Consider that this section is only relevant if you are an “expatriate” because you have transferred your tax residency to Sicily. This occurs when you spend more than 183 days per year in Italy or, in any case, when Italy is the centre of your business or family life.
In this case, you are liable for taxes in Italy on your entire worldwide income and are eligible for the tax reliefs provided by Italian legislation.
If you instead maintain your tax residence abroad, you will be liable for taxes in Italy only on your Italian source income (e.g., rental income from your Italian property). In this case, you will not be entitled to specific deductions or allowances.
Tax BENEFITS for expatriates in Italy
- Taxpayers over 65
If you receive a foreign pension, are over 65 years old, and move your residence to a municipality in Sicily with fewer than 20,000 inhabitants, you qualify for flat-rate taxation at 7%. This applies to all your foreign income, including your foreign pension. The relief lasts for 10 years and depends on not having been a tax resident in Italy for the five years before your move.
- Inpatriates
This applies to everyone who moves their residence to Italy and holds a master’s degree or works in specific sectors. The allowance is 50% of the income and remains valid for five years. It applies to both employment and self-employment income and is subject to the conditions that you stay in Italy for at least four years and that your work is mainly carried out in Italy. The allowance applies to an annual income of up to €600,000.
- Flat tax
This is interesting for large taxpayers who can elect to be taxed at a flat rate of €300,000 on all their foreign-source income. The option can be extended to their accompanying family members, with an additional €50,000 per person. The option is available for 15 years and is subject to the condition that you have not been a tax resident in Italy for at least 9 of the last 10 years before your arrival.
Tax benefits for the restructuring of houses
This applies to every resident taxpayer who pays taxes in Italy at the standard progressive tax rates (those who pay flat taxes or at flat rates are excluded).
The benefit includes a 36% tax credit on restructuring costs, up to a maximum of €96,000 per property (maximum tax credit = 36% of €96,000 = €34,560). The bonus is distributed in 10 annual instalments of 1/10 each (maximum €3,456 per year) and can be used to offset income taxes payable. If, in a given year, the income taxes paid are less than the bonus, the remaining amount is forfeited and cannot be carried forward to future years. For properties used as your primary residence, this tax credit is increased to 50% (maximum tax credit = 50% of €96,000 = €48,000).
Similar benefits are available for work aimed at removing architectural barriers, purchasing certain household appliances, and repairing earthquake damage.
SUCCESSION TAX
In Italy, succession tax rates range from 4% to 8%, depending on the degree of kinship (for the spouse and children, it is 4%). The tax-free allowances also vary by degree of kinship (for spouses and children, it is €1,000,000 each).
Additionally, life insurance policies with a designated beneficiary are always tax-free. In the case of international successions, tax relevance is based solely on the deceased person’s residence, not on the heirs’. Consequently:
- If, at the moment of death, the deceased was a tax resident in Italy, the entire estate is subject to taxation in Italy.
- If, at the time of death, the deceased was not a tax resident in Italy, only Italian assets are taxable in Italy.
The country of residence of the heirs is irrelevant.
