40% must be paid by June 30, while the remaining 60% must be paid by November 30 of the same year^{[6]Source: Italian Revenue Agency. How to pay IRPEF}.

Deductions. Certain expenses can reduce the total taxable income. Among them are medical expenses, education, childcare, mortgage interest payments, charitable donations, renovations made to the property, and some energy-saving improvements.

Special Tax Regime. High-net-worth expatriates can sign up for the Special Tax Regime. It allows new residents to pay a flat sum of €300,000 per year on income from foreign sources, regardless of their amount and nature. 

To qualify for the program, individuals must not have been residents of Italy for the previous 9 years. The regime is valid for 15 years from the first year of tax residency.

Social security contributions 

Italian employees generally pay about 10% of their salary to the Italian National Institute for Social Security^{[7]Source: Italian National Social Security Institute. Contribution rates}. 

Self-employed people pay social contributions at a higher rate. Individuals covered by a mandatory pension fund make contributions at a rate of 24%^{[8]Source: Italian National Social Security Institute. Artisans and traders management: contributions for 2026}. Self-employed persons with a VAT number who are registered in the separate social security regime pay contributions at around 26.07%^{[9]Source: Italian National Social Security Institute. Instructions for completing Form RR for artisans, traders, and separate management}. 

Capital gains tax 

Tax on capital gains is paid when a person sells an asset at a higher price than they originally paid for it. Real estate, building land, stocks, bonds, other financial instruments, precious metals, and crypto-assets can generate taxable capital gains. The standard tax rate is 26%.

Capital gains from real estate owned for more than five years or inherited are usually exempt from income tax.

Dividends and interest are generally taxed at a 26% rate. From January 1st, 2026, gains and other proceeds from crypto-assets are taxed at 33%. The tax rate on Italian government bonds is 12.5%.

Dividends received by individuals who hold shares outside business activity are generally taxed at 26%, including dividends from qualified shareholdings. 

Inheritance and gift tax

Inheritance and gift tax in Italy has one of the lowest rates in Europe. The tax rate ranges from 4 to 8% and depends on the participants’ relationship:

1. Recipients or heirs in the direct line pay 4% tax on the inherited or donated sum above €1 million. The direct descendants can be spouses, children, parents, and sometimes grandchildren.
2. Siblings are charged 6% tax on the value exceeding €100,000.
3. Family members up to the fourth generation must pay 6% on the entire value of the inheritance or donation.
4. Other heirs, recipients, and non-related inheritors pay 8% on the entire sum.

Inherited real estate is taxed at 3% extra, which is the sum of 2% mortgage tax and 1% cadastral tax on the property value. Non-residents are charged inheritance and gift tax only on assets located in Italy.

Whole-life policies, government bonds and shares, and equity in a family business are not taxed under Italian inheritance law.

Vehicle tax 

Vehicle tax is charged annually on all motor vehicles registered in Italy, even if they are not being used. The tax also applies to vehicles with long-term rentals, leases, or those purchased with installments. 

The tax rate depends on the vehicle’s engine power in kilowatts, the region where the car is registered, and the vehicle’s EU emission grades: Euro 0—6. The owners of cars with grades 4, 5, and 6 pay the lowest rate.

The regional set rate is determined by the local government. For example, in Rome, the 2026 rate for Euro 4, 5, and 6 cars is €2.84 per kilowatt up to 100 kW and €4.26 for each kilowatt above 100 kW. A standard car with a 180 horsepower engine is about 132 kW, so the annual tax in Rome would be about €420.32. 

In Naples, the rate is higher: €3.12 per kilowatt up to 100 kW and €4.69 for each kilowatt above 100 kW. It means the owner of the same car would pay about €462.08 per year.

You can calculate the exact tax to be paid on the Automobile Club d'Italia website^{[10]Source: Automobile Club of Italy. Vehicle tax calculator}. It will require the car’s licence plate number and the region of residence.

There are certain types of vehicles that are eligible for tax reductions and exemptions:

• historic vehicles over 30 years old;
• vehicles intended for disabled drivers;
• electric vehicles and vehicles that run on liquified petroleum gas (LPG), natural gas, or hybrids;
• vehicles delivered to dealership for resale^{[11]Source: Lazio Region. Vehicle tax payments}.

