Italy-SrL

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

   


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TAXES

Personal Tax

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.

For income tax purposes, an individual is deemed to be a resident if he/she is domiciled in Italy for more than 183 days in a year.
The rates of personal tax in Italy are as follows:
  • 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.

Additional regional tax may range from 1.2 % to 2.03 % depending on the region in which the individual lives, and an additional municipal tax may apply at 0 % to 0.8 % depending on the taxpayer’s municipality.
An additional 3 % solidarity surtax is applied until 2013 on all income exceeding 300,000 EUR.
The income which is subject to tax:
  • employment income;
  • income from a profession or business;
  • investment income;
  • income from immovable property;
  • other income from worldwide sources.

All entries are summed up by the tax return.
The tax period is the calendar year (1 January to 31 December).
An individual whose only income is from a salary is not obligated to file an annual tax return. His employer deducts tax from the employee and transfers the payment immediately to the tax authorities on a monthly basis.
The date for filing an annual return for an individual is July 31.
Fines are imposed for arrears in filing an annual return at the rate of 120 % – 240 % of the tax, depending on the length of time that the return is in arrears.
Exemptions from filing a tax return
Exempted from the obligation to submit a tax return are those who:
  • do not carry out a business or professional activity;
  • have not received any income;
  • have only received income exempt from tax.

Corporate Tax

IRES
Taxpayers of Corporate Tax (IRES, Imposta sul reddito delle Società) are legal entities.
Legal entity is resident for tax purposes if its legal seat, place or effective management or main business activity is in Italy for the greater part of the fiscal period (at least 183 days).
The following types of companies are considered Italian tax residents as well:
  • 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.

The provisions related to IRES are included in the Decree of the President of Republic, 22 December 1986, n. 917, called TUIR.
The rate of corporate tax in Italy is 24 %.
The income which is subject to tax:
  • resident companies are taxed on worldwide income;
  • non-resident companies are taxed on Italian-source income.

Tax period is one financial year.
Regional Tax on Productive Activities (IRAP)
Taxpayers of the Regional Tax on Productive Activities (IRAP):
  • firms;
  • professional autonomous activities.

For professional activities, individuals may be exempted if they prove that they act without any organised structure (no employees).
The rate is different in each Region. The ordinary rate is 3.9%. If profit is produced abroad, Regional Tax does not apply.

Capital Gains Tax

Capital Gains generally are treated as ordinary income and taxed at the 27,4 % 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.

Withholding Tax

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 a direct/indirect 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.

VAT

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.
The VAT registration procedure is performed by a Notary in the network of the unified registration procedure “Comunicazione Unica”.
Ordinary rate is 21%
Lower rates are established for:
  • food;
  • transfer of real estate;
  • maintenance of buildings and other cases.

Some services are exempt:
  • medical;
  • gambling;
  • banking;
  • insurance, etc.

Export both to the EU and outside EU are not subject to VAT
Tax period:
  1. One calendar month: companies with turnover exceeding 516.000 EUR (in case of sale of goods) and 309.000 EUR (in case of services);
  2. 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);
  3. One calendar year: one man firms with special regimes.

Other Taxes

Register Tax
Register Tax is charged for registration of several acts.
Registration may be:
  • obligatory (in case it is established by law);
  • voluntary.

Typical contracts subject to Register Tax:
  • sale of real estate (whenever they are not subject to VAT);
  • sale of business units;
  • rent contracts;
  • sale of shares;
  • transfer of vehicles.

Register Tax may be:
  • proportional in % of value of transaction (from 1 to 12 %);
  • fixed.

Gift and Inheritance Taxes
Inheritance tax is payable on any inheritance from a deceased person’s estate in Italy. Gifts are subject to a gift tax at the same rate as inheritance tax. Rates depend on the relationship of the donor to the donee.
Chamber of Commerce duties are charged yearly from 200 to 2000 EUR depending on the annual income of the company.

Stamp Duty

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).

Exchange Control

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.

