Taxes in Italy 2026: rates, IRPEF, and regimes for individuals and business

Italy's tax system: the overall picture

Italy's tax system is multi-tiered, and that's the first thing important to understand. Taxes are collected at three levels: state (national), regional, and municipal. So when people talk about income tax in Italy, they usually mean national IRPEF, but regional and local surcharges are almost always added to it - depending on exactly where the person lives.

For individuals the basis is IRPEF (Imposta sul Reddito delle Persone Fisiche) - progressive income tax. For companies - IRES (corporate profit tax) and IRAP (regional production activity tax). On top of all this operates VAT, called IVA in Italy, and a set of property taxes - on real estate, on foreign assets.

The principle is simple: the higher the income and the more ties a person has with Italy, the more tightly the fiscal system covers them. The key fork here is tax residency - it's exactly this that determines whether you pay in Italy on all worldwide income or only on what's earned in the country. We'll return to it separately.

IRPEF: Italy's income tax and its rates

IRPEF is the central tax for individuals. It's progressive: the higher the income, the higher the rate on each next part. In 2026 three IRPEF tiers apply in Italy (after the reform approved by the late-2025 budget law, the middle rate was lowered). Below is the current scale.

It's important to understand the mechanics: the rate applies not to all income at once, but to each part within its own tier. If a person earns 60,000 EUR a year, they pay 23 percent only on the first 28,000, 33 percent - on the part between 28,000 and 50,000, and only the remaining 10,000 is taxed at 43 percent. The real average burden turns out noticeably lower than the top rate.

Separately, it's worth noting that employees with low income are effectively exempt from IRPEF on the first few thousand euros through the employment tax deduction (detrazione per lavoro dipendente). This isn't a separate zero tier, but a tax benefit that offsets the tax at the lower income level.

Regional and municipal surcharges on IRPEF

The national scale isn't the whole story. Two surcharges are added to IRPEF in Italy, and their size depends on the place of residence.

The regional surcharge (addizionale regionale) is usually in the range of roughly 0.7 to 3.33 percent - the exact figure is set by the region. The north and south of the country, wealthy and subsidized regions can differ. The municipal surcharge (addizionale comunale) - up to 0.9 percent, set by the specific city or commune.

In practice this means two people with the same income but living in different provinces will pay slightly differently. The difference isn't dramatic - it's a matter of single percentage points - but at high income in absolute figures it's noticeable. So when planning a move, it makes sense to look not just at the national rate, but at the chosen region's local surcharges.

For people seriously considering Italy as a country to live in, these nuances add up to the overall cost of holding resident status - and they're better calculated in advance together with a specialist.

Italian tax residency: the key fork

Italian tax residency is what determines the scope of your obligations. A tax resident pays in Italy on all worldwide income, a non-resident - only on income received in the country. The difference is huge, so it's worth knowing the rules precisely.

A person is considered an Italian tax resident if, for most of the tax year (more than 183 days), at least one of the conditions is met:

• they're physically present in Italy most of the year;
• their domicilio is in Italy - the center of vital interests, that is, the place where personal, family, and economic ties are concentrated;
• they're registered in the resident population register (registered).

Note: one of the criteria is enough. You can spend less than half a year in the country, but if the family lives in Italy and the main ties are concentrated there, the tax authority can recognize the person as a resident by the center of interests. Italian citizens who moved abroad register with AIRE (the register of Italians living abroad) to end residency - but even this doesn't always automatically break the tax tie.

And separately: citizenship and tax residency aren't the same thing. You can have an Italian passport and not be an Italian tax resident, and vice versa - live and pay taxes in Italy while remaining a citizen of another country.

Business taxes: IRES and IRAP

If it's about a company, two corporate taxes come into play. This is important to know for those planning not just to relocate, but to run a business in Italy.

IRES (Imposta sul Reddito delle Societa) - the corporate profit tax. Its rate is 24 percent of net taxable profit. Resident companies pay IRES on worldwide income, non-residents - only on income from Italian sources.

