Italy’s tax system combines progressive personal taxation with competitive corporate rates, offering a mix of traditional and modern approaches. Corporations face a 24% income tax plus a regional levy, while individuals are taxed up to 43% on worldwide income, with additional municipal and regional taxes. Gift, inheritance, and wealth taxes apply, but Italy also offers a unique flat-tax regime to attract high-net-worth individuals, exempting them from most foreign asset taxes. Italy’s robust anti-avoidance measures and a broad network of tax treaties ensure compliance and international collaboration.
Italy’s Tax System overview
| Corporate Income Tax: | 24% |
| Personal Income Tax: | 43%, progr. |
| Inheritance Tax: | 4%, direct line |
| Gift Tax: | 4%, direct line |
| Wealth Tax: | 0.2% foreign assets |
Legal System
Italy has a civil law legal system, with origins in Roman law.
Corporate Income Tax
Resident corporations are subject to tax on worldwide income at 24%. There is also a regional tax on productive activities (IRAP) of 3.9%.
Personal Income Taxation
Resident individuals are subject to tax on their worldwide income at progressive national rates up to a maximum of 43%. There is also regional and municipal taxation. Italy applies gift and inheritance tax, and wealth tax on certain foreign assets.
Italy offers a special forfait regime, designed to attract high net worth individuals to live in Italy. Under the forfait, a flat tax of EUR 100,000 is payable with respect to foreign income, and foreign assets are not subject to gift, inheritance or wealth tax, or reporting.
Anti-Avoidance Rules
Italy has Transfer Pricing rules, Controlled Foreign Corporation (CFC) rules, and General Anti-Avoidance Rules.
Controlled Foreign Corporations (CFCs)
CFC are foreign corporations that are controlled by Italian residents that are resident in a foreign jurisdiction subject to an effective tax rate lower than 50% of the effective Italian rate; and more than 1/3 of its income is passive or from intercompany transactions. Italian residents are taxable on their share of the undistributed profits of the CFC.
Trusts
Italy ratified the Hague Convention on the Recognition of trusts, and has an established regime for the taxation trusts.
Trusts are either transparent, where they are revocable or powers are exercised by the settlor or beneficiaries, or opaque, where trusts are irrevocable and discretionary. In the case of transparent trusts, undistributed income is imputed to the settlor and/or beneficiaries as is taxed at their marginal rate, but tax is not imputed on undistributed income in the case of opaque trusts. Distributions from foreign opaque trusts that are resident in jurisdictions where the tax rate is at least 15% (more than 50% of the Italian rate), are not subject to tax in the hands of Italian resident beneficiaries. Distributions of capital to beneficiaries are not considered taxable. Gift tax is payable on distributions, not funding.
Double Tax Treaties (DTTs)
OECD Multilateral Convention
Common Reporting Standard (CRS)
Italy is a party to the Multilateral Competent Authority Agreement (MCAA) and has implemented CRS for the automatic exchange of information.
FATCA
Italy has a FATCA Model 1 Intergovernmental Agreement (IGA) with the United States for the automatic exchange of account information.
