Taxes & Business Setup in Italy

Relocating to Italy as a remote professional introduces distinct tax obligations. Understanding your status under both Italian and U.S. tax laws is crucial to avoid double taxation and optimize your net income.

Generally, spending more than 183 days in Italy during a calendar year makes you an Italian tax resident, subjecting your worldwide income to Italian income taxes.

Tax Setup for Freelancers (Digital Nomads)

If you operate as a freelancer or self-employed consultant, you must register for an Italian VAT number (Partita IVA) and register with the social security administration (INPS).

The Regime Forfettario (Flat-Rate Scheme)

Italy offers an attractive tax incentive for new self-employed residents:

• Low Tax Rate: A flat tax rate of just 5% for the first five years (which rises to 15% from year six onwards).
• Revenue Cap: Valid for gross annual revenues up to €85,000.
• Simplified Deductions: Instead of tracking individual business expenses, your taxable income is calculated using a flat profitability coefficient based on your industry code (Codice ATECO).
• Social Security: Freelancers must register for the Gestione Separata (separate management) under INPS, paying contributions based on net business income.

Tax Setup for W-2 Employees (Remote Workers)

If you are employed by a non-Italian company, your employer cannot simply run your standard U.S. payroll while you reside in Italy.

• Italian Payroll Compliance: Your employer must comply with Italian labor and social security laws. This involves setting up a representative office in Italy to process local tax withholdings and pay social security contributions (INPS and INAIL).
• Employer of Record (EOR): Many foreign employers choose to utilize an Employer of Record (EOR) service to hire the employee locally in Italy, ensuring full compliance without needing to establish a local corporate entity.

U.S.-Italy Double Taxation Treaty

As a U.S. citizen or green card holder, you must continue to file tax returns in the United States regardless of where you live. Our tax strategist, Luigi Parente, CPA, helps you utilize treaty benefits to prevent double taxation:

• Foreign Earned Income Exclusion (FEIE): Excludes a portion of your foreign earned income from U.S. federal income tax.
• Foreign Tax Credit (FTC): Allows you to offset your U.S. tax liability by the amount of income tax paid to Italy.

Luigi Parente is dual-licensed in New York and Italy, ensuring that your Partita IVA setup, corporate payroll, and annual tax filings in both countries are fully aligned.

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