Wealth tax 

Wealth tax in Italy is levied on properties and financial investments owned by Italian residents outside the country. The tax rate for real estate is 1.06% of the cadastral value.

The wealth tax does not apply to properties used as a main residence or to the marital home assigned to the spouse. The payment is also not required if the total amount is less than €200.

Foreign financial assets are taxed at the 0.2% rate of the value of financial products. For financial products held in jurisdictions with a privileged tax regime, the rate is 0.4%. The tax is not applied if the average annual value of stock does not exceed €5,000.

Companies in Italy are taxed based on their residence status, income source, and business activity. Italian tax-resident companies generally pay tax on their worldwide income, while non-resident companies are taxed only on Italian-source income. The main corporate taxes include IRES, IRAP, VAT, and employer social security contributions.

Business income tax

Italian corporate entities must pay corporate income tax, or IRES, on their worldwide profits and regional production tax, or IRAP. Non-resident companies are charged only for income from Italian sources^{[12]Source: Italian Revenue Agency. Taxes on corporate income}.

The standard corporate tax rate is 24%^{[13]Source: Italian Revenue Agency. Corporate income tax — IRES}, while the regional production tax is charged at 3.9%. Regional authorities can increase or decrease the IRAP rates within the limit of 0.92%^{[14]Source: Italian Ministry of Economy and Finance. IRAP: tax rules}.

Some companies pay the regional production tax at a higher rate. For example, the IRAP rate for banks and financial institutions is 4.65%, while insurance companies are charged 5.9%.

When filing the company's taxes, you can offset certain allowance deductions, such as depreciation of assets, interest payments, and charitable contributions.

Italy offers tax exemptions and lower rates for companies investing in production facilities in the Single Special Economic Zone for Southern Italy, or ZES Unica, which includes assisted areas in Basilicata, Calabria, Campania, Molise, Puglia, Sardinia, Sicily and Abruzzo^{[15]Source: Italian Revenue Agency. Tax credit for investments in the single SEZ in 2026}.

Companies that carry out eligible research and development activities related to certain intangible assets may benefit from the Patent Box regime, which allows an additional 110% deduction for qualifying costs.

Corporate capital gains 

Corporate capital gains are also subject to a 24% income tax. However, under a specific participation exemption regime (PEX), capital gains realised by Italian companies on sales of shareholdings can be 95% exempt from IRES.

Companies that invest in certain research and development activities may be eligible for a tax credit. It can reduce the amount of income tax, regional production tax, or social security contributions. The tax credit is 10%, within a maximum annual limit of €5 million.

Taxes for self-employed and individual entrepreneurs

Self-employed and individual entrepreneurs are subject to individual income tax, IRPEF, with ordinary progressive tax rates ranging from 23 to 43% on income exceeding €50,000^{[16]Source: Italian Revenue Agency. Personal income tax rates and calculation}.

People starting self-employed or freelance businesses can take advantage of a special taxation regime called Regime Forfettario. It allows them to replace the income tax and IRAP with a single tax of 15%. To qualify, their income has to be less than €85,000 per year. Also, the total expenses for employees work and fees for staff must not exceed €20,000^{[17]Source: Italian Revenue Agency. Circular no. 32 on the flat-rate regime}.

If the taxpayer has not been involved in any artistic, professional, or business activity during the previous 3 years, this tax can be reduced to 5% for the first 5 years.

VAT or sales tax

Any business in Italy needs to charge value added tax (VAT) on its products and services. In Italy, it is called IVA. The standard VAT rate in Italy is 22% of any taxable sales. It applies to most goods and services.

Some categories of products and services have reduced VAT rates:

• 10% for food in restaurants, wines and alcohol, olive oil, water supplies, public transportation, real estate maintenance services, hotel accommodation, theatrical performances and concerts;
• 5% for some social services, and herbs, such as basil, rosemary, sage, and oregano^{[18]Source: Italian Revenue Agency. Resolution no. 56 of May 3rd, 2017};
• 4% for basic food and agricultural products, books, newspapers, medical devices, and wheelchairs;
• 0% or VAT-exemption for international transport services, intra-community and international trade, services related to education, health, insurance, and real estate transactions.

