The Benefits of Residing in Italy in 2025: A Guide for Retirees and Freelancers

Italy could be one of the most attractive countries for your retirement, but not only. However, you don’t have to wait until the age of retirement to benefit from wonderful tax opportunities. For example, by relocating to regions that the Italian government has been promoting for the last few years now. See below.

Why Move to Italy in 2025? Tax Benefits, Residency Rules & Key Advantages

Italy is increasingly attracting expats, retirees, and digital nomads thanks to its lucrative tax incentives, high quality of life, and special residency programs. In 2025, Italy remains a top choice for those seeking tax optimization while enjoying la dolce vita.

This guide covers the key tax benefits, eligibility criteria, and requirements for becoming an Italian tax resident in 2025.

1. Tax Benefits for New Residents in Italy (2025)

A) The “Impatriati” Regime (Workers & Professionals)

Designed for remote workers, entrepreneurs, and freelancers relocating to Italy. This scheme has been modified in 2024 and offers:

• 50% tax exemption for 5 years with an annual limit of €600,000
• reduction of 60% of taxable income up to an annual limit of €600,000 for taxpayers who transfer their residence with a dependent child or a newborn or adopted minor.
• effective tax rate as low as 11,5-21,5% (vs. standard progressive rates up to 43%).

Eligibility:

• Must not have been an Italian tax resident for at least 3 years prior.
• Must commit to staying in Italy for at least 4 years.
• Requires an Italian employment contract or self-employment registration.
• Requires a visa for non-EU citizens

B) Flat Tax Regimes

Italy offers two flat tax regimes : for small businesses and freelancers ; and for high-net-worth individuals (HNWIs). Actually, there is a third flat tax (retirees) that is covered separately – see further below.

The reforms in 2025 are:

💼 Flat-Rate Regime for Small Businesses and Freelancers – Option 1

The flat-rate tax regime (regime forfettario) for self-employed individuals and small businesses has been updated with the following limitations:

• Income Threshold: Increased to €85,000 gross annual revenue.

• Employee Income Limit: Raised to €35,000 for 2025 (previously €30,000).

• 15% flat tax on taxable income.

• 5% reduced rate for the first five years for new businesses, provided specific conditions are met.

• Exclusions: Those primarily invoicing former or current employers, or entities linked to them, are excluded.

• Expense Cap: Annual expenses for employees and collaborators must not exceed €20,000.

• INPS Contribution Reduction: New enrollees in 2025 benefit from a 50% reduction in social security contributions for up to 36 months.

Eligibility for the 5% rate includes:

• No prior business, professional, or artistic activity in the three years before starting the new business.

• The new activity must not be a continuation of a previous employment or self-employed activity, except for mandatory internships.

• If continuing a business from another person, the previous year’s revenues must not exceed the regime’s income threshold.

Under this regime, taxable income is calculated by applying a profitability coefficient to gross revenues, based on the business’s ATECO code (industry classification).

💡 Example Scenario

Consider you are a freelancer with €50,000 in gross revenue. A coefficient of 78% would have a taxable income of €29,000 : you would pay €1,450 tax.

• Gross Revenue: €50,000

• ATECO Profitability Coefficient: 78% (e.g., for certain professional services)

• INPS Contributions Paid: €10,000

• Taxable Income: (€50,000 × 78%) – €10,000 = €29,000

• Tax Due:

  • At 15%: €29,000 × 15% = €4,350

  • At 5% (if eligible): €29,000 × 5% = €1,450

Important note about the Annual Revenue Threshold: With the Regime Forfettario , your gross annual revenue must not exceed €85,000 in 2025, but there is a tolerance until €100,000 as explained hereafter:

• Exceeding €85,000 but Not €100,000: If your revenue surpasses €85,000 but remains at or below €100,000 within a tax year, you can continue using the flat-rate regime for that current year. However, you will be required to transition to the standard tax regime starting the following year.

• Exceeding €100,000: Should your revenue exceed €100,000 during the tax year, the flat-rate regime is immediately forfeited. This means that from the moment you surpass this threshold, you must apply the standard taxation rules, including VAT obligations, to your income for the entire year.

This regime is designed to simplify tax obligations and reduce the tax burden for small businesses and freelancers in Italy.

💼 Flat-Rate Regime for Small Businesses and Freelancers – Option 2

This is a variant for the flat tax option above. 

Italy’s 2025 Budget Law introduced a new “incremental flat tax” aimed at individuals not enrolled in the flat-rate regime but who experience an increase in income. 

Key Features:

• Eligibility: Individuals not participating in the flat-rate regime.

• Tax Rate: A flat 15% tax applies to the portion of income that exceeds the highest income earned in any of the previous three years.

• Deduction: Before applying the tax, a 5% deduction is made on the incremental income.

• Cap: The benefit is limited to a maximum of €40,000 of incremental income.

💡 Example Scenario

Let’s consider you have the following income over the past three years:

• 2022: €60,000

• 2023: €65,000

• 2024: €62,000

In 2025, your income rises to €80,000.

Step 1: Determine the Highest Previous Income

The highest income in the past three years is €65,000 (from 2023).

Step 2: Calculate Incremental Income

Incremental income = 2025 income – highest previous income

Incremental income = €80,000 – €65,000 = €15,000

Step 3: Apply 5% Deduction

Deduct 5% from the incremental income:

€15,000 × 5% = €750

Taxable incremental income = €15,000 – €750 = €14,250

Step 4: Apply 15% Flat Tax

Tax due = €14,250 × 15% = €2,137.50

Result: you pay €2,137.50 in tax on the €15,000 income increase, benefiting from the incremental flat tax regime.

