Tax residency is a crucial consideration for individuals who move to a new country, as it determines which country has the right to tax their worldwide income. Italy has become an increasingly popular destination for expatriates. Yet, the question “when does a tax residency actually begin?” remains tied to the fulfillment of a substantial condition rather than the obtaining of a certification.
Other important questions to be analyzed would be: Will tax residency in Italy be considered for the entire year? Or does Italy allow partial tax residency (as happens in other countries, such as Portugal, for example)?
1. What is tax residency?
Tax residency is the legal status that determines where an individual or entity is subject to taxation. It is not solely determined by the number of days spent in a country; various factors, including ties to the country, economic interests, and intentions to reside, can also play a role. Different countries have different criteria for establishing tax residency and in many cases, it could be unclear where a person is tax resident.
Importantly, tax residency is different to legal residency. A person can be a legal resident but not yet a tax resident, and a tax resident and not a legal resident.
2. Italy’s legal criteria for becoming a tax resident
Starting from 2024, the Italian rules on tax residency for individuals have been updated with a more substantial and inclusive approach.
A person is now considered a tax resident in Italy if, for most of the year (at least 183 days, or 184 in a leap year), they meet at least one of the following criteria:
- their main domicile is in Italy, meaning the center of their personal and family interests;
- they have their residence in the country, i.e., they habitually live there;
- they are physically present in the national territory, even for parts of the day.
An important element is that the days do not need to be consecutive: the law allows for the accumulation of non-continuous periods throughout the year. As a result, continuous presence is not required, what matters is that the connection criteria are met collectively for at least 183 days in the calendar year.
This change is accompanied by a key clarification issued by the Italian Revenue Agency (Agenzia delle Entrate) in Circular No. 20/E of November 4, 2024, which elaborated on the amendments introduced by the International Taxation Decree (Legislative Decree No. 209/2023).
In particular, it emphasizes the prevalence of personal and family ties over economic ones when determining tax domicile, while still respecting the application of double taxation treaties.
One of the most significant innovations is the introduction of the “physical presence” criterion: simply being physically present in Italy for most of the year is enough to be considered a tax resident. A clear example is that of remote workers (smart workers): even if they are not formally registered or domiciled in Italy, they may still qualify as tax residents if they perform their work from Italian territory for the majority of the year.
Practical steps for establishing tax residency include:
- Securing suitable accommodation in Italy (owned or leased)
- Registering with the local municipality (comune)
- Obtaining an Italian tax identification number (codice fiscale)
- Transferring significant personal belongings to Italy
- Establishing Italian banking relationships
- Obtaining an Italian mobile phone number and utility connections
- For non-EU citizens: securing appropriate visa and residency permits
Therefore, if you meet these conditions, you will become a tax resident for the entire year in Italy; that is, imagine that you move to Italy in June 2026 and stay more than 183 days in the country and have registered (or not) as a tax resident. In 2027, when you file your tax return in Italy, you must consider your worldwide income from January 2026 until 31st of December 2026; in other words, there will not be a partial taxable year as exists, for example, in Portugal.
In other words, you should carry out proper tax planning before moving from abroad, because a sale of your property abroad in March (before your move to Italy in our example above) will indeed be subject to taxation in Italy, but would not be in Portugal.
2.1 And what companies?
With regard to corporations, partnerships and equivalent entities, as well as entities other than companies, Article 73, paragraph 3 of the Italian Income Tax Code (TUIR) provides that:
“For income tax purposes, companies and entities are considered to be resident if, for the greater part of the tax period, they have their legal seat, place of effective management or principal place of ordinary management in the territory of the State.”
The occurrence of even just one of these criteria for the majority of the tax period is sufficient to determine the tax residence of the company in Italy.
Article 2 of the Decree, in amending paragraph 3 of Article 73 of the TUIR, further establishes that:
“Place of effective management refers to the continuous and coordinated making of strategic decisions concerning the company or entity as a whole.”
In this regard, it has been clarified that, for the purposes of effective management, decisions that are not related to management and are taken by shareholders, as well as supervisory or monitoring activities, are not relevant.
As for the principal place of ordinary management, this represents a genuine connection of the company or entity to the territory, meaning “the continuous and coordinated performance of current management activities concerning the company or entity as a whole.”
In other words, it refers to the place where the normal operations of the company take place and where day-to-day administrative functions are carried out. So, the concept may vary depending on the structure and characteristics of the business.
3. What happens if a person is a tax resident in more than one place?
If a person is considered tax resident in more than one country (i.e., has dual tax residency) both countries may try to tax the same income.
These treaties play a crucial role in cross-border tax matters and often contain specific provisions that take precedence over the domestic tax laws of the countries involved. One of the key areas addressed by these treaties is the determination of tax residency, which can become complex when an individual meets the criteria for being considered a resident in more than one country under domestic rules.
In the event of a clash, the tax treaty should be consulted and there would normally be “tie-breaker” rules helping to identify where a person is a tax resident.
4. Losing tax residency
Many people worry that if they do not spend at least 183 days per year in Italy, they will lose their tax residency and, consequently, their eligibility for special tax regimes such as the residenza fiscale agevolata per nuovi residenti or the impatriate regime.
In fact, under Italian domestic law, tax residency is lost if, for the greater part of the year, none of the domestic connecting factors is met (civil-law domicile, habitual abode, physical presence, or registration in the Anagrafe — the latter being a rebuttable presumption). You do not need to become a tax resident of another country to cease being an Italian tax resident, although establishing and evidencing residence abroad is often crucial in practice (and may be necessary to overcome anti-avoidance presumptions). Where a double tax treaty applies, treaty tie-breaker rules determine residence for treaty purposes. Special regimes apply only for years in which Italian tax residence is actually met.