If you're considering moving from Portugal to Italy, understanding the tax implications should be at the top of your relocation checklist. Expat tax planning between these two European countries involves navigating overlapping residency rules, different income tax structures, and a bilateral double taxation agreement (DTA) that can prevent you from being taxed twice on the same income. Whether you're drawn by Italy's culture, career opportunities, or its well-known expat-friendly tax regimes, this guide provides the essential tax information for the 2025/2026 tax year to help you plan your relocation with confidence.
Below, we walk through every major consideration — from severing your Portuguese tax residency to establishing Italian residency, comparing income tax rates, leveraging treaty benefits, and avoiding the most common mistakes expats make.
Understanding Tax Residency: Portugal vs. Italy
Before you can plan your expat tax obligations between Portugal and Italy, you need to understand how each country determines tax residency. Residency status dictates which country has the right to tax your worldwide income.
Portuguese Tax Residency Rules
Portugal considers you a tax resident if you meet either of the following criteria:
- You spend more than 183 days (consecutive or not) in Portugal during a calendar year.
- You have a habitual residence (habitation) in Portugal as of December 31 of the relevant year, even if you spend fewer than 183 days there, provided the circumstances suggest an intention to use it as your principal home.
Once you leave Portugal, you must formally communicate your departure to the Portuguese Tax Authority (Autoridade Tributária e Aduaneira). Failure to do so can leave you classified as a Portuguese tax resident, exposing your worldwide income to Portuguese taxation even after you've moved.
Key action: Register your change of address with the Portuguese tax office and cancel your NHR (Non-Habitual Resident) status or any other special regime, if applicable, before or upon departure.
Italian Tax Residency Rules
Italy considers you a tax resident if, for the greater part of the tax year (more than 183 days, or 184 in a leap year), you meet any one of the following conditions:
- You are registered in the Italian civil registry (Anagrafe della Popolazione Residente).
- You have your habitual abode (domicilio) in Italy — meaning your center of personal and economic interests is in Italy.
- You have your physical residence (residenza) in Italy.
Importantly, registration in the Anagrafe alone is sufficient to trigger residency, even if you physically spend fewer than 183 days in Italy. This is a common trap for newly arriving expats.
Dual Residency and the Tie-Breaker Rules
During your year of relocation, it is possible to be considered a tax resident of both Portugal and Italy simultaneously — particularly if you move mid-year. In such cases, the Portugal-Italy Double Taxation Agreement provides tie-breaker rules (following the OECD Model) to determine a single country of residence for treaty purposes:
- Permanent home — Where do you have a permanent home available?
- Centre of vital interests — Where are your personal and economic ties closer?
- Habitual abode — Where do you spend more time?
- Nationality — Which country's citizenship do you hold?
- Mutual agreement — If none of the above resolves it, the tax authorities negotiate.
Proper documentation of your move date, lease termination in Portugal, and new lease or property purchase in Italy is critical to support your position.
Portugal Income Tax: Your Obligations Before and After Leaving
Tax Year and Filing Deadlines
Portugal's tax year follows the calendar year (January 1 – December 31). Personal income tax returns (Modelo 3) are typically due between April 1 and June 30 of the following year.
If you leave Portugal partway through 2025, you are still required to file a Portuguese tax return for the portion of 2025 during which you were a resident. You will be taxed on your worldwide income earned during the residency period and on any Portuguese-source income earned after you become a non-resident.
Portuguese Income Tax Rates (2025)
Portugal applies a progressive income tax scale for residents. The main brackets for 2025 are approximately:
| Taxable Income (EUR) | Tax Rate |
|---|---|
| Up to 7,703 | 13.25% |
| 7,703 – 11,623 | 18% |
| 11,623 – 16,472 | 23% |
| 16,472 – 21,321 | 26% |
| 21,321 – 27,146 | 32.75% |
| 27,146 – 39,791 | 37% |
| 39,791 – 51,997 | 43.5% |
| 51,997 – 81,199 | 45% |
| Above 81,199 | 48% |
A solidarity surcharge (taxa adicional de solidariedade) of 2.5% applies on income between EUR 80,000 and EUR 250,000, and 5% above EUR 250,000.
Use our Portugal Income Tax Calculator to estimate your final Portuguese tax liability for the year of departure.
Non-Habitual Resident (NHR) Regime — Transitional Considerations
Portugal's NHR regime, which offered a flat 20% rate on certain Portuguese-source employment income and broad foreign income exemptions, was officially wound down for new applicants from 2024 onwards. However, those who were already registered under the NHR before the deadline may continue to benefit for the remainder of their 10-year period.
If you're currently on the NHR regime and moving to Italy, your NHR benefits cease once you become a non-resident of Portugal. You cannot "pause" and resume the regime if you return later. Make sure to account for this in your long-term planning.
