If you're considering moving from Portugal to Italy, understanding the tax implications is one of the most important steps in your relocation planning. Expat tax obligations when transitioning between two European countries can be surprisingly complex—even within the EU. From determining your tax residency status to navigating the Portugal–Italy double taxation treaty, getting your expat tax Portugal Italy strategy right can save you thousands of euros and keep you fully compliant with both tax authorities.

This guide walks you through the critical elements of relocation tax planning for the 2025/2026 tax year, including income tax rates in both countries, residency triggers, treaty protections, Italy's attractive flat-tax regime for new residents, and common pitfalls that catch expats off guard.

Understanding Tax Residency: When Do You Stop Being a Portuguese Tax Resident?

The foundation of any cross-border tax plan is determining where you are considered a tax resident. Both Portugal and Italy have their own residency rules, and it's possible—at least temporarily—to be considered a resident of both countries simultaneously.

Portuguese Tax Residency Rules

Under Portuguese law, you are considered a tax resident if you meet either of the following conditions:

  • You spend more than 183 days in Portugal during a calendar year (these do not need to be consecutive).
  • You maintain a habitual residence (habitação permanente) in Portugal at any point during the tax year, even if you spend fewer than 183 days there.

When you leave Portugal, your tax residency generally ceases on the date of departure, provided you no longer maintain a permanent home there. However, Portugal uses a split-year treatment in certain circumstances, meaning you may be taxed as a resident for the portion of the year you lived in Portugal and as a non-resident for the remainder.

Key action: Formally deregister your fiscal address with the Portuguese Tax Authority (Autoridade Tributária e Aduaneira) and notify them of your change of residency. Failing to do so can lead Portugal to continue treating you as a tax resident.

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 criteria:

  • You are registered in the Italian civil registry (Anagrafe della Popolazione Residente).
  • You have your habitual abode (domicilio) in Italy.
  • You have your centre of vital interests in Italy—meaning your primary personal, family, or economic ties are there.

Starting from the 2024 tax year (and continuing into 2025/2026), Italy reformed its residency rules to also include a concept of physical presence aligned more closely with international standards. Registering with the local comune upon arrival typically triggers Italian tax residency.

Important: Unlike Portugal, Italy does not routinely apply split-year rules. If you qualify as an Italian tax resident for a given calendar year, Italy may tax your worldwide income for the entire year. This makes the timing of your move critically important.

Income Tax Rates: Portugal vs. Italy in 2025/2026

One of the first questions expats ask when planning a move is: Will I pay more or less tax? Here's a side-by-side comparison of the standard progressive income tax rates for the 2025/2026 tax year.

Portugal's IRS Income Tax Brackets (2025)

Taxable Income (EUR) Marginal Rate
Up to 7,703 13.25%
7,703 – 11,623 18.00%
11,623 – 16,472 23.00%
16,472 – 21,321 26.00%
21,321 – 27,146 32.75%
27,146 – 39,791 37.00%
39,791 – 51,997 43.50%
51,997 – 81,199 45.00%
Over 81,199 48.00%

Note: An additional solidarity surcharge of 2.5% applies to income between EUR 80,000 and EUR 250,000, and 5% on income above EUR 250,000.

Use our Portugal Income Tax Calculator to model your specific Portuguese tax liability before you leave.

Italy's IRPEF Income Tax Brackets (2025/2026)

Taxable Income (EUR) Marginal Rate
Up to 28,000 23%
28,001 – 50,000 35%
Over 50,000 43%

Italy simplified its bracket structure in recent years, moving from four brackets to three. In addition to IRPEF, you should factor in:

  • Regional surcharges (addizionale regionale): Typically 1.23%–3.33%, depending on the region.
  • Municipal surcharges (addizionale comunale): Typically 0%–0.9%, depending on the municipality.

This means the effective top marginal rate in Italy can reach approximately 47% when all surcharges are included.

Use our Italy Income Tax Calculator to estimate your Italian tax bill under the standard regime.

Practical Example

If you earn EUR 50,000 in gross employment income:

  • In Portugal: Your approximate IRS liability would be around EUR 12,350–13,500 (before deductions), putting your effective rate at roughly 25–27%.
  • In Italy: Your approximate IRPEF liability would be around EUR 12,900–13,500 (before deductions and surcharges). Including regional and municipal surcharges, the total could reach EUR 14,000–14,500, for an effective rate of roughly 28–29%.

At moderate income levels, the tax burden is broadly comparable, though Italy's surcharges can tip the scales. At higher incomes, Portugal's solidarity surcharge and 48% top rate can make it costlier than Italy's 43% top IRPEF rate—but Italy's surcharges narrow that gap.

Italy's Special Tax Regimes for New Residents

One of the most compelling reasons expats relocate to Italy is the availability of preferential tax regimes for incoming residents. If you qualify, these can dramatically reduce your Italian tax bill.