Italy offers exemptions from VAT obligations to small businesses with an annual gross income up to €85,000 and total gross expenses up to €20,000 for employee work and payments to collaborators in the previous year.

Most taxpayers calculate and pay VAT returns by the 16th of the following month. Taxpayers who have an annual turnover of less than €400,000 for self-employed persons and service businesses or €700,000 for other activities can pay the VAT quarterly. Payments for the first three quarters are due by May 16th, August 20th and November 16th. In this case, 1% interest is added to the VAT due. 

Social security contributions

Social security contributions paid by Italian companies usually amount to around 30% of employees’ gross compensation, but the exact rate depends on the sector, employee category and applicable social security funds.

The total contribution is split between the employer and the employee. For employees covered by the general mandatory pension scheme, the standard pension contribution is 33% of gross pay, with the employee usually paying 9.19% and the employer covering the remaining part^{[19]Source: Italian National Social Security Institute. Contribution rates}.

Tax residence in Italy does not affect tax expenses on real estate. Property tax rates are the same for both non-residents and Italian nationals.

Taxes at real estate purchase

When buying real estate in Italy, you need to pay several taxes:

• registration tax;
• mortgage tax;
• cadastral tax;
• VAT — in certain cases^{[20]Source: Italian Revenue Agency. Taxes on buying a home}.

The tax rates depend on whether you buy the property from a company or a private person and if it is used as a main residence or a second home.

Property registration tax can be 2 or 9% of the cadastral value, but it can never be less than €1,000. The buyer is charged 2% of the cadastral value if the property is their primary residence in Italy. They must meet the first-home relief conditions, including residence requirements in the municipality where the property is located^{[21]Source: Italian Revenue Agency. Buying with first-home benefits}. 

The mortgage tax in Italy is fixed. A buyer pays €50 to purchase property from a private seller and €200 if the seller is a company registered in Italy.

Cadastral tax is the same as mortgage tax. It is €50 on purchase from a private seller and €200 from a registered company.

If the seller is a registered company, they can choose to charge VAT on the transaction. In this case, the buyer will pay the VAT and the fixed registration tax of €200. It is possible in two situations:

1. The property is bought from a construction company within 5 years of completion.
2. The residential property is classified as social housing.

For main residences bought from a registered seller, VAT is 4%. For second homes, VAT is 10% for the majority of homes. For properties classed as luxury and stately homes, the VAT rate is 22%.

Taxes at real estate sale

Selling real estate in Italy can require paying capital gains tax at a 26% rate if the property value has increased during ownership. The tax won’t be applied if you have owned the real estate for more than 5 years. Capital gains tax is also not charged if you received the property by inheritance^{[22]Source: Italian Revenue Agency. Taxation of real estate capital gains}.

Ownership taxes

Owning real estate in Italy has several taxes to pay regularly:

• IMU — a municipal property tax^{[23]Source: Italian Ministry of Economy and Finance. Municipal property tax — IMU};
• TARI — a tax on waste collection^{[24]Source: Italian Ministry of Economy and Finance. Waste tax — TARI}.

IMU is charged with Italian property intended for any use, including business activities. Depending on the municipality, the tax rate can vary from 0.46 to 1.06%. The standard IMU rate is 0.76%.

Note that the tax base is not the cadastral value of the object. You must increase the cadastral value by 5%, and then multiply that number by a coefficient. To this tax base, you apply the IMU tax rate.

The coefficient depends on the type of property. The coefficient for apartments and other residential buildings is 160. For shops or similar commercial buildings, it is 55. 

You can use the IMU calculator website to estimate the rate for your own Italian property^{[25]Source: Amministrazioni Comunali. IMU calculator}.

The tax is paid in two installments on June 16 and December 16 of each financial year. IMU is not applied to property considered the taxpayer’s main residence, provided it is not a luxury home.

The tax on waste collection is paid once a year. The tax rate depends on the city, the property’s square metres, and the number of people living there. 

The final TARI amount depends on the municipality’s tariff, the property’s square metres and the number of occupants. In 2024 the average waste tax was €329 per year for a sample household of 3 people living in a 100 m² home, up by around 2.6% compared with 2023^{[26]Source: Cittadinanzattiva. 2025 report on waste tax and waste services}.

