The Italian Tax Residency – Main Rules

Understanding the concept of tax residency is crucial for determining the applicable personal income tax in Italy. Taxation varies depending on whether an individual is a resident or a non-resident for tax purposes. According to Article 3 of Presidential Decree No. 917/1986 (“TUIR” or “ITC” – Testo Unico Imposte sui Redditi), the taxable amount includes:

  • For residents: All income accrued worldwide (i.e., both in Italy and abroad), implementing the “worldwide taxation principle.”
  • For non-residents: Only income accrued within Italy’s territory, following the territoriality principle.

If an individual qualifies as a tax resident in Italy, they are liable to taxation on all income accrued anywhere. For non-residents, only income connected to the Italian territory is taxable under domestic regulations.

Italian Tax Residency Rules Effective FY2024

Under the updated rules effective January 1, 2024, an individual is considered an Italian tax resident if any of the following criteria are met for more than half of the year (at least 183 days, or 184 days in leap years):

  1. Physical presence within Italian territory;
  2. Domicile in Italy, defined as the place where personal and family relationships are primarily based;
  3. Residency in Italy, as described in Article 43 of the Italian Civil Code (place of habitual abode).

The new legislation specifies that any part of a day meeting one of these criteria is counted toward the 183-day threshold.

Registration in the Anagrafe (Population Register)

The new rules confirm that registration in the Anagrafe serves as a presumption of tax residency but is not definitive. Taxpayers can rebut this presumption by proving that they resided abroad for most of the year and did not have their domicile or residency in Italy.

As clarified by Circular Letter n. 20/E (November 4, 2023), individuals enrolled in the resident population registry for most of the tax period are presumed tax residents unless evidence shows otherwise. This flexibility benefits taxpayers who may be considered residents elsewhere under a double tax treaty.

Changes to the Definition of Domicile

The definition of domicile has been updated to focus on personal and family relationships. Economic interests are no longer considered decisive. This change simplifies the assessment of tax residency, resolving previous uncertainties about whether personal or economic ties should prevail.

Consequences of Being Qualified as an Italian Tax Resident

An individual qualifying as an Italian tax resident is subject to:

  1. Worldwide income taxation: All income earned globally from January to December is taxable in Italy.
  2. Wealth taxes on foreign assets:
    • IVIE (real estate): Applies at a rate of 1.06% on the purchase price or market value of real estate held abroad (with alternative rules for EU properties).
    • IVAFE (financial instruments): Applies at a rate of 0.2% on the market value of foreign financial assets (potentially 0.4% for assets held in tax havens starting in 2024).
  3. Monitoring obligations: Tax residents must report all foreign assets (e.g., real estate, bank accounts, financial instruments, pension plans, cryptocurrencies) in their Italian tax returns.

Quadro RW: The Monitoring Obligation

Italian tax residents are required to complete Quadro RW in their tax returns to declare foreign assets for monitoring purposes. This includes real estate, financial instruments, pension plans, and other investments.

Key Takeaways

The 2024 amendments to Italian tax residency rules bring clarity and flexibility:

  • Domicile Focus: The new definition emphasizes personal and familial relationships over economic interests.
  • Anagrafe Presumption: Registration in the population register is no longer definitive proof of residency, allowing taxpayers to challenge this classification.
  • Monitoring Compliance: Comprehensive reporting requirements ensure transparency for individuals with foreign assets.

Understanding these rules is vital for individuals navigating Italy’s tax system, whether relocating or managing cross-border assets. If you’re planning to move to Italy or have questions about your tax residency, contact our team at Move to Dolce Vita for expert advice tailored to your needs.

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