Italy tax system: audit, reporting and optimization of taxation of Italian companies and individuals: VAT, income tax and capital gains

Basic taxes (briefly)

Personal tax 23-43%
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.
Government fee
Stamp duty 1.5%

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


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Taxation of individuals

Italian tax residents pay tax on their worldwide income; non-residents pay tax on income from sources in Italy.

National, regional and municipal income tax is paid.

The main tax paid by individuals is income tax (IRPEF).

National income tax is paid at progressive rates:

  • income up to 15 00 EUR - 23%;
  • income from 15 001 to 28 000 EUR - 27%;
  • income from 28 001 to 55 000 EUR - 38%;
  • income from 55 001 EUR - 43%

There is an additional tax on the variable part of remuneration (bonuses, stock option plans) (SIM) for the management of banks, financial institutions, holding and management companies, financial intermediaries. The base is calculated in a special way and the rate is 10%.

There are special rules for the taxation of 'performance bonus'.

At regional level, income tax is levied at rates ranging from 1.23% to 3.33%. Municipal tax usually ranges from 0% to 0.8%.

There is a special tax regime for employees who become tax residents in Italy. If certain requirements are met, taxable income from employment may be reduced by 70% and, in the case of work in certain southern regions of Italy, by 90%.

Investment income is normally taxed at a flat rate of 26%.

There is a special tax regime for individuals who have recently become tax residents in Italy. Subject to certain conditions, they may opt to pay a fixed tax amount of 100,000 EUR per annum which will allow them not to pay tax on income from foreign investments and tax on foreign assets for a certain period of time.

Income tax

Companies pay income tax (IRES) at a rate of 24%.

In addition there is a regional production tax (IRAP) at the rate of 3.9%. The regions are entitled to increase or decrease the tax within certain limits.

Other rates are used for financial institutions and in some other cases.

95% of capital gains on capital gains on share investments may be exempted from IRES if the subsidiary is held for at least 12 months, carries on business activities and meets a number of other conditions. IRAP tax is generally not imposed on gains from the disposal of financial assets.

95% of dividends received from Italian companies and non-blacklisted foreign companies are exempt from IRES tax. However, there are exceptions to this rule. Dividends are generally not subject to IRAP tax.

CFC rules

A foreign company is recognised as a CFC in case of direct or indirect control.

The profits of a CFC are subject to tax if the effective income tax rate is lower than the effective tax rate that would be paid by the company in Italy and more than 1/3 of its revenue is passive income.

If the CFC conducts a real business activity using employees, equipment, assets, premises, it is possible to obtain an opinion from the tax authorities on the non-application of the CFC rules.

Withholding tax on income

The withholding tax is levied at the rate of:

  • 26% on dividends (with the possibility for a non-resident to obtain a refund of up to 11/26 tax upon proof of taxation of dividends in its country of residence),
  • 26% on interest,
  • 30% on 75% of royalties paid.

Tax may be withheld on certain other payments of income.

Tax rates may be reduced under relevant double taxation treaties or EU directives.

VAT

The standard rate of VAT is 22%.

For some goods and services, the tax rate is 10% and 4%.

Social contributions

Social contributions make up on the whole about 40% of employees' remuneration. Of these, about 30% are the employer's contribution and 10% are the employee's. The specific rates depend on the type of company's activity, the number of employees and the employee's position (special rules apply in particular to management).

About 33% of the contribution is paid to the national pension fund and the rest to the employment fund, sickness insurance fund, social mobility fund, etc. There is a maximum amount of employee's remuneration on which the pension contributions are calculated (103 055 EUR for the year 2020).

Tax on foreign immovable property

Foreign estate tax (IVIE) is payable at a rate of 0.76%.

The tax base is the acquisition cost, in some cases the market value or the cadastral value.

Foreign real estate tax can be deducted from such property.

Tax on financial investments

Individuals pay tax on financial investments.

The rate of tax is 0.2%.

The tax base is the value of the financial investment as at 31 December.

A small fixed fee is paid on bank accounts.

Inheritance and gift tax

The tax rates may be 4%, 6% or 8% depending on the degree of relatedness of the parties.

There are non-taxable minimums.

Registration tax. Stamp duty

There is a registration tax - levied when documents are registered at public registers.

Contracts for the transfer of real estate are subject to such registration.

Rates usually range from 3 to 15%.

Stamp duty is levied on certain contracts and documents and is usually at a fixed rate, but in some cases stamp duty can also be charged as a percentage of the value of the contract.

Italian property taxes

These taxes are levied at municipality level.

Double taxation agreements

Italy has entered into a number of double taxation avoidance and tax information exchange mechanisms:

105 DTCs: 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, Vietnam, Zambia.

12 TIEAs: Andorra, Bermuda, Cayman Islands, Cook Islands, Gibraltar, Guernsey, Holy See (Vatican City State), Isle of Man, Jersey, Liechtenstein, Monaco, Turkmenistan.

Currency controls

There are no exchange controls in Italy.

    Taxes of Italy

    Min. rate for corporate tax 24%
    Capital gains tax Regular rate
    VAT 22%
    Withholding tax 26%/26%/30%
    Exchange control No
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