A widespread misconception leads many foreign taxpayers to assume that, because they live abroad — or because a Double Tax Convention allocates taxing rights to their State of residence — no Italian obligation can arise on income deriving from Italy. The assumption is unfounded, and the assessments issued by the Italian Revenue Agency (Agenzia delle Entrate) in these cases carry significant financial consequences.
This note sets out the sequence of questions a non-resident should work through in order to establish where tax on Italian-source income is actually due, and what has to be filed.
Step 1 — Confirm your residence status under the reformed rules
The threshold question is not where the income arose, but where the recipient is tax resident. Residents of Italy are taxed on their worldwide income under Art. 3 TUIR; non-residents are taxed only on income considered produced in Italy.
Legislative Decree 209/2023 rewrote Art. 2(2) TUIR with effect from the 2024 tax period. Under the current text, an individual is resident in Italy if, for the greater part of the tax period — counting fractions of days — any one of the following alternative criteria is met:
- residence in Italy within the meaning of the Civil Code (habitual abode);
- domicile in Italy, now defined for tax purposes as the place where the person’s personal and family relations principally develop — a definition that departs from the previous reference to the Civil Code and gives precedence to personal over economic ties;
- physical presence in Italy.
Registration with the register of resident population (anagrafe della popolazione residente) for the greater part of the tax period no longer operates as a conclusive presumption: following the reform it is a rebuttable presumption, and the taxpayer may prove that the formal record does not reflect the factual position.
The Revenue Agency issued operating instructions on these criteria in Circular no. 20/E of 4 November 2024. The exercise matters: if any criterion is met, Italy taxes worldwide income, and the analysis that follows does not apply.
Step 2 — Identify which income is considered produced in Italy
For non-residents, the taxable perimeter is set by Art. 23 TUIR. Under paragraph 1, the following are considered produced in Italy:
- income from immovable property (redditi fondiari) situated in Italy;
- investment income paid by the Italian State, by persons resident in Italy, or by Italian permanent establishments of non-residents — expressly excluding interest and other proceeds from bank and postal deposits and current accounts;
- employment income for work performed in Italy, including the assimilated income referred to in Art. 50(1)(a) and (b) TUIR;
- self-employment income from activities carried out in Italy;
- business income from activities carried out in Italy through a permanent establishment;
- certain other income (redditi diversi) arising from activities carried out, or assets located, in Italy.
Paragraph 2 adds a separate category, taxable irrespective of where the underlying activity was performed, provided the payer is the Italian State, an Italian resident, or an Italian permanent establishment of a non-resident. This covers pensions and assimilated allowances, severance indemnities, various forms of assimilated employment income, consideration for the use of intellectual property, patents and trademarks and for industrial, commercial or scientific know-how, and fees paid to non-resident undertakings for artistic or professional services rendered in Italy.
A further rule, at Art. 23(1-bis), treats as Italian-source the capital gain on the disposal of shareholdings in non-resident companies whose value derives, for more than half, directly or indirectly, from immovable property situated in Italy at any point in the preceding 365 days, unless the securities are traded on a regulated market.
Article 23 lays down the general domestic source rules applicable to non-residents. Income that falls outside it is not taxable in Italy in the hands of a non-resident.
Step 3 — Apply the relevant Double Tax Convention
Where a Convention is in force between Italy and the State of residence, it allocates taxing rights between the two States and provides the mechanism for relieving double taxation. Its operation is superimposed on Italian domestic law: depending on the category of income, a treaty may reserve taxation to one State alone, or permit concurrent taxation while capping the rate applicable in the source State.
Because rates and allocation rules differ from treaty to treaty, the applicable Convention must be consulted in each case; no general rate can be assumed.
Access to treaty benefits is documentary. The Revenue Agency approved standard forms by Provvedimento of 10 July 2013 (prot. 2013/84404): Forms A, B, C and D for refunds, exemption from Italian tax, or application of a reduced rate under a Convention, and Forms E and F for the Parent-Subsidiary and Interest and Royalties Directives respectively. The forms require certification of residence by the foreign tax authority, valid from the date of issue until the end of the tax period indicated.
