Tax Break in Italy for Expats: 5 Questions and Answers

For expats considering a move to Italy, the country has an attractive tax regime. Officially it’s called the regime for “impatriate workers” (lavoratori impatriati). “Impatriate” simply means “inbound” and the concept refers to either Italians or non-Italians settling (again) in Italy. The regime has existed for about ten years already but became really popular when in 2019 the so-called Decreto Crescita (“Growth Decree”) hugely increased its tax breaks. In 2024 some new changes have been carried out. In this article we’ll discuss the regime’s main characteristics by answering 5 frequently asked questions.     

Impatriate Regime and Decreto Crescita: What Is It?

In 2015, Italy created the impatriate regime for workers relocating to Italy for employment. It offered tax breaks that were significantly expanded only a few years later with the Decreto Crescita, or Growth Decree. In order to attract ever more talent, innovation, and investment to Italy, particularly from highly qualified professionals, the law allowed foreign workers to receive reductions on their taxable income between 70% and 90%. With new rules that came into force in 2024 under Law Decree N. 209/2023, the regime has again been updated. So let’s have a look at where things stand now.

Tax Break in Italy: Who’s Eligible?

Eligibility for Italy’s tax break isn’t always completely straightforward. Under the current regime, workers who move their tax residence to Italy from 2024 onwards can benefit, but specific conditions must be met.

Key requirements include:

• Tax residence abroad for at least three tax years before moving to Italy.
• Tax residence in Italy for four years after the move. If you leave earlier, you lose the tax benefits.
• The worker must be highly qualified or specialized, as per Italian laws.

It's also worth noting that both foreigners and Italians who have lived abroad can qualify, provided they meet these criteria.

Tax Cuts in Italy: How Much Can I Save?

The real question for most expats: how much can you save under the impatriate tax regime?

Under the new rules of 2024, eligible workers can benefit from a 50% tax cut on their taxable income. This means that only half of your income will be subject to the standard Italian income tax (known as IRPEF). Until 2024, there were additional benefits when moving to Southern Italy or specific regions such as Sicily. Under the new regime, the tax cuts are similar for all regions. However, if you have a dependent child under 18, or if you have a child after moving to Italy, you can also claim an additional cut of 10%, meaning that 60% of your taxable income will be exempt from taxation.

Example Savings:

• Moving to a Northern region without children: 50% of income is taxable.
• Have a dependent child: only 40% of income is taxable.

The benefit applies to income from employment and self-employment. However, it’s important to note that the income should be generated mostly in Italy in order to qualify for the tax reduction. 

How to Apply for Italy’s Tax Breaks?

Applying for impatriate tax breaks requires some planning. First, ensure you meet the residence requirements by being officially registered as an Italian tax resident. You’ll also need to file the appropriate paperwork with the Italian tax authorities to prove your eligibility.

You’ll need to prove that:

• You were a tax resident abroad for at least three years before relocating.
• You intend to maintain your tax residence in Italy for at least four years.
• You have a high level of education or specialization. This means that you must have completed at least three years of higher education and have a professional qualification that is recognized in Italy.

Read more on these requirements here.

What’s Included in The Tax Break?

The tax break covers several types of income:

• Employment income: Wages from working in Italy are eligible for the tax break.
• Self-employment income: If you’re a freelancer or professional, you can apply the tax cut to your earnings from practicing arts, professional services, or trades.
• Business income: Sole proprietors can also benefit, provided their income qualifies.

However, be aware that under the new rules a maximum of €600,000 per year applies. If you earn more than this cap, you won’t be able to apply the tax break to your income beyond this threshold.

Tax Break Duration

The standard tax break duration is five years. This means that, for the first five tax years after moving to Italy, eligible expats can benefit from the tax relief. However, there are possibilities to extend the benefit under very specific circumstances.

If you move to Italy in 2024 and had already purchased a residential property by December 31, 2023, you may qualify for a three-year extension of the tax break. This way, the benefits from the special tax regimes can be extended to a total of eight years.  

Conclusion

Italy’s impatriate tax regime offers significant opportunities for expats looking to reduce their tax burden. Don’t forget to check out our articles on “Spain's tax incentives for expats: golden opportunity or done and dusted?” and “Sun, Sea, and Savings: Greece's Updated Tax Schemes for Expats”.