Rental Income From Properties Overseas And How To Declare It In Italy.

One of the questions I am asked regularly is how income from property held overseas is taxed in Italy. Many people wonder whether rental income is exempt from Italian tax because tax has already been paid abroad, and whether it is treated in the same way as rental income from Italian property. To be absolutely clear, if you are an Italian tax resident, you must declare and pay Italian tax on the net profit from rental income on properties held overseas. The arrangement is reciprocal: if you were resident in another country and owned rental property in Italy, you would also be required to declare that income there.

Italian tax law states that the net profit, after allowable expenses, from property overseas must be declared in your annual Italian tax return. This net profit is added to your other income for the year and taxed at your applicable income tax rate. In addition to income tax, IVIE — the tax on foreign real estate — applies. IVIE is calculated as a percentage (currently 1.06% [2026])  of the property’s value (purchase value if outside the EU and cadastrale value equivalent if inside the EU)  as defined by the rules of the country where the property is located. Even if tax has been paid in the country of origin, you are still required to declare the income in Italy, and annual declarations must be made regardless of foreign tax paid.

There is, however, a legitimate way to reduce your Italian tax liability. If the rental income is declared in the country of origin and all allowable expenses are deducted there, then only the resulting net profit needs to be declared in Italy. This can be advantageous because some countries allow a wider range of deductible expenses than Italy. In certain cases, it may even be advisable to file a tax return in the country of origin, even if that country no longer requires you to do so, simply to document expenses clearly and establish the net profit figure. By doing this, you provide the Italian authorities with evidence of your expense deductions, and the net profit declared in Italy may be significantly reduced, sometimes even to zero.

It is important to understand that all rental income from overseas property must be declared in Italy if you are an Italian tax resident, and what you declare is the net income after expenses rather than the gross amount. The net figure is then added to your other income and taxed at your applicable IRPEF rate. IVIE also applies to foreign property, and declaring the income and expenses in the country of origin can help reduce the taxable amount in Italy. Lower expenses result in a higher net profit and therefore higher Italian tax, while higher expenses reduce the net profit and may lower your Italian tax liability.

Depending on your goals, owning property overseas can work in different ways. If you have high expenses, the property may function well as a long‑term capital appreciation investment with little taxable income. If you have low expenses and high net income, particularly if you rely on the rental income in retirement, you may find yourself taxed at higher IRPEF rates in Italy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.