One practical point is frequently misunderstood. Where the required documentation is produced, the withholding agent may apply the treaty benefit directly at source, assuming responsibility for its correct application. If no request supported by proper documentation is submitted, the withholding agent will apply the full domestic rate, and recovery then depends on the refund procedure described below.
Step 4 — Establish whether an Italian return must be filed
Italian law generally requires anyone in receipt of income produced in Italy, including a person resident abroad, to declare it, subject to the exemptions expressly provided. Non-residents use the same Modello Redditi PF as residents; the instructions for non-residents are contained in Fascicoli 1 and 2, with the general exemption cases set out in Fascicolo 1.
Certain income is in no case to be declared, and its receipt by a non-resident therefore generates no Italian filing obligation at all. This includes investment income for which, in relation to non-residents, domestic law or the applicable Convention provides for exemption, for a final withholding tax, or for a substitute tax.
Filing may also be advisable where it is not compulsory — for instance to claim deductions or allowances not otherwise granted, or to recover excess tax paid.
An Italian tax code (codice fiscale) is a precondition for these formalities. A foreign national not resident in Italy may appoint a representative to apply on their behalf at any office of the Revenue Agency, pursuant to Art. 1 of Ministerial Decree no. 281 of 17 May 2001. Application through an Italian consulate is possible only in limited circumstances — where the code is needed for an online procedure, or where the applicant is unable to appoint a representative — in which case the consulate forwards the request to the Revenue Agency.
Step 5 — Recover the Italian tax, where it exceeds the treaty entitlement
Where Italian tax has been withheld in excess of the amount permitted by the Convention, a non-resident may apply for a refund using the relevant form, or by plain application, to the Centro Operativo di Pescara. The application must be filed within the forfeiture term of 48 months from the date on which the tax was levied, under Arts. 37 and 38 of D.P.R. 602/1973. The application must be accompanied by evidence that the tax was actually levied.
The term is one of forfeiture: once it expires, the ordinary refund route is closed.
Consequences of non-compliance
Failure to file where a filing was required exposes the taxpayer to assessment, with recovery of the tax, interest, and penalties under Legislative Decree 471/1997. The penalty regime was reformed by Legislative Decree 87/2024, which applies to violations committed from 1 September 2024: the penalty for omitted declaration is set at 120% of the tax due, with a minimum of EUR 250, and for unfaithful declaration at 70%, with a minimum of EUR 150. Violations committed before that date remain governed by the previous, more severe framework, so the applicable regime depends on the year concerned.
In cases of particular gravity, conduct may also fall within the scope of the criminal provisions of Legislative Decree 74/2000.
Available remedies
A taxpayer who receives an assessment may consider accertamento con adesione under Legislative Decree 218/1997, which reduces penalties to one third of the statutory minimum and permits payment in instalments. Following the 2024 reform, where the assessment is preceded by a schema di atto under the prior adversarial procedure, adhesion may be sought within 30 days; the ordinary term is 60 days from notification of the assessment.
For years not yet under audit, ravvedimento operoso under Art. 13 of Legislative Decree 472/1997 remains available, with penalty reductions graduated according to the time elapsed since the violation. In each case, early analysis materially reduces the total cost of regularisation.
Conclusion
For a non-resident with Italian-source income, the answer to “where is my tax due?” is reached in sequence: confirm residence status under the reformed Art. 2 TUIR; test each item of income against the exhaustive list in Art. 23 TUIR; consult the applicable Convention and secure the documentation needed to obtain its benefits at source; and verify whether an Italian return is required, exempted, or merely advisable. An error at any of these stages tends to surface either as double taxation borne unnecessarily, or as an Italian assessment served years later.
Our firm assists foreign individuals and entities in reviewing their Italian position, obtaining and maintaining the documentation required for treaty benefits, filing the Modello Redditi PF, submitting refund applications to the Centro Operativo di Pescara, and managing assessments, adhesion and voluntary correction procedures.
Chiara Pascale
Paolo Gaeta & Associati