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Income Tax Incentives in Italy: The Recent Reform Explained

Italy has recently restructured its incentive programs on the income tax for foreigners. 

These changes affect both former and future residents, shaping the benefits and requirements associated with moving to the country.

Former Program: Who Qualified and What Were the Benefits?

Under the previous regulations, the program was open to anyone, regardless of nationality, employed or self-employed, who relocated to Italy before December 31st, 2023. 

To qualify, individuals should not have been fiscally resident in Italy for the previous two years and were required to commit to remaining a resident for at least two years.

The benefits were substantial, offering a significant reduction of taxable income ranging from 70% to 90% (varied between Northern and Southern Regions, including Sardinia and Sicily) for a five-year period. 

Renewal was possible for another five years in specific cases.

However, these provisions on Italy income tax have been repealed and are now applicable exclusively to those who transferred their residence before the end of 2023.

The Current Program: Updated Criteria and Benefits

The revised program on the income tax applies to anyone relocation after January 1st, 2024, irrespective of nationality and employment status.

Specific Criteria Include: 

  • meeting qualification and specialization standards, 

  • not being fiscally resident in Italy for the previous three years, 

  • not working in Italy for the same entity/corporate group as abroad, and 

  • committing to maintaining residence in Italy for five years after the move.

Fiscal benefits have been modified, offering a significant reduction of taxable income at a fixed rate of 50% nationwide (60% if there’s at least one child) for a five-year term. 

However, this new provision is non-renewable.

Key Exceptions on Italy’s Income Tax Benefits for Foreigners:

  • Individuals working for the same entity/corporate group as abroad can still benefit if their prior foreign residency is at least six years

  • For those moving in 2024, benefits can be extended for an extra three years beyond the initial five-year term if they buy a home within 12 months before moving.

In Summary: Italy's new Income Tax new Residents

Under the revised regulations on Italy’s Income Tax for new residents: 

  • eligible workers form a more restricted group

  • committing to a full five-year residence term is imperative

  • benefits are limited to 50% of taxable income

  • the benefits are non-renewable beyond the initial five-year term, except for narrow exceptions.

Closing Thoughts: Seeking Professional Guidance is Vital

Italy still offers attractive incentives on income tax for foreigners relocating to the country. 

Yet, with stricter guidelines, seeking professional advice to secure compliance in benefiting from these regulations is more crucial than ever.

Don't hesitate to reach out to us to learn more about how we can assist you.

- We hope you enjoy reading this blog post.
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