Customs duties are generally levied on goods imported into Italy from non-EU countries with a value exceeding €150. The duty rate depends on the type of product and typically ranges between 0% and 17%, with an average rate of around 4.2%.

Import VAT is charged separately. Italy's standard VAT rate is 22%, although reduced rates of 10%, 5%, and 4% apply to certain goods and services.

Export taxes are generally not levied on goods leaving Italy.

Italy provides several tax reliefs to encourage residents to invest in the country’s economic growth and sustainability. Most of the measures are related to property.

Superbonus. A tax reduction up to 110% on building renovations for energy-efficiency and protection from earthquake damage.

The initiative includes a variety of measures, such as insulation solutions, efficient window frames, replacing heating and air conditioning systems, and installing facilities for renewable energy production.

Renovation bonus. A tax deduction for recovery renovations of residential buildings. In 2026, the rate can reach 50% for work on a main home. The maximum spending limit for each real estate object is €96,000. The work can include extraordinary maintenance, restoration, and building renovation.

First home purchase subsidies are available for those who do not own another property in Italy or are going to sell their previously subsidised first home within 2 years of the new subsidised purchase. It allows the buyer to pay a registration tax of 2% instead of 9%, together with the mortgage and cadastral taxes at €50 each.

Italy loses more than €100 billion per year to tax and contribution evasion. The latest available estimate includes around €90 billion in unpaid taxes and around €11.5 billion in unpaid social security contributions^{[27]Source: Italian Ministry of Economy and Finance. 2025 report on tax and contribution evasion}. 

A significant part of this amount is unpaid VAT. One of the reasons is that cash is still widely used in Italy: in 2024, 61% of point-of-sale payments were made in cash by number of transactions, and 49% by value^{[28]Source: Bank of Italy. Payment markets, infrastructure, and systems report no. 68}.

Due to the tax evasion problem, Italy implemented heavy fines for inaccurate, incomplete, or fraudulent tax filings. For violations committed from September 1st, 2024, here are some of them:

• 120% of the taxes due for failure to file a tax return;
• 70% of the higher tax due or lower credit used for inaccurate tax returns;
• 25% of the unpaid or late paid tax; if the delay does not exceed 90 days, the penalty is reduced to 12.5%; for delays of up to 15 days, the penalty is reduced further on a daily basis^{[29]Source: Italian Revenue Agency. Legislative Decree no. 87 of June 14th, 2024}. 

Tax fraud that involves creating invoices for fictitious transactions, false tax returns, concealing or destroying accounting documents can result in much higher fines and imprisonment.

Foreigners in Italy may face different tax rules depending on their status: tourist, non-resident taxpayer, or a new tax resident. 

Taxes for tourists

In most Italian cities, travellers pay a tourist tax for staying in hotels, bed and breakfasts, or holiday rentals. The tax rate depends on the popularity of the city, the duration of the stay, and the type of accommodation. Each municipality determines the tax rate independently. In Milan, rates range from €3 to 12 per person per day. 

Venice also applies an Access Fee for day visitors on scheduled dates and times, unless an exemption applies. Day visitors must pay the fee online before arrival and receive a QR code as proof of payment or exemption. Municipal inspectors conduct spot checks at major arrival points and throughout Venice’s historic centre, and visitors must present the QR code upon request.

Non-EU nationals are eligible for a VAT refund in Italy if they purchase goods for personal or family use for more than €70 per invoice^{[30]Source: Italian Customs and Monopolies Agency. OTELLO tax-free shopping procedure}.

Taxes for non-residents

Non-residents who receive income in Italy can reduce their tax payments on income and capital. If there is a double tax agreement, DTA, between Italy and the country where they are tax residents, they can pay taxes in one country or in both countries, but at lower rates. The full list of countries that have signed a double tax agreement with Italy can be found on the website of the Ministry of Economy and Finance of Italy.

If there is no DTA between countries, you will have to pay taxes both in Italy and in your country of tax residence^{[31]Source: Italian Ministry of Economy and Finance. Conventions for the avoidance of double taxation}.

Rules for new tax residents

New tax residents in Italy pay taxes on their global income, including profits from real estate owned outside of Italy, foreign interests, dividends, and capital gains. In addition, Italy offers special tax regimes, which are among the most attractive benefits of living in the country.