🇮🇹 €200,000 Flat Tax for New Residents

Effective from 2025, Italy’s flat tax for new residents has doubled from €100,000 to €200,000 annually. This regime allows eligible individuals to replace the standard progressive tax rates on their foreign income with a fixed annual payment. Additional family members can be included for an extra €25,000 each per year.

Eligibility Criteria:

• Must not have been an Italian tax resident for at least 9 of the previous 10 years.

• Applies to foreign-sourced income; Italian-sourced income remains subject to regular taxation.

• The regime is valid for up to 15 years.

This change positions Italy as an attractive destination for wealthy individuals, especially in light of the UK’s decision to abolish its non-domiciled tax regime in 2025.

C) Tax Exemptions for Retirees Under Italy’s Special Regime

A 7% flat tax on all foreign-sourced income, including pensions, capital gains, dividends, rental income, and overseas business income.

• Full tax exemption on foreign pensions for 10 years (conditions apply). The option begins in the year of establishing Italian tax residency and remains valid for 9 subsequent years (10 years total).
• Exemption from Wealth Taxes: Foreign financial investments and real estate held outside Italy are exempt from IVAFE and IVIE (Italy’s wealth taxes)
• No Reporting Obligation: Taxpayers under this regime are not required to disclose foreign-held assets.
• Qualifying Criteria: To opt in, you must meet the following conditions:
  1. Retirement Status: Must be a retiree receiving a foreign pension.
  2. Prior Non-Residency: Must not have been an Italian tax resident for the 5 years preceding relocation.
  3. Geographic Requirement: Must establish tax residency in:
     • A Southern Italian region (Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, or Apulia); and
     • A municipality with fewer than 20,000 inhabitants.7% flat tax for retirees relocating to Southern Italy.

     • Administrative Cooperation: Must relocate from a country that has an administrative cooperation agreement with Italy.

💡 Example Scenario

Consider you are a retiree who has lived outside Italy for the past 5 years and you  receive a foreign pension of €50,000 annually. If you relocate to a qualifying municipality in Puglia in 2025, you would pay a flat tax of €3,500 (7% of €50,000) each year for up to 9 years, instead of the standard progressive tax rates.

Important note: the 7% applies to the gross income received and the not the net amount after deduction or payment of any foreign tax. Therefore, you should ensure that you relocate in Italy during the 5 first months of the year, to avoid any double taxation (under the special regime, you are not able to claim credit for any foreign tax!)

2. Italy’s Personal Income Tax (IRPEF) in 2025

If you don’t qualify for special regimes, standard progressive rates apply. 

Good to know: In 2025, Italy reduced its IRPEF (personal income tax) brackets from 4 to 3 as part of a broader tax simplification reform. Here are the new progressive rates effective from January 1, 2025:

Italy’s 2025 Tax Brackets (IRPEF)

The key Change vs. 2024 is that the 25% bracket has been eliminated (previously applied to €15,001–€28,000).

Middle-income taxpayers (€15k–€28k) pay now 23% instead of 25%.

Old brackets:

3. Minimum Stay & Tax Residency Rules

To qualify as a tax resident (Permesso di Soggiorno), obtain a residency certificate (Certificato di Residenza) and access benefits, you must :

• Spend 183+ days per year in Italy (or declare Italy as your “center of vital interests”).
• Register with AIRE (if retaining another nationality).

The minimum stay requirement does not apply to special tax regimes such as HNWI.

Path to Permanent Residency and Citizenship

• Permanent Residency: After five years of continuous legal residence, EU/non-EU citizens can apply for permanent residency, provided they meet certain requirements, including language proficiency. Non-EU citizens can apply for a long-term EU residence permit, valid for 10 years and renewable. They must not have been absent from Italy for more than 6 consecutive months or 10 months in total during the 5-year period.

• Citizenship: EU citizens can apply for the Italian passport after 4 years of continuous legal residence. Non-EU citizens may apply after 10 years. 

4. Conclusion: Is Italy the Best Tax Move in 2025?

Now that you see the main tax incentives, you probably ask yourself if Italy could be a good choice for your residency. Well, it goes without saying that Italy stands out as one of Europe’s most attractive destinations for:

• Digital nomads & remote workers (Impatriati regime).
• HNWI (€200K flat tax).
• Retirees (7% tax on foreign pension income)
• Investors (Southern Italy incentives).

Even with the doubled flat tax for HNWI, Italy can still be an attractive destination for wealthy individuals, especially in light of the UK’s decision to abolish its non-dom tax regime in 2025.

However, crypto gains will be more taxed.soon If you have such assets, be aware that the current 26% rate is planned to raise to 33% in 2026. 

Inconvenients in the daily life in Italy 

Living in Italy in 2025 offers rich cultural experiences, but there are nevertheless several challenges to consider, such as Bureaucracy and Administrative Complexity.

Italy’s bureaucratic processes are often lengthy and intricate, particularly for foreigners dealing with residency permits, visas, or tax matters. The procedures can be time-consuming and may require navigating language barriers, as English-speaking officials are not always available.

Another point to raise is the public transport, which is not very reliable and where pickpockets are notorious!

How can BanTheTax help you ?

If you are attracted by becoming an Italian resident, contact us, send us an email at : info@banthetax.com with full details of your situation.

We will get back to you on the feasibility of your project and organize a private consultation to explain you all the pro’s and con’s to make sure that you are eligible for the chosen special regime. 

“Don’t let your government poke your money; give less and keep more ! You deserve a better tax treatment !”

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