Italian Income Tax: What Awaits You After Arrival
Tax Year and Filing Deadlines
Italy's tax year also runs from January 1 to December 31. The main personal income tax return (Modello Redditi Persone Fisiche) is due by November 30 of the year following the tax year. The simplified Modello 730, available to employees and pensioners, is due by September 30.
As a new Italian tax resident, you will be taxed on your worldwide income from the date your Italian residency begins (or for the full year if the residency test is met).
Italian Income Tax Rates (IRPEF) — 2025
Italy levies a national progressive income tax (IRPEF) with the following brackets for 2025:
| Taxable Income (EUR) | Tax Rate |
|---|---|
| Up to 28,000 | 23% |
| 28,001 – 50,000 | 35% |
| Above 50,000 | 43% |
In addition to IRPEF, Italian residents pay regional surcharges (typically 1.23%–3.33%) and municipal surcharges (up to 0.8%), depending on the region and municipality of residence. These can add several percentage points to your effective rate.
Practical example: If you earn EUR 50,000 in Italy, your approximate IRPEF calculation would be:
- 23% on the first EUR 28,000 = EUR 6,440
- 35% on the remaining EUR 22,000 = EUR 7,700
- Total IRPEF: EUR 14,140 (before deductions and regional/municipal surcharges)
Use our Italy Income Tax Calculator to get a personalised estimate including surcharges and deductions.
Italy's Flat Tax Regime for New Residents (Imposta Sostitutiva)
One of Italy's most attractive offerings for incoming expats is the flat tax regime for new residents (often called the "regime dei nuovi residenti" or "impatriati flat tax"). Key features:
- Available to individuals who have not been Italian tax residents for at least 9 of the previous 10 tax years.
- Allows you to pay a flat substitute tax of EUR 200,000 per year on all foreign-source income (with no obligation to declare specific amounts).
- Italian-source income remains subject to normal IRPEF rates.
- The regime lasts for up to 15 years and can be extended to family members for an additional EUR 25,000 each.
This regime is particularly attractive for high-net-worth individuals with significant investment portfolios, rental income, or business interests outside Italy. However, it requires careful planning and a formal election in your first Italian tax return.
Italy's Impatriate Tax Incentive (Regime Impatriati)
For employees and self-employed professionals relocating to Italy, the impatriate regime provides a substantial income tax reduction:
- Under the rules as reformed from 2024 (applicable for 2025 arrivals), 50% of qualifying employment or self-employment income is exempt from taxation, up to a cap of EUR 600,000 of gross income.
- You must not have been an Italian tax resident for at least 3 years prior to your move (or 6–7 years if you previously worked in Italy).
- You must commit to remaining an Italian tax resident for at least 4 years.
- Additional benefits may apply if you purchase a home in Italy or have dependent children.
This means that on EUR 100,000 of employment income, only EUR 50,000 would be subject to IRPEF — potentially reducing your tax bill by tens of thousands of euros.
Important: Eligibility criteria were tightened in 2024/2025. Not all expats qualify, and the conditions around employer relationships and new employment contracts must be carefully reviewed.
The Portugal-Italy Double Taxation Agreement
Portugal and Italy have a bilateral double taxation agreement (DTA) in force, modelled on the OECD framework. This treaty is your primary tool for avoiding being taxed on the same income by both countries.
Key Provisions of the DTA
- Employment income (Article 15): Generally taxed in the country where the employment is exercised. If you work physically in Italy, Italy has primary taxing rights.
- Pensions (Article 18): Government pensions are typically taxed only in the paying country. Private pensions may be taxable in the country of residence (Italy, after your move).
- Dividends, interest, and royalties (Articles 10–12): Subject to reduced withholding tax rates under the treaty (typically 15% for dividends, 15% for interest, and 12% for royalties).
- Capital gains (Article 13): Gains on the sale of real property are taxable in the country where the property is located. Gains on other assets are generally taxable only in the country of residence.
- Elimination of double taxation (Article 23): Italy generally grants a foreign tax credit for taxes paid in Portugal on income that Italy also taxes, and vice versa.
How to Claim Treaty Benefits
To claim benefits under the DTA, you may need to:
- Obtain a certificate of tax residency from the Italian tax authority (Agenzia delle Entrate) once you establish residency.
- Present this certificate to Portuguese payers or withholding agents to apply reduced treaty rates.
- Claim a foreign tax credit on your Italian return for any Portuguese taxes still withheld on Portuguese-source income.
Keep meticulous records of all taxes paid in Portugal during and after your transition year.
Step-by-Step Relocation Tax Checklist
To ensure a smooth tax transition when relocating from Portugal to Italy, follow this practical checklist:
- Determine your move date and plan it strategically (ideally early in the calendar year to avoid split-year complications).
