Do I need to file an Italian Tax Return?

The answer is most probably yes as the reader will desume from reading the instructions from the Italian tax return (these are from the 2023 return). The rules are complex and there are many exceptions and derogations.

The rules can be summarised as follows, but with the caveat that one needs to check, starting from an analysis of whether or not you were tax resident in Italy for the particular year, very carefully before deciding not to file a tax return.  The penalties (which can include criminal penalties in serious cases) for failure to file an annual tax return can be steep, if a return was actually due. Limitation periods are extended if a return is not filed by the due date.

In summary you may be exempt from filing a return if you have only one of the following types of income :

Employment Income 

If your only source of income derives from employment, i.e.. you are hired on an definite or indefinite term contract with an Italian registered business which has withheld tax via the payroll, unless:

1. you had more than one employer during the year or were paid from more than one source;
2. the amount of tax withheld by the Italian employer is not correct (and the Tax Agency make it clear that it is up to the recipient of the income to check that tax has been properly withheld). This can be due to:
   1. tax not having been correctly calculated via the payroll – this may be due to a simple mistake or miscommunication between you and your employer. 
   2. an employer which has not given effect to an applicable tax deduction or tax relief – e.g. the Impatriates Relief reduction in taxable income for new residents.  You should consider making a formal written request to your employer to give effect to this relief via the payroll if you have not already so.

Pension Income

You do not need to file if you are in receipt of taxable pension income, which is paid by an Italian pension provider and the total income is less than Euro 8,500 (or 7,500 where you have income from land which is less than Euro 500.

1. you have tax deductible items or tax credits which have not been captured through the payroll – tax credits for dependent family members are typically taken through the payroll and  Italian healthcare and pharmacy costs can be  captured at the point of sale if you are registered for Italian healthcare and have a Tessera Sanitiaria. However other expenses (including medical expenses incurred abroad)  may not have been and so you should claim them (providing they are documented properly in line with the rules)  in a tax return;
2. You are Italian tax resident and you have foreign (non Italian) real estate, financial assets, individual retirement accounts,  and bank accounts – these need to be reported by filing a section of the Italian tax return (the Section RW) listing opening and closing values.  There may also be a “wealth tax” (equivalent to the tax you would pay if you owned Italian real estate or  invested via an Italian bank or other intermediary here) to pay.

4) You have other sources of income, such as rental income from real estate or financial income from investments where tax has not been withheld (by way of a definitive withholding tax).  

If you are Italian tax resident you are under an obligation to report worldwide income, unless it is specifically exempt, eg. under a double tax treaty.

The instructions are evidently targeted at Italian tax resident individuals and make no mention of the position of non residents.

As a non resident you are obliged to report  income which has, or is deemed to have, an Italian source. This includes

• income from employment or from self employment where the services are provided from Italian soil
• income from the rental of land and buildings situated in Italy
• income from the leasing of plant and machinery in Italy
• investment income paid by the Italian state or entitles resident in Italy (unless a final withholding tax has been operated on payment
• royalty income paid by an Italian resident. 

As a general rule you do not to file a tax return if the total tax due is less than Euro 10,33.  It is perhaps ironic that the general rule,  requires the taxpayer to calculate the tax and that usually means slotting the relevant income into the tax return software to check the result.

If you would like a professional consultation on any aspect of this please complete a contact form request.