How Italy’s New 183-Day Tax Residency Rule Affects HNWIs

Marco Mesina
Milan

Last year was an eventful one for European tax advisors. Italy doubled its special tax rate, the UK closed its non-dom regime, and Portugal revamped its Non-Habitual Residency (NHR) tax program.

This rapid changing of regulations has left many high-net-worth individuals flummoxed and unaware of the requirements, benefits, and responsibilities of some of Europe’s special tax regimes.

This article examines Italy’s 183-day rule, how it interacts with other residency criteria, and its implications for individuals navigating Italy’s tax landscape.

New Regulations

Italy introduced new regulations in November 2024 that would change the process of determining tax residency.

Before 2024’s rule change, there were three criteria to qualify as an Italian tax resident:

1. Residency: This refers to an individual’s habitual residence, where they spend the majority of their time and manage their personal and professional activities.
2. Domicile, which could previously be determined by either personal ties or economic ties. From 2024, domicile is only based on family and personal relationships.
3. Enrollment in the Anagrafe (The Italian civil registry): Before 2024 this was an absolute presumption—meaning that being enrolled for more than 183 days would automatically trigger tax residency.

Meeting just one of these three criteria was sufficient to establish tax residency under domestic rules. However, that is not the case now.

Italy’s 2024 tax regulations have fundamentally changed how tax residency applies to individuals spending time in the country. Under the updated guidelines, physical presence now serves as an independent criterion for determining tax status.

Italy’s updated regulations have introduced clearer guidelines for defining tax residency, including specific provisions for physical presence that will apply in 2025 onward.

Circular No. 20/E from the Italian Revenue Agency (dated November 4, 2024) establishes specific provisions that affect both temporary visitors and potential residents. 

The Four New Criteria for Tax Residency in Italy

Tax residency in Italy requires meeting one or more of four distinct criteria in Article 2, paragraph 2, of the Italian Tax Code:

1. Residency: This refers to an individual’s habitual residence, where they spend the majority of their time and manage their personal and professional activities.
2. Domicile: The place where the person’s personal and family relationships mainly develop.
3. Enrollment in the Anagrafe: The Italian civil registry lists individuals who have long-term ties to Italy, a rebuttable presumption under current law.
4. Physical Presence: Spending more than 183 days (or 184 in leap years) in Italy during a calendar year establishes tax residency.

These criteria create a comprehensive framework for evaluating residency status. Legislative Decree No. 209 of December 27, 2023, added physical presence as an independent criterion.

To summarize the changes:

• Domicile is now solely determined by personal and family relationships (economic ties are no longer relevant).
• Anagrafe enrollment has become a rebuttable presumption, meaning the individual can provide evidence to prove otherwise.
• Physical presence has been introduced as a completely new criterion.

The 183-Day Physical Presence Rule

Circular No. 20/E clarifies the 183-day rule as a determinant of tax residency. Physical presence in Italy for more than 183 days in a calendar year establishes tax residency.

Fractions of days in Italy count as full days, regardless of the stay’s duration. This rule requires meticulous record-keeping since every day—or part of a day—affects the calculation.

The circular includes detailed examples of calculating physical presence, confirming that non-consecutive periods within the calendar year count toward the total. Brief and intermittent stays in Italy can establish tax residency under this objective criterion.

The Potential Effects of Italy’s New Rules

Italy’s changes to its tax residency framework will have various effects, including:

• More individuals will qualify as tax residents: The physical presence rule means that even tourists, remote workers, and frequent travelers who spend a lot of time in Italy may now be taxed as residents.
• More focus on personal & family ties: Even if someone’s economic activities are abroad, having a spouse, children, or other close family in Italy can now contribute to being classified as a tax resident.
• Easier to prove non-residency: Before, being registered as a resident meant automatic tax residency. Now, individuals can present counterproof to show they are actually tax residents elsewhere.
• Tighter control over Italians in tax havens: The Italian tax authorities still assume Italians in low-tax jurisdictions are Italian tax residents unless they provide strong counterproof.

Qualifying as a Tax Resident: Domestic Rules vs. Double Tax Treaties

Meeting the criteria under Italian domestic tax law establishes residency, but a double tax treaty (DTT) can prevent Italian tax residency classification. Italy’s treaties with other countries place international agreements above domestic legislation. Article 4 of the OECD Model Convention, which Italy’s treaties widely adopt, uses tie-breaker rules to resolve residency conflicts. These rules examine:

• Permanent Home: The availability and location of a permanent home in one jurisdiction.
• Center of Vital Interests: The country where personal, family, and economic connections are strongest.
• Habitual Abode: The state where the individual spends the majority of their time.
• Nationality: When other factors don’t resolve the conflict, nationality becomes the deciding criterion.

Circular No. 20/E reaffirms that treaty law supersedes domestic law, allowing individuals to use these tie-breaker rules to prevent unintended Italian tax residency.

Avoiding Tax Residency in Italy

Avoiding Italian tax residency requires careful planning. Key strategies include:

• Track Days: Keep a detailed time log in Italy to comply with the 183-day threshold.
• Plan Travel Strategically: Limit Italian stays within the allowable days.
• Skip Anagrafe Enrollment: Register in the civil registry only when planning long-term residence.
• Document Everything: Keep travel itineraries, rental agreements, and evidence of ties to other jurisdictions to prove non-residency.

Understanding treaty provisions alongside these strategies helps manage residency status effectively.

Taxation of Italian Residents

Italian tax residents must pay taxes on their worldwide income, including foreign employment, investments, and property earnings. Residents must report all foreign-held assets and accounts.

The considerable financial impact makes avoiding unintended residency status crucial unless it fits one’s financial planning.

Italy offers attractive tax benefits: The €200,000 flat tax for high-net-worth individuals and the 7% flat tax for retirees moving to southern Italy. However, the country’s global taxation framework demands careful attention.

Understanding the 183-day rule, using double tax treaties effectively, and tracking time in Italy lets individuals enjoy these benefits without extra tax burdens. Circular No. 20/E guides taxpayers through these complexities to optimize tax outcomes.

Those seeking Italy’s favorable tax regime should build stronger ties through Anagrafe enrollment, stay more than 183 days yearly, and meet other criteria.