Non-residents in Italy are taxed solely on Italian-sourced income and must comply with specific Italian tax filing requirements. Below is a detailed breakdown of the types of income that non-residents must declare and the relevant tax rules.
Who Is a Non-Resident for Italian Tax Purposes?
A person is considered a non-resident if they do not:
- Spend 183 days or more in Italy during the year,
- Register as a resident in the Italian Civil Registry (Anagrafe), or
- Establish their main economic or personal interests in Italy.
Income Types Non-Residents Must Declare in Italy
Italy taxes non-residents only on income derived from Italian sources. The primary categories of income that typically trigger Italian tax obligations include:
1. Employment and Self-Employment Income
- Income from work performed in Italy (including both employed and self-employed work) must be declared, regardless of the non-resident’s country of tax residence.
- The location where the work is carried out determines its Italian-source character.
2. Rental Income from Italian Property
- Rental income from real estate located in Italy is fully taxable in Italy, regardless of the landlord’s country of residence.
- Both long-term and short-term rentals (including vacation lets) are covered.
- Non-residents can generally choose between two main tax regimes:
- Flat-rate regime (Cedolare Secca): 21% tax on gross rental income (or 26% in certain cases, such as for multiple properties). No deductions are allowed under this regime.
- Ordinary progressive IRPEF regime: Tax is applied at progressive rates (23%–43%) on 95% of the gross rental income; certain expenses are deductible.
3. Capital and Investment Income
- Dividends, interest, and other investment income paid by Italian entities to non-residents are generally subject to a withholding tax in Italy. The statutory rate can vary, and double taxation treaties may reduce or exempt this tax.
- Income from the sale of shares in Italian real estate companies is also considered Italian-source income.
4. Real Estate Gains
- Capital gains from the sale of Italian real estate are taxable in Italy, except for certain exemptions (such as if the property was owned for a period exceeding a legislative threshold or was used as the main residence - currently 5-years in Italy).
5. Pensions and Royalties
- Pension income paid by an Italian pension provider is generally taxed in Italy, subject to applicable tax treaties.
- Royalties paid by Italian companies are also generally subject to Italian tax at the applicable withholding rate, with treaty provisions potentially reducing the rate.
Tax Filing Requirements and Process
- Tax Return Form: Non-residents must file their taxes using the Modello Redditi PF form, not the simplified Modello 730 form used by residents.
- Withholding Tax: If Italian-source income (such as employment or investment income) has already been subject to a definitive withholding tax at source, you may not have an obligation to file for those income types.
- Filing Deadlines: The Italian tax year matches the calendar year. Tax returns are generally due between May and November of the following year, depending on your filing method.
- Additional Taxes: Regional (Addizionale regionale) and municipal (Addizionale comunale) surcharges may apply to taxable income, with rates varying depending on location.
- Deductions: Non-residents can claim certain deductions up to 19% of the taxable income, including medical expenses, mortgage interest tied to Italian property, and donations to Italian charities.
Penalties and Double Taxation Considerations
- Penalties: Failing to report Italian-source income can result in substantial interest and financial penalties.
- Double Taxation Treaties: Treaties between Italy and numerous other countries may reduce or exempt some income from Italian tax, or provide credits to avoid being taxed on the same income in both countries. The details of the applicable treaty must always be checked.
Conclusion
In summary, non-residents of Italy are required to declare and pay tax on all income derived from Italian sources, especially employment and rental income, as well as certain investment returns and capital gains from the sale of Italian assets. The rules can be complex and change depending on your specific circumstances—including your home country’s tax treaty with Italy.
