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Italy vs. Spain, where are taxes lower?
Learn where you pay lower taxes: Italy vs. Spain. We analyse and compare the tax regimes for individuals and businesses.
If you’ve already decided to base yourself in Southern Europe, understanding Spain and Italy’s tax systems will be essential. Both countries offer regimes designed to attract international talent. However, key differences exist that you must understand.
Did you know both countries updated their laws to attract remote workers? Spain promotes its famous “Beckham Law”. Meanwhile, Italy responds with its “Lavoratori Rimpatriati” regime.
In this article we are going to compare and analyse taxes in Spain versus Italy, from Income Tax until VAT you pay on your morning coffee. Keeping finances organised matters as much as having a reliable eSIM. Let’s discover which country suits your budget better.
Taxes in Italy versus Spain for businesses or individuals
If your plan includes relocating your business or opening a European branch, focus on corporate taxation. Business incentives may determine your project’s success. Managing a consultancy differs from running a company with employees. Therefore, the tax environment shapes your growth potential.
1. Corporate tax in Spain compared to Italy
In Spain, the standard Corporate Tax rate stands at 25%. This applies to most companies. However, if you’re a new entrepreneur, the Spanish system welcomes you with open arms: start-ups are taxed at a reduced rate of 15%. This applies during the first profitable year and the following one.
This 15% advantage makes Spain attractive for start-ups. Moreover, under the Start-up Law, companies certified by ENISA may extend this reduced rate of 15% up to four years. Therefore, you can reinvest profits into marketing or development instead of paying taxes.
In contrast, Italy uses a more complex system. Companies first pay IRES (Corporate Income Tax) at 24%. At first glance, it appears lower than in Spain, but then there is the IRAP (Regional Tax on Productive Activities). This regional tax is usually around 3.9%, although each Italian region has some leeway to raise or lower it. Therefore, total taxation often exceeds 27.9%.
While Spain simplifies early taxation, Italy offers incentives such as the “Mini-IRES”.
This mechanism reduces tax to 20% if companies reinvest profits into assets or hiring. It suits businesses aiming to expand operations in Italy.
2. Other corporate taxes and strategic benefits
Spain recently introduced improvements for small businesses. From 2025 and 2026, rates may drop to 17% for the first €50,000.00 ($52,750.00) of taxable income.
This measure reduces pressure for digital nomads operating through small companies. It allows growth before facing higher taxes.
Additionally, Spain maintains strong double taxation treaties with most countries in Latin America and the U.S. Therefore, foreign dividends may receive exemptions and avoid double taxation. This is a key point if you run an international organisation.
Italy offers generous tax credits for innovation and digitalisation. It provides deductions up to 30% for hiring skilled employees or R&D projects.
If your company operates in technical sectors, Italy’s “Industry 4.0” incentives may return part of your investment through tax credits.
Italy also offers the Srl Semplificata (simplified limited company). You can start with just €1.00 ($1.05). It is a very attractive option for young entrepreneurs or projects with limited start-up capital, although the annual running costs (accounting and fees) remain somewhat high compared with other European countries.
3. Withholding taxes and dividends: Taking money out
Many overlook how much it costs to withdraw profits. Spain applies a 19% dividend tax. Italy applies around 26% on dividends.
This 7% difference matters long term. If you reinvest profits, Italy offers strong incentives.
However, if you withdraw dividends yearly, Spain usually leaves more money in your personal account.
Taxes in Italy versus Spain for individuals or natural persons
If you work remotely or freelance, understanding personal taxation is essential. Both countries offer attractive regimes. However, you must understand the details.
1. VAT in Spain vs Italy Italy
Value Added Tax (VAT) is the tax you’ll notice most in your day-to-day spending. It’s that extra bit that adds up when you buy your coffee, pay your coworking bill and buy train tickets to explore your new home. Spain’s standard VAT rate stands at 21%. This is the rate you’ll pay for most tech services, clothing and electronics.
However, Spain applies an appealing system of reduced rates. The 10% rate covers hospitality, transport, and most food products like meat or fish).