The "Impatriate" Worker Regime (Regime Impatriati)

Italy offers a significant tax incentive for individuals who transfer their tax residence to Italy and have not been Italian tax residents for at least three tax years (increased from two years under 2024 reforms) prior to the transfer. Starting from 2024 onward (applicable to the 2025/2026 period):

  • 50% of qualifying employment or self-employment income is exempt from Italian income tax, up to a cap of EUR 600,000 per year.
  • The benefit lasts for 5 tax years.
  • To qualify, you must commit to remaining tax resident in Italy for at least 4 years (or the benefit must be repaid).
  • You must perform a predominantly Italy-based work activity.

What changed: Prior to the 2024 reform, the exemption was 70% (or even 90% for those moving to southern Italy). The new rules are less generous but still valuable. If you moved to Italy before 31 December 2023, transitional rules may apply.

Example: If you earn EUR 50,000 under the impatriate regime, only EUR 25,000 is subject to IRPEF. Your tax bill (IRPEF only) would drop to approximately EUR 5,750—an effective rate of just 11.5%.

The Flat Tax for High-Net-Worth Individuals (Regime Forfettario per Neo-Residenti)

Italy also offers a flat tax of EUR 200,000 per year on all foreign-sourced income for individuals who transfer their tax residence to Italy and have not been Italian tax residents for at least nine of the previous ten tax years. Key features:

  • Italian-sourced income is taxed normally under IRPEF.
  • The EUR 200,000 flat tax replaces all Italian taxes on worldwide non-Italian income, regardless of the amount.
  • Family members can be included for an additional EUR 25,000 each.
  • The regime lasts up to 15 years.

This regime is primarily attractive to high-net-worth individuals with substantial foreign investment income, property income, or business interests outside Italy.

Portugal's NHR: Is It Still Relevant to Your Move?

Portugal's famous Non-Habitual Resident (NHR) regime was effectively closed to new applicants from 1 January 2024 (with limited transitional provisions). If you were already benefiting from NHR status in Portugal, leaving the country means you will forfeit the remaining years of the 10-year NHR benefit. This is an important consideration: if you still have several years of NHR benefits remaining, the tax savings of staying in Portugal may outweigh the benefits of Italy's impatriate regime.

Portugal introduced a successor incentive—the Tax Incentive for Scientific Research and Innovation (IFICI)—which applies to a narrower group of professionals. If you qualified under this regime, weigh the comparison carefully before relocating.

The Portugal–Italy Double Taxation Treaty

Portugal and Italy have a bilateral double taxation agreement (DTA) in force, which is critical for avoiding being taxed on the same income by both countries. Here's how the treaty typically allocates taxing rights:

Employment Income

  • Generally taxed in the country where the work is performed. If you work in Italy for an Italian employer after relocating, Italy has the primary right to tax that income.
  • During the transition year, income earned while physically working in Portugal may still be taxable in Portugal.

Pension Income

  • Under the Portugal–Italy DTA, private pensions are generally taxable only in the country of residence of the recipient. If you become an Italian tax resident, your private pension income is taxable in Italy.
  • Government pensions (paid by the Portuguese state for services rendered to the state) are generally taxable only in Portugal, unless you are both an Italian resident and an Italian national.

Investment Income

  • Dividends: The source country may withhold tax (typically limited to 15% under the treaty), and the residence country grants a credit or exemption.
  • Interest: Similar rules apply, with withholding typically limited to 15%.
  • Capital gains on real estate: Taxable in the country where the property is located.

The Tie-Breaker Rule

If both countries consider you a tax resident in the same year, the DTA's tie-breaker provisions determine your single country of residence for treaty purposes, based on the following hierarchy:

  1. Permanent home – Where do you have a permanent home available?
  2. Centre of vital interests – Where are your closer personal and economic relations?
  3. Habitual abode – Where do you spend more time?
  4. Nationality – Which country's nationality do you hold?
  5. Mutual agreement – The two tax authorities negotiate if none of the above resolves the question.

Practical tip: To avoid disputes, make your move clean. Terminate your lease or sell your home in Portugal, move your family, switch your bank accounts, and establish clear ties in Italy. The more ambiguous your situation, the more likely both tax authorities will claim residency.

Step-by-Step Relocation Tax Planning Checklist

To ensure a smooth transition from Portugal to Italy, follow this structured approach:

  1. Determine your move date strategically. If possible, move early in the calendar year. Since Italy may tax your worldwide income for the full year if you qualify as resident, arriving in January or February minimizes the overlap period with Portugal.

  2. Deregister from Portuguese tax residency. Notify the Autoridade Tributária of your departure and update your fiscal address. Cancel or redirect any Portuguese tax correspondence.

  3. Register in Italy. Upon arrival, register with your local comune (civil registry) and obtain or update your Italian codice fiscale (tax identification number). This triggers Italian tax residency.

  4. Assess eligibility for Italy's special regimes. Determine whether you qualify for the impatriate worker regime or the flat-tax regime before finalizing your move. Eligibility requirements are strict, and planning ahead is essential.

  5. File a Portuguese exit-year tax return. You will need to file a Portuguese IRS return for the year of departure, declaring income earned while you were a Portuguese tax resident. The deadline is typically June 30 of the following year.