New residents, who were not tax residents in Italy for the past 9 out of 10 years, are offered a Special Tax Regime. They can pay a flat-rate tax of €300,000 per year on all their non-Italian-sourced income for up to 15 years.

Foreign workers who move their tax residence to Italy can apply for the new Lavoratori Impatriati regime. It allows 50% of qualifying employment, similar employment, or self-employment income to be exempt from tax, within an annual income limit of €600,000^{[32]Source: Italian Revenue Agency. Inbound workers regime under Legislative Decree no. 209/2023}.

The special tax status is valid for 5 years but can be extended for another 5 years. To qualify, the person must not have been an Italian tax resident in the three tax years before moving to Italy. The work activity must be performed in Italy for most of the tax period.

Retirees can benefit from a 7% flat tax rate on their foreign-sourced income. To qualify, they must receive pension income paid by a foreign entity and transfer their tax residence to an eligible municipality in Italy. 

Since April 2026, the population limit for eligible municipalities has increased from 20,000 to 30,000 inhabitants, expanding the number of locations available under the regime. The tax regime is valid for a maximum of 9 years^{[33]Source: Italian Revenue Agency. Optional regime for foreign pensioners}.

Business owners who joined the Investor Visa for Italy programme and obtained a residence permit do not have to stay in Italy for 183 days per year. The investor can remain a tax resident of their country but pay tax in Italy on income from their Italian business.

The Italy Golden Visa, also known as the Investor Visa, is the fastest way for wealthy people to become legal residents in Italy. It allows third-country nationals to obtain an Italian residence permit in 4+ months by investing in the country’s economy.

Italy offers 4 investment options to choose from:

1. Invest at least €250,000 in an innovative startup approved by Italian authorities.
2. Invest €500,000 or more in a company incorporated and operating in Italy.
3. Invest €1,000,000 or more in socially essential projects.
4. Purchase government bonds for at least €2,000,000.

A residence permit issued under the Italy Golden Visa program is valid for 2 years. It can be extended for 3 years if the investment is maintained. Investors can apply with their family members: spouse, children, and parents.

Italian residents can access multiple major benefits. For example, they can travel visa-free to the Schengen countries, enrol their children in Italian universities, and enter Italy even when the borders are closed for foreigners.

After 5 years of residence, the investors can apply for permanent residence in Italy. After another 5 years, they become eligible for Italian citizenship by naturalisation.

Candidates for citizenship by naturalisation are required to pass a language test and keep a clean criminal record.

Immigrant Invest helps clients choose a suitable route to residence in Italy, including the Investor Visa programme. Our team checks whether the applicant meets the conditions, prepares a list of documents, and supports the client at each stage: from the initial assessment to applying for a residence permit after entering Italy.

Our assistance goes beyond document preparation. We help clients understand how moving to Italy may affect their tax position. This includes analysing whether the client may become an Italian tax resident, what income may be taxed in Italy, and whether special tax regimes for new residents, foreign workers, retirees, or high-net-worth individuals may apply.

We partner with licensed and recognised tax advisors. They help structure the move, investment, and assets in advance, so the client can obtain residence in Italy and plan tax obligations legally and efficiently.

1. Most Italian taxes are set at a national level, but they also have regional surcharges. Municipalities have the right to change the tax rates within the given limit.
2. Individuals in Italy pay taxes on their income, capital gains, inheritance, and vehicles. The income tax is progressive and varies from 23 to 43%. Inheritance and gift taxes in Italy are among the lowest in Europe — the rate is between 4 and 8%.
3. The main taxes for companies in Italy are corporate income tax of 24%, regional production tax of around 3.9%, and 22% VAT.
4. When buying property in Italy, you need to pay registration, mortgage, and cadastral taxes. The rates mostly depend on who you buy the property from and whether you will use it as your first or second residence.
5. Owning property in Italy also implies paying several taxes: a municipal property tax, and a tax on waste collection. Their rates depend on the type of property and where it is located.
6. New residents in Italy can apply for one of the special tax regimes. Italy offers reduced tax rates to high-net-worth individuals, foreign professionals, and retirees.
7. The Italy Golden Visa programme is one of the fastest ways to move to the country. It allows obtaining an Italian residence permit in 3 months by investing at least €250,000 in the country’s economy.