The 4% rate applies to essential goods such as bread, milk, fruit, vegetables, and eggs. An interesting fact for book lovers is that books and newspapers also benefir from this 4%.
In Italy, the structure remains similar. The standard VAT rate is 22%. That extra 1% compared to Spain might not seem like much, but when it comes to big purchases, such as equipment for your home office, it really makes a difference. Just like Spain, Italy applies a reduced rate of 10% to tourism and hospitality services.
For essential goods, Italy applies a rate of 4% or 5%, depending on the specific item. For example, whilst in Spain the rate for olive oil has returned to 4% following periods of exemption, in Italy feminine hygiene products and certain baby foods may fall within these lower tax brackets.
Overall, daily expenses remain slightly higher in Italy because of that extra percentage point in the standard rate.
2. Spain versus Italy. Where do you pay less Personal Income Tax?
This is where the main difference in taxes between Italy and Spain appears. Spain. If you stay more than 183 days, you become a tax resident. Therefore, you must declare worldwide income. However, both countries offer attractive incentives.
In Spain, standard residents pay Personal Income Tax (IRPF). This is a progressive tax that is divided into state and regional brackets. This progressive tax starts at 19% for €12,450.00 ($13,133.00). It rises quickly to 45% or even 47% for incomes above €300,000.00 ($316,500.00) annually.
However, digital nomads may apply the Beckham Law (Special Regime for Displaced Workers). This regime allows a fixed 24% rate on the first €600,000.00 ($633,000.00) during six years.
Under this regime, you only pay tax on Spanish income. Your savings or income generated abroad (for example, dividends from a company in your home country) often go unnoticed by the tax authorities.
Italy offers an even more aggressive system. The IRPEF (Personal Income Tax) also follows progressive brackets.
- Up to €28,000.00 ($29,540.00): 23%.
- From €28,001.00 ($29,540.00) to €50,000.00 ($52,750.00): 35 %.
- Above €50,000.00 ($52,750.00): 43%.
However, the Lavoratori Rimpatriati regime for expatriates taxes only 50% of your income for five years. This means that if you earn €60,000, you will only pay tax as if you had earned €30,000.
But there’s more: If you decide to settle in southern regions such as Sicily, Calabria or Sardinia, the tax relief can rise to 90%. Therefore, you only tax 10% of your income. This means that, on paper, Italy is much more affordable for people on middle and high incomes who move to specific areas.
3. Social security and freelancers
Income tax isn’t everything. Monthly contributions can become challenging.
In Spain, freelancers pay based on income. If your income isn’t too high, you may pay around €230.00 ($242.65). However, if you earn more than €6,000 ($7,050) per month, you may pay up to €590.00 ($622.45).
New freelancers benefit from a flat rate of €80.00 ($84.40) during the first year.
In Italy, freelancers join Gestione Separata by the INPS. They pay around 26% of net income. The advantage is that if you don’t earn anything in a given month, you don’t have to pay a fixed mandatory contribution, as is the case in Spain (with certain professional exceptions).
However, the total cost of social security in Italy tends to rise as your income increases, unless you are eligible for the Regime Forfettario, a simplified system for those earning less than €85,000 ($99,866) a year, under which you pay a flat-rate tax of 5% or 15% that covers almost everything.
4. Wealth and foreign assets tax
If you’ve accumulated wealth and properties, this point becomes essential. Spain is one of the few countries in the EU that maintains a Wealth Tax. If your assets exceed €700,000.00 ($738,500.00), rates range between 0.2% and 3.5%.
However, this completely depends on the region. Madrid and Andalusia apply major reductions. Meanwhile, Catalonia and Valencia apply full taxation.
Italy does not apply a global wealth tax. However, it applies two key taxes on foreign assets.
- IVIE: 1.06% on foreign real estate value.
- IVAFE: 0.2% on financial assets (bank accounts, shares, cryptocurrencies) abroad.
Although Italy seems to ‘penalise’ holding assets abroad, its tax rates are fixed and predictable, unlike the progressive tax brackets on wealth in Spain, which can rise much higher if you have a substantial investment portfolio.
