Italy Tax Rates 2025

Taxes for Resident Foreign Investors (Individuals)

• Personal Income Tax (IRPEF): Taxable income is subject to progressive rates. For 2025, the brackets are:
  • 23% on income up to €28,000.
  • 35% on income over €28,000 up to €50,000.
  • 43% on income exceeding €50,000.
• Regional Income Tax: An additional tax levied at rates varying by region.
• Municipal Income Tax: A further tax levied at rates set by each municipality.
• Social Security Contributions: Mandatory contributions are levied on employment and self-employment income.
• Wealth Tax (IVAFE & IVIE): A tax applies to the value of financial assets held abroad (IVAFE) and real estate held abroad (IVIE).
  Specific rates and exemptions apply.

Special Tax Regimes for Resident Foreign Investors (Individuals):

• Lump-Sum Tax Regime for High-Net-Worth Individuals: A substitute tax of €200,000 annually on foreign-sourced income.
  Applicable for a maximum of 15 years for individuals who were non-resident for at least 9 out of the preceding 10 tax years.
• Inbound Workers Regime: A 70% reduction (up to 90% in specific Southern regions) of taxable employment and self-employment income for a limited period for individuals transferring their tax residence to Italy for work.
• Flat Tax Regime for New Retirees in Southern Italy: A 7% substitute tax on foreign-sourced pension income for a maximum of ten years for individuals transferring their tax residence to specific Southern Italian municipalities.

Taxes for Non-Resident Foreign Investors (Individuals):

• Non-residents are generally taxed only on income sourced in Italy.
• Withholding Tax:Applicable on certain types of income paid to non-residents, such as dividends (generally 26%, with potential reductions based on tax treaties or EU directives), interest (rates vary), and royalties.
• Capital Gains Tax: Gains from the sale of Italian assets may be taxable. The standard rate is 26%, but different rules apply to specific types of assets.
• Income from Italian Property: Subject to IRPEF (or a flat tax regime for rental income under certain conditions).

Taxes for Foreign Investors (Companies/Permanent Establishments):

• Corporate Income Tax (IRES): The standard rate is 24%. A reduced rate of 20% may apply for FY 2025 under specific conditions of profit reinvestment and new investments.
• Regional Tax on Productive Activities (IRAP): A regional tax levied on the value of production. The standard rate is 3.9%, but it varies by region.
• Value Added Tax (VAT): The standard rate is 22%. Reduced rates of 4%, 5%, and 10% apply to specific goods and services.
• Withholding Tax on Outbound Payments: Applicable on dividends, interest, and royalties paid to non-resident companies, with rates varying based on the recipient's country of residence and applicable tax treaties or EU directives.
• Capital Gains Tax: Gains from the sale of Italian participations or other business assets are generally treated as ordinary business income and subject to IRES and IRAP.
  Specific exemptions may apply under certain conditions (e.g., the EU Parent-Subsidiary Directive).

Other Relevant Taxes:

• Stamp Duty: Applicable on specific transactions and documents.
• Registration Tax: Levied on the registration of certain legal acts.
• Real Estate Transfer Tax: Applicable on the transfer of property.

Important Considerations:

• Tax Residency: Determining tax residency is crucial as it dictates the scope of taxable income.
• Double Taxation Agreements: Italy has tax treaties with many countries to avoid double taxation.
  These treaties may reduce or eliminate Italian taxes on certain types of income.
• EU Directives: EU directives, such as the Parent-Subsidiary Directive and the Interest and Royalties Directive, can impact the taxation of cross-border payments within the EU.
• Pillar Two: Italy has implemented the EU directive on the global minimum tax rate of 15% for large multinational groups.