What Taxes Will I Have to Pay as an Italian Citizen?
Italy is such a beautiful country, so it comes as no surprise that many Americans, and tourists from other places, head there and never return back home. If you’re an American living in Italy, there are some tax rules that you’ll want to know about to ensure that you’re compliant with tax laws in the country.
Keep reading to learn about the tax ID in Italy and how it impacts you.
Where You Reside Matters
As an Italian American citizen, both the U.S. and Italian governments have tax treaties in place that protect citizens from dual taxation.
These protections include:
- Foreign Earned Income Exclusion
- Tax credit on remaining income based on taxes paid to a foreign government
- Exclusion on foreign housing (income used for household expenses can be excluded as taxable)
The good news is that if you live in the U.S., it’s very unlikely that you’ll have to worry about paying taxes in Italy.
However, if you’re a permanent resident of Italy, you’ll be required to file tax returns with the federal government each year that you reside in the country. Similarly to the U.S., Italian tax law requires income tax. You may also have to disclose any assets that are being held in foreign countries.
Income that’s earned in Italy is taxed based on the amount. The more you make, the higher the tax rate you face. For example, if you make between EUR 55,001 – EUR 75,000, you’ll be taxed at a 41% tax rate. If you make EUR 1 – EUR 15,000, you’ll only be taxed at 23%. Be aware that there are always municipal and regional taxes as well. These rates vary by municipality but can range from 0.1% to 2.03%.
Tax deductions are the best way to reduce your taxable income. Understanding which deductions apply to your situation will increase your chances of not owing at the end of the tax year. The Italian government offers many different deductions that can be used, including:
- Tuition expenses
- Social security contributions
- Family allowances
- Charitable contributions
- Interest paid on principal residence loans
- Medical expenses greater than EUR 129.11
Once you’ve determined your taxable income and any applicable deductions, the next step is to file. Taxes in Italian are due between May 1st and June 30th. If you owe taxes, 40% of your total amount owed is due by May 31st. You have until November 30th to pay the remaining 60%.
Let Us Help with Your Dual Citizenship
Understanding Italian tax laws is one of many steps to becoming a citizen. If you’re interested in obtaining Italian citizenship, we’re the company for you! We offer a comprehensive consultation to identify your exact needs and to make the process of becoming an Italian citizen a breeze.
For all of your Italian citizenship requirements questions, we’re here to help. Call the Italian American Citizenship Assistance Program at (305) 812-5512.