Do I Have to Pay Tax in Italy?

Infographic about tax in Italy

Our Financial section is provided by our tax expert Gareth Horsfall

Gareth Horsfall is manager and financial planner for The Spectrum IFA Group in Italy. He's helped the English speaking community in Italy with their financial and tax planning since 2004 and has built up a wealth of experience and knowledge to assist people living in, or thinking of moving to Italy permanently.  

Gareth has an Italian family and is a great advocate of life in Italy but admits that it takes careful preparation before making your move to navigate the bureaucracy and traps that many seeking a dream life in Italy fall into. Saying that, with a bit of planning, life in Italy can be really amazing and you can enjoy the wealth of culture, art, history, food, people, sun, sea and mountains that 'Il bel paese' provides. 

Excuses that will not fly with the Agenzia delle Entrate 

The world is slowly getting back to normal, but the tax authorities never stopped.  Now governments are short of money they are the search for the easy money.   If you are a resident in Italy but haven’t put your tax situation ‘in regola’, then it might be a good time to start.  

The Agenzia delle Entrate do not care about your excuses.   Here are my top excuses: 

1.   I didn't know I had to pay tax in Italy. 

This is the most common excuse by a long way. The AdE have no interest in whether you knew you had to do something or not. It is your responsibility to get informed, and failure to take the right advice means you are liable for all back taxes if they catch up with you.  

2.  I am not a tax resident. 

If you are registered as resident in Italy then you are more than likely, in the eyes of the AdE, going to be considered fiscally tax resident. Just because you live in another country for more than 183 days per calendar year and your main work and/or family interest are outside Italy, it does not matter to the tax authorities. You have registered to say you are resident and therefore they can legitimately come after you for taxes. 

If you are contacted you will be asked to repay all your back taxes.  At that point, the only way to resolve matters is pay up and then start a long process of proving your innocence. That will mean lawyers and accountants getting involved and extensive negotiations with the AdE and the other tax authority. 

** If you want to simply own a holiday home and have no intention of becoming a fiscal tax resident in Italy then do NOT, under any circumstances, register as resident at your comune **

3.  I am covered by the tie-breaker clause in double taxation treaty (DTA) 

This is one that I also hear often and stems from a misunderstanding of the DTA. The tie-breaker clause in the DTA states that where two states cannot agree on the residence of an individual then a number of criteria will be applied to determine the residency of the said person. 

This might seem cut and dried, but if you register as resident in Italy but maintain your family/work/social and business interests in another country it DOES NOT automatically mean that you fall under your home country rule. In reality Italy, as any other country, could ask you to pay your taxes for your time registered as resident.

4.  My commercialista told me not to declare it. 

The simple rule with the commercialista is that whatever they 'advise' must be written down either in an email or on headed paper and signed. The excuse that they told you not to do it, which you later find out not to be the case, will not pass AdE inspection. If it isn't written down then you also have no come back against the commercialista if they advised you incorrectly. All commercialisti have to hold professional insurance in the case of them giving bad advise, but no evidence, no claim!  

5.  I pay tax already on my house in the country where it is located. Why I should pay the Italians as well? 

I understand the feelings around paying taxes in one state and then having to declare them again in Italy, these are the rules. Property is a fixed asset and therefore you must, by law, declare the asset and income from it in Italy, once it has been declared in the country which it is located.  Tax credits may apply for double taxes paid.   

6.  I don't want to declare that for tax in Italy, it was a gift. 

If you received a gift from an inheritance that was administered in the state where the inheritance originated then no further tax will be payable in Italy.  Italy respects the fact that taxes have already been paid on the gift/inheritance. 

7.   My 'stranieri' friends have been in Italy for years and don’t pay tax. 

These excuses are not in any particular order because if they were then this one would be nearer the top of the list. It's a common one and makes me sigh with despair every time I hear it.

The chances are that your friends are not doing what they should be doing and it is only a matter of time before they get picked up by the tax authorities. I know there are plenty of people who are living in Italy, and have been for many years, without having made any declaration to the Italian state. I don't think I need to say that this is 100% illegal and is advice that should not be followed!    

Clearly it is not a definitive list. Just remember that it’s better to be in the system and be asked to clarify matters than getting caught having done nothing at all. 

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