5. Family benefits
Both countries support families differently. In Spain, there are ‘family allowances’, which reduce the taxable income for each dependent child or relative. The first child reduces taxable income by around €2,400.00 ($2,532.00).
Italy offers the Assegno Unico. Families receive between €50.00 ($52.75) and €190.00 ($200.45) monthly per child.
Additionally, Italy may extend expat benefits up to ten years if you have children or buy property. This makes Italy a very solid choice for digital nomads travelling with their families who are looking for long-term stability.
Tax Comparison Spain versus Italy
Both countries offer attractive incentives. Spain focuses on simplicity. Italy offers large tax reductions, especially in southern regions.
Below are two detailed tables. These show the minimum and maximum percentages to ensure there is no loss. Please note that the dollar amounts are approximate figures based on the current exchange rate.
Comparison for individuals
Here we compare what you would pay as an individual, whether as a remote worker or a tax resident.
| Tax | Spain | Italy |
| VAT (Standard) | 21% | 22% |
| VAT (Reduced) | 4% – 10% | 4% – 10% |
| Income Tax | 19% – 47% | 23% – 43% |
| Nomads Special Regime | 24% (Fixed) | 5% – 15% (Forfettario) |
| Expat Exemption | 0% | 50% – 90% |
| Wealth Tax | 0.2% – 3.5% | 0% |
| Foreign Assets Tax | 0% | 0.2% – 1.06% |
If you’re on a high income, Italy is the clear winner thanks to its expat tax regime, which allows you to ‘deduct’ up to 90% of your income from your taxable income if you move to the south.
Although Spain’s tax system is simpler thanks to the 24% flat rate under the Beckham Law, it still imposes a higher tax burden on the average individual. Furthermore, if you have a large investment portfolio, Italy offers more predictable fixed rates than the Spanish wealth tax.
Comparison for legal entities (businesses)
If you plan to create a company or relocate your business to Europe, consider these key figures carefully.
| Tax | Spain | Italy |
| Corporate Tax (Standard) | 25% | 24% |
| Corporate Tax (New Companies) | 15% (2 years) | 20% (incentives) |
| Regional Tax (IRAP) | 0% | 3.9% |
| Dividend Withholding Tax | 19% | 26% |
| R&D Incentives | 25% – 42% | 10% – 45% |
For companies, Spain usually offers a simpler and more predictable system. It avoids additional regional taxes like IRAP. Italy becomes attractive if your business focuses on innovation. Its R&D incentives may significantly reduce your effective tax burden.
Taxes in Italy versus Spain: Frequently Asked Questions
In both countries, the key rule is 183 days. If you stay longer than half the year, you become a tax resident. Therefore, authorities tax your worldwide income. However, be careful: Spain also considers your economic centre. If your family lives in Spain or your main income comes from there, authorities may still treat you as a resident.
This question appears often. Previously, the Beckham Law mainly applied to employees. However, the Start-up Law expanded access. Digital nomads holding the relevant visa can now benefit from this flat rate of 24% ($25.32/€24), even if they are self-employed and working for foreign companies. It’s a golden opportunity that didn’t exist before for freelancers.
Both countries require full transparency. Spain uses Form 720, which is informative but carries strong penalties. Italy applies IVIE and IVAFE on foreign assets. If you fail to declare accounts or properties, penalties may exceed the tax saved. Authorities now exchange data quickly, so honesty remains essential.
Yes, this is correct. Italy offers a strong advantage through the Regime Forfettario. If you earn less than €85,000.00 ($89,675.00) yearly, you don’t charge VAT. This makes you up to 22% cheaper than competitors. Spain currently offers no similar VAT exemption for freelancers.
If you are paid in dollars but live in the Eurozone, you need to be very careful. If you earn in dollars while living in the Eurozone, convert income into euros using official exchange rates. Authorities may require daily or annual averages. Exchange fluctuations may affect your final tax amount. Therefore, using financial tools helps maintain accurate records.