IRAP (Imposta Regionale sulle Attivita Produttive) is the regional tax on production activity. The standard rate is about 3.9 percent, but regions have the right to adjust it slightly up or down. Increased rates apply for banks, financial intermediaries, and insurance companies. In total, the base burden on a company's profit in Italy is made up of roughly these two taxes.

The 2026 budget law added a number of investment incentives with accelerated depreciation - this works in favor of business investing in development. We break down corporate taxation and structure details inour article on business in Italy.

VAT in Italy (IVA): standard and reduced rates

VAT in Italy is called IVA (Imposta sul Valore Aggiunto) and works on the familiar European logic - it's an indirect consumption tax built into the price of goods and services.

The standard IVA rate is 22 percent. This is the base level at which most goods and services are taxed. But there are three reduced rates for socially significant categories:

• 10 percent - some food products, food service, certain tourist and utility services;
• 5 percent - certain social and medical services, some products;
• 4 percent - basic food products, books, newspapers, essential goods.

For an entrepreneur, IVA isn't just a line on a receipt, but full reporting: the company collects tax on sales, deducts what's paid on purchases, and remits the difference. For an individual as a consumer, IVA is already built into the price, and there's no need to pay it separately. When buying real estate from a developer, IVA may also apply - this should be accounted for in the deal's budget.

Taxes on real estate and foreign assets

Besides income, Italy taxes property - both local and foreign. For those relocating with capital, this block is especially important.

IMU (Imposta Municipale Unica) is the municipal property tax in Italy. There's good news here for most: a single main residence (except luxury categories) is exempt from IMU. The tax is paid on a second property, investment properties, and luxury items, the rate depends on the municipality.

Next - two taxes specifically affecting Italian residents who own assets abroad:

• IVIE - a tax on real estate outside Italy. The rate is roughly 1.06 percent of the property's tax value;
• IVAFE - a tax on foreign financial assets (accounts, securities, portfolios). The rate is about 0.2 percent, higher for assets in non-cooperative jurisdictions.

The logic is simple: having become an Italian tax resident, a person falls under taxation of not just Italian but also foreign property. This is exactly why wealthy people look so carefully at special regimes when relocating - more on them further on. Details on housing taxes are collected ina separate article on real estate taxes.

Flat tax: a fixed tax for wealthy new residents

This is exactly the lever that changes the whole math for well-off people. Italy offers a special regime for new tax residents (non-dom) - a fixed tax on all foreign income instead of the progressive scale.

The rate's history is telling. The regime launched in 2017 with a payment of 100,000 EUR a year. From August 2024 for new applicants the amount was raised to 200,000 EUR, and from January 1, 2026 - to 300,000 EUR a year. A fixed amount is paid extra for each family member (from 2026 - 50,000 EUR). Those who entered the regime earlier retain the old rate: those who arranged it in 2024 continue paying 100,000, in 2025 - 200,000. This is grandfathering, protection for earlier participants.

The point is that a person pays a fixed amount on any volume of foreign income - be it dividends, rent, or profit from selling assets abroad. For someone whose worldwide income runs into millions, this can be dramatically more advantageous than regular IRPEF. Someone who hasn't been an Italian tax resident for at least 9 of the last 10 years can enter the regime, it applies for up to 15 years. This is a working tool, but one requiring careful arrangement - details inour breakdown of the flat tax regime.

The impatriati regime: a benefit for relocating employees

The flat tax is designed for those with large passive income abroad. And for people relocating to Italy to work - employed or self-employed - another regime is provided, impatriati (a regime for returning and incoming specialists).

The point is that for a qualified worker transferring tax residency to Italy, a significant part of their Italian employment income is exempted from tax - only the remaining share is taxed. This sharply reduces the effective IRPEF rate for years ahead, and the regime was created exactly to attract specialists and talent to the country.

An interesting nuance: the Italian tax authority confirmed that the impatriati regime can be combined with the flat tax. The logic of splitting by income source: foreign income is covered by the flat tax's fixed payment, while Italian employment income is taxed under the impatriati benefit. For a person with an international income structure, this combination opens serious optimization opportunities - but it's exactly here where getting the conditions and arrangement wrong is critical to avoid.