  6. File an Italian tax return. Italian tax returns (Modello 730 or Modello Redditi PF) are due between May and November of the year following the tax year, depending on the filing method.

  7. Claim double taxation relief. If both countries tax the same income during the transition year, use the DTA to claim a foreign tax credit or exemption. In Italy, foreign taxes paid are generally creditable against IRPEF via the Modello Redditi.

  8. Review your global asset and investment structure. Italy has a monitoring obligation (quadro RW) requiring Italian residents to report all foreign financial assets and investments. Failure to comply can result in significant penalties (from 3% to 15% of undeclared asset values).

  9. Consider social security implications. Within the EU, you generally pay social security in only one country (where you work). Obtain an A1 certificate if applicable, and ensure there's no gap or overlap in coverage.

  10. Engage professional advisors. Work with a tax advisor licensed in both jurisdictions, or coordinate between a Portuguese and an Italian tax professional.

Common Mistakes and Misconceptions

Even well-prepared expats make errors during an international move. Here are the most frequent ones to avoid:

  • Assuming EU freedom of movement means simple taxes. The EU single market makes it easy to move physically, but tax systems remain national. You must comply with the domestic tax laws of each country independently.

  • Forgetting to deregister in Portugal. If you don't formally notify the Portuguese tax authority, they may continue to treat you as a resident and expect you to file returns on worldwide income.

  • Ignoring Italy's foreign asset reporting. The quadro RW disclosure requirement catches many new Italian residents off guard. Portuguese bank accounts, investment portfolios, real estate, and even cryptocurrency holdings must be reported annually.

  • Misunderstanding the impatriate regime eligibility. You must not have been an Italian tax resident for the three preceding tax years. If you spent significant time in Italy before your formal move, you could inadvertently fail this test.

  • Not planning for the transition year. The year you move is often the most complex. Both countries may claim taxing rights on overlapping income, and without proper documentation, you may struggle to obtain double taxation relief.

  • Overlooking municipal and regional taxes in Italy. Many expats compare only national rates (IRS vs. IRPEF) and are surprised by the additional 2–4% from Italian regional and municipal surcharges.

Frequently Asked Questions

Do I need to pay tax in both Portugal and Italy during the year I move?

Potentially, yes. Portugal will tax income earned while you were a Portuguese tax resident, and Italy may tax your worldwide income for the full year if you qualify as an Italian resident. The double taxation treaty ensures you receive relief (typically via a foreign tax credit) so the same income isn't taxed twice.

Can I benefit from both Portugal's NHR and Italy's impatriate regime?

Not simultaneously—you can only be a tax resident in one country at a time. If you leave Portugal, you forfeit any remaining NHR benefits. However, having previously held NHR status does not disqualify you from Italy's impatriate regime, provided you meet Italy's eligibility criteria.

How does Italy tax rental income from a property I keep in Portugal?

Under the DTA, rental income from Portuguese real estate is taxable in Portugal. However, as an Italian tax resident, you must also declare this income in Italy and claim a credit for Portuguese tax paid. Portugal typically withholds 25% on rental income earned by non-residents (or 28% on net income if you opt for it).

What happens to my Portuguese social security contributions?

Once you start working in Italy, you'll contribute to the Italian social security system (INPS). Your Portuguese contribution history is preserved and can be aggregated with Italian contributions when you eventually claim a pension, thanks to EU Regulation 883/2004.

Is Italy more expensive for taxes overall compared to Portugal?

It depends on your income level, type of income, and whether you qualify for a special regime. For employment income in the EUR 30,000–60,000 range, the standard tax burden is broadly similar. Italy's impatriate regime can make it significantly cheaper for qualifying workers. For retirees, Portugal's NHR was historically very favorable, but since it's no longer available to new applicants, Italy's flat-tax regime may offer an alternative for high-net-worth individuals.

Conclusion: Plan Early, Move Smart

Relocating from Portugal to Italy in 2025/2026 offers exciting opportunities—from Italy's rich cultural heritage to potentially lucrative tax incentives for new residents. However, the tax implications of this move are far from straightforward. The interplay between Portuguese exit taxation, Italian residency triggers, the bilateral double taxation treaty, and Italy's special regimes demands careful planning.

Key takeaways:

  • Establish a clear date of departure from Portugal and formally deregister your tax residency.
  • Time your move strategically—early in the calendar year is often optimal.
  • Investigate whether you qualify for Italy's impatriate regime (50% income exemption) or flat-tax regime (EUR 200,000 on foreign income).
  • Don't forget Italy's foreign asset reporting requirements (quadro RW).
  • Use the Portugal–Italy double taxation treaty to avoid being taxed twice on the same income.
  • Model your tax liability in both countries before making the move. Use our Portugal Income Tax Calculator and Italy Income Tax Calculator to compare scenarios.

With the right preparation and professional guidance, your move from Portugal to Italy can be both personally rewarding and fiscally efficient.

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.