Italy tax system: audit, reporting and optimization of taxation of Italian companies and individuals: VAT, income tax and capital gains
Basic taxes (briefly)
|Corporate tax (in detail)||24% + IRAP (regional tax on productive activities, generally - 3.9%)|
|Capital gains tax. Details||Capital gains are included into corporate tax base|
|VAT. Details||For some goods and services, the tax rate is 10% and 4%.|
|Other taxes||Social contributions, Overseas property tax, Financial investment tax, Inheritance and gift tax, Registration tax. Stamp duties, etc.|
International tax agreement
|Albania, Algeria, Argentina, Armenia, Australia, Austria, Azerbaijan, Bangladesh, Barbados, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Croatia, Cuba, Cyprus, Czech Republic, Côte d'Ivoire, Denmark, Ecuador, Egypt, Estonia, Ethiopia, Finland, Former Yugoslav Republic of Macedonia, France, Gabon, Georgia, Germany, Ghana, Greece, Hong Kong, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Japan, Jordan, Kazakhstan, Kenya, Korea (Republic of), Kuwait, Kyrgyzstan, Latvia, Lebanon, Libya, Lithuania, Luxembourg, Malaysia, Malta, Mauritius, Mexico, Moldova (Republic of), Mongolia, Montenegro, Morocco, Mozambique, Netherlands, New Zealand, Norway, Oman, Pakistan, Panama, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, San Marino, Saudi Arabia, Senegal, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Syrian Arab Republic, Tajikistan, Tanzania, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan, Venezuela, Viet nam, Zambia|
|Andorra, Bermuda, Cayman Islands, Cook Islands, Gibraltar, Guernsey, Holy See (Vatican City State), Isle of Man, Jersey, Liechtenstein, Monaco, Turkmenistan|
IRPEF Taxpayers of personal tax in Italy are individuals:
- all people having their residence in Italy for all their incomes; people having their residence in other countries for certain incomes produced in Italy.
- 23 % on income up to15,000 EUR; 27 % on income from 15,001 to 28,000 EUR; 38 % on income from 28,001 to 55,000 EUR; 41 % on income from 55,001 to 75,000 EUR; 43 % on income exceeding 75,000 EUR.
- employment income; income from a profession or business; investment income; income from immovable property; other income from worldwide sources.
- do not carry out a business or professional activity; have not received any income; have only received income exempt from tax.
Corporate Tax for S.A.S. in Italy
The partnership is a taxable entity only for the purpose of IRAP (local income tax).Once the income has been determined, it is allocated to the individual partners who will then pay corporate (IRES if the partner is a company) or personal (IRPEF) income tax on the amounts allocated. The taxable income for IRAP purposes and the allocation of the individual income must result from the tax return that the partnership has to file each year. Regional Tax on Productive Activities (IRAP) Taxpayers of the Regional Tax on Productive Activities (IRAP):
- firms; professional autonomous activities.
- a foreign company controlled by an Italian tax resident that holds a controlling participation in an Italian company; a foreign company managed by Italian residents representing the majority of its board of directors is considered Italian tax resident, unless demonstrated otherwise.
- resident companies are taxed on worldwide income; non-resident companies are taxed on Italian-source income.
Capital Gains Tax
Capital Gains generally are treated as ordinary income and taxed at the 27.5 % corporate income tax rate. Only 5 % of Capital Gains generated by sale of shares held in other companies is subject to taxation, upon following conditions:
- shares should be owned for not less than 12 months; shares should be classified as a financial fixed asset in the first financial statement closed after the shares were acquired; shares do not refer to companies established in tax heavens; company carries out a business activity.
Domestic companies making certain types of payments (e.g. interest, royalties, professional fees, etc.) are required to withhold taxes at varying rates. Italian legislation has implemented EU Council Directive on taxation of interest and royalty payments 2003/49/EC of June 3, 2003, which means that all payments of interest and royalties between EU companies are exempt from withholding tax. Dividends Dividends paid to a non-resident company are generally subject to a 20 % withholding tax unless the rate is reduced under a tax treaty or the dividends qualify for exemption under the EU parent-subsidiary Directive. To qualify for the exemption under the directive, the parent company must hold directly at least 10 % of the subsidiary for at least one year. Interest Unless reduced by a tax treaty, Italian-source interest paid to a non-resident is generally subject to a 20 % withholding tax. Interest derived from an investment in government bonds and similar securities are subject to withholding tax at a rate of 12.5 %. Under Italy’s implementation of the EU interest and royalties directive, qualifying interest payments are exempt from withholding tax. Royalties Royalties paid to a nonresident company are subject to a 30 %, withholding tax on 75 % of the gross royalty, resulting in a final tax of 22.5 %. The rate may be reduced under a tax treaty of the EU interest and royalties directive. Licensing fees and some service fees are exempt from withholding tax.
All services and goods sales from firms are subject to VAT. Procedure of getting VAT-number required for every Italian entity. No business can be carried out without VAT even in case of one-man firm. Ordinary rate is 21%. Lower rates are established for:
- food; transfer of real estate; maintenance of buildings and other cases.
- medical; gambling; banking; insurance, etc.
- One calendar month: companies with turnover exceeding 516.000 EUR (in case of sale of goods) and 309.000 EUR (in case of services); One calendar quarter: firms with lower turnover than 516.000 EUR (in case of sale of goods) and 309.000 EUR (in case of services); One calendar year: one man firms with special regimes.
Register Tax Register Tax is charged for registration of several acts. Registration may be:
- obligatory (in case it is established by law); voluntary.
- sale of real estate (whenever they are not subject to VAT); sale of business units; rent contracts; sale of shares; transfer of vehicles.
- proportional in % of value of transaction (from 1 to 12 %); fixed.
Stamp duty is levied on legal and banking transactions, at varying rates up to 1.5 %. Tax on Company Books is charged every year for 309 – 516 USD (approx. 240 - 400 EUR).
There is no exchange control in Italy. Residents and non-residents may hold foreign currency inside and outside the country, and direct and indirect investments may be made in any currency. For tax purposes, however, all holders of currency are required to declare funds held outside Italy and funds that are repatriated to Italy without a bank intermediary.
The bookkeeping rules are the same as for companies, but partnerships do not have to file their financial statements with the Register of Enterprises
Bookkeeping is compulsory for every natural and legal person that owns a business in Italy. The principle requirements for accounting in Italian Companies:
- there is no obligation to employ an accountant; accounting year normally corresponds to calendar year; accounts should show only profit generated within accounting year; accountancy must be kept in accordance to rules established by Civil Code and Accounting Policies of Italy.
The Italian Civil Code establishes that the annual financial statements for the partnerships are used by the associate for annual profit sharing (Article 2262 Italian Civil Code). Partnerships are exempted from publication of annual financial statements and from drafting the director’s report.
Auditing is not compulsory, but can be adopted on a voluntary basis.
Taxes of Italy
|Min. rate for corporate tax||24%|
|Capital gains tax||Regular rate|