Summary table: tax - rate

To keep the whole picture in view, let's collect Italy's main taxes for 2026 into one table. This is a convenient benchmark, but remember: the real burden depends on the region, residency status, and applicable regimes.

Figures are given approximately and can be refined by regulations and regional decisions; check their currency before making decisions.

Russians and the CIS: what's important to know about taxes in Italy

For citizens of Russia and CIS countries, entering the Italian tax system has its own specifics, and it's important to be careful here.

First: tax residency arises from actual criteria, not from citizenship. If a person spends most of the year in Italy or moves their center of vital interests there, they become an Italian tax resident with all the consequences - including taxes on foreign assets. This needs to be planned in advance, especially with business and capital in the country of origin.

Second: all operations must proceed strictly within the EU legal field, with enhanced compliance on the origin of funds and no attempts whatsoever to circumvent sanctions restrictions. A transparent structure and confirmed source of money are a mandatory condition.

Third: Russia allows a second citizenship with notification to the Ministry of Internal Affairs (about 60 days to file). At the same time, as we've already said, having or not having Italian status on its own doesn't determine where a person pays taxes - tax residency decides this. A properly built configuration allows relocating to Italy without ending up under double taxation - double taxation avoidance agreements work for this.

How relocating to Italy relates to taxes

The tax regime in Italy doesn't exist in a vacuum - it's closely tied to the grounds on which a person gets the right to live in the country. Special regimes like the flat tax are available specifically to those transferring tax residency to Italy through legal means.

Italy offers several routes to a residence permit for financially independent people and investors - from the investor visa to residency for passive income. They set the legal framework for relocation, and the tax strategy is built on top of it: which regime to choose, how to arrange the flat tax, how to avoid double taxation. The logic is always from the client's goal: where to live and what to do is their own decision, and our job is to build the path to the needed status and tax configuration.

For more on grounds for relocation and residency, readour article on Italy's residence permit. And if you're considering the investment route with an eye on tax optimization - it's worth studyingItaly's investment residency program.

Common misconceptions about taxes in Italy

A lot of myths have built up around Italian taxes, and some of them are costly. Let's break down the main ones.

Myth one: Italy always takes 43 percent.No. 43 percent is the top rate, which applies only to the part of income over 50,000 EUR. The real average burden is lower, and for wealthy people with foreign income, a fixed flat tax applies instead.

Myth two: bought real estate - became a tax resident.Buying real estate in Italy on its own doesn't make a person a tax resident and doesn't give a residence permit. Residency is determined by presence and the center of interests, not by the fact of owning square meters.

Myth three: citizenship automatically means taxes in Italy.These are different things. You can have a passport and not pay in Italy if you're not a tax resident. And vice versa.

Myth four: the flat tax still costs 100 thousand.Not anymore. From 2026, for new applicants it's 300,000 EUR a year; the former amounts are retained only for those who entered the regime earlier. Relying on outdated figures when planning is a direct path to unpleasant surprises.

Bottom line: high taxes, but with flexible regimes

If you bring it all together, the picture is this. Italy is indeed a country with high base taxes: progressive IRPEF up to 43 percent plus surcharges, corporate IRES and IRAP, VAT 22 percent, taxes on foreign assets for residents. For an ordinary worker or local business the burden is serious.

But this system has a second layer - special regimes for those relocating. The flat tax turns the tax on all worldwide income into a fixed payment and can be dramatically advantageous for wealthy people. Impatriati removes a significant part of the tax from incoming specialists' employment income. Combined with a smart choice of region and legal grounds for relocation, the final picture turns out much softer than the scary 43 percent from the headlines.

The main thing is not to act at random. Tax residency, choosing the regime, protection from double taxation, compliance on the origin of funds - these are connected elements that only work together. A mistake at the start is costly, while the right configuration, on the contrary, saves substantial amounts for years ahead. This article is a reference benchmark, not individual tax advice: a specific strategy should always be calculated for your situation.

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Expert comment

Taxes in Italy is a topic where generalizations hurt. The figures in this breakdown are a current benchmark for 2026, but the final decision is always made for the specific person: their income, assets, family, and plans. This is especially true of special regimes, where the price of an arrangement mistake is losing the benefit and additional assessments.