- Notify the Portuguese tax authority of your departure and update your address to a foreign address.
- Cancel or update your NIF registration in Portugal and inform your employer (if applicable).
- Register with the Italian Anagrafe at your new municipality within 20 days of arrival (for EU citizens).
- Obtain an Italian tax code (codice fiscale) from the Agenzia delle Entrate.
- Evaluate eligibility for Italy's impatriate regime or flat tax regime and make the election in your first Italian tax return.
- File your final Portuguese tax return for the year of departure, reporting income earned during your period of Portuguese residency.
- File your first Italian tax return for the year of arrival, reporting your worldwide income from the date of Italian residency (or the full year, depending on the circumstances).
- Claim foreign tax credits in Italy for any taxes paid in Portugal on the same income.
- Review your investments and assets — some may generate Portuguese-source income that remains taxable in Portugal even after you leave (e.g., Portuguese rental property).
Common Mistakes Expats Make When Moving from Portugal to Italy
Avoiding these pitfalls can save you thousands of euros and significant stress:
- Failing to formally exit Portuguese tax residency. Simply leaving the country is not enough. If you remain registered at a Portuguese address or fail to notify the tax authority, you risk being taxed as a Portuguese resident on your worldwide income.
- Missing the Italian impatriate regime election. The election must typically be made in your first Italian tax return or communicated to your Italian employer. Missing the deadline can forfeit the benefit entirely.
- Ignoring regional and municipal surcharges in Italy. Many expats focus only on IRPEF rates and underestimate the additional 2%–4% in local surcharges that apply on top.
- Overlooking social security coordination. Under EU Regulation 883/2004, you generally pay social security contributions in the country where you work. Ensure your employer applies for an A1 certificate if there's any cross-border work during the transition.
- Not keeping proof of departure. Flight records, lease termination documents, utility cancellation confirmations, and deregistration certificates are all valuable evidence if either tax authority questions your residency status.
- Assuming the DTA automatically applies. Treaty benefits often require affirmative claims — withholding agents won't automatically apply reduced rates unless you provide the proper documentation.
Frequently Asked Questions
Will I be taxed in both Portugal and Italy during my year of relocation?
Possibly. If you meet the residency tests in both countries during the transition year, both may claim taxing rights on your worldwide income. The Portugal-Italy DTA tie-breaker rules and foreign tax credits are designed to resolve this, but you may need professional help to apply them correctly.
Can I still benefit from Portugal's NHR regime after I move to Italy?
No. The NHR regime applies only while you are a Portuguese tax resident. Once you become a non-resident, the benefits cease. You cannot pause the 10-year clock.
What happens to my Portuguese property income after I move?
Rental income from Portuguese property remains taxable in Portugal, even after you become an Italian resident. As a non-resident, you'll be taxed at a flat rate of 25% on Portuguese rental income (or you can opt to be taxed at progressive rates if it results in a lower liability). Italy will also tax this income as part of your worldwide income but should grant a credit for the Portuguese tax paid.
Is Italy more expensive from a tax perspective than Portugal?
It depends on your income level and type. Portugal's top marginal rate (48% + 5% solidarity surcharge = 53%) is higher than Italy's top IRPEF rate (43% + surcharges ≈ 47%), but Italy's rates kick in at lower thresholds. The Italian impatriate regime or flat tax regime can make Italy significantly cheaper for qualifying expats. Use our Portugal Income Tax Calculator and Italy Income Tax Calculator side-by-side to compare.
Do I need to declare my foreign bank accounts in Italy?
Yes. Italian tax residents must report foreign financial assets on the RW section of their tax return (Quadro RW) and may owe the IVAFE tax (a financial assets tax of 0.2% on the value of foreign-held financial assets). This is a frequently overlooked obligation.
Conclusion: Plan Early, Save More
Relocating from Portugal to Italy offers exciting opportunities — and potentially significant tax advantages if you plan ahead. Italy's impatriate regime and flat tax scheme can dramatically reduce your tax burden, but they require careful timing and proactive elections. At the same time, you must cleanly exit the Portuguese tax system to avoid dual taxation headaches.
Here are your key takeaways:
- Formally terminate your Portuguese tax residency by notifying the tax authority and deregistering.
- Register promptly in Italy and obtain your codice fiscale.
- Evaluate Italy's special tax regimes (impatriate or flat tax) and elect them within the required deadlines.
- Leverage the Portugal-Italy DTA to claim foreign tax credits and avoid double taxation.
- File returns in both countries for the transition year, with accurate income allocation.
- Keep thorough documentation of your move for both tax administrations.
Use our Portugal Income Tax Calculator and Italy Income Tax Calculator to model your tax exposure before and after the move.
This article is for informational purposes only and does not constitute tax advice. Tax laws change frequently; consult a qualified tax professional for advice specific to your situation.