S.R.L. Taxation

S.R.L. as Holding

There are two main aspects that have to be mentioned, in considering the case of S.r.l. as holding: in particular, the PEX (participation exemption) and the Double Taxation Treaty in force between Russia and Italy.
PEX (participation exemption):
through PEX, part of the capital gains from the negotiation of participations are exempted, so that they don’t contribute to the formation of taxable income. The framework in object is applied under certain conditions:
  • Possession of the participations for at least one year;
  • They have to be accounted inside the category of Financial Assets;
  • The company has to be a resident of a State characterized by a NON tax-privileged regime;
  • The company has to exercise a commercial activity; for this reason PEX is not applied in case of real estate companies.

If these conditions are satisfied, the capital gain will be exempted by 95%. This entails that only the 5% of the total amount is going to contribute to the composition of taxable income.
Double Taxation Treaty between Russia and Italy:
Taking into consideration article 10 (dividends) of the DTA into force between Russia and Italy:
“Dividends paid by a company resident in a State to a resident of the other State are taxable in the last one. However these dividends can be taxed also in the source State (where the company paying the dividends is resident) in accordance with the legislation of the State; but, if the person who is receiving the dividends is the effective beneficiary, the tax applied cannot exceed:
а) 5% of the gross dividend, if the beneficiary is a company which holds directly at least 10% of the share capital of the distributing company (this share has to be at least equal to $ 100.000 or to the equivalent named in another currency);
b) 10% of the gross dividend in the other cases.
These dispositions are not applied if the beneficiary, resident in one contracting State, is operating in the other through a permanent establishment and the participation generating dividends is connectable to this permanent establishment; in this significant case the income is taxable in the other contracting State.”

S.R.L. as Trading Company

We are now examining the case where the S.r.l. creates income in Italy and has to distribute it beyond the national borders; we have to take into account both the European legislation and the Double Taxation Treaties into force between Italy and other States.
The reduced withholding tax 1,375% on dividends is applied under two conditions:
  1. The beneficiary is a European company or it joined the “European Economic Agreement” included in the so-called “white list”;
  2. It is a taxable entity subject to the corporation tax of its country.

The entities mentioned in the previous point (European companies and societies that joined the “European economic agreement”) could also request the exemption of the dividends (according to directive 90/45/CE) in certain circumstances:
  1. Type of beneficiary company corresponds to one of those types included in the Annex to Directive n.435/90/CEE;
  2. Beneficiary company is resident in one of the Member States of EU;
  3. Beneficiary company is subject in the country of residence to one of the taxes listed in the Annex to Directive n.435/90/CEE, without the possibility of an option or of being exempted;
  4. Beneficiary company has held the participation (which has to be not less than 20%) for at least one year.

In case of beneficiary company resident in Russia, the DTA is applied.
In case of beneficiary company resident in Cyprus, the legislation of this State provides a withholding tax, known as “defence contribution”, which is applied in the measure of 15% on the dividends of non-residents companies. However the DTA between Italy and Cyprus set that the dividends paid by a resident Italian company to a resident of Cyprus are subject to a withholding tax, which cannot exceed the 15% of the gross dividends.

ACCOUNTS

Accounts

It is required to prepare and file accounts for SRL in Italy. They are publicly accessible.
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;
  • Accounts of S.R.L. must be filed yearly after approval of Meetings of shareholders. Accounts include Balance sheet, Loss and profit account and a Report called Nota integrativa;
  • Another report should be compiled by Collegio Sindacale, if appointed, with an opinion on the accounts.

The small companies are allowed to file abbreviated accounts, i.e. companies that do not exceed for two consecutive years, two of following three limits:
  • total assets: 400.000 EUR;
  • revenues: 8.800.000 EUR;
  • average number of employees: 50.

Accounts Filing to the Register of Enterprises of the Chamber of Commerce and Industry
Company Accounts should be approved by the Meeting of Shareholders within 120 days after the end of the accounting period (calendar year). Normally the date of General Meeting of Shareholders is the 30th of April (or 29th of April in leap years).
The major term of 180 days is not freely determined in the Memorandum of Association. According to the Civil Code these term could be “used” only in case of: companies required to prepare the consolidated financial statements; companies with particular needs related to the activity and the organization/structure.
Italian Law set the following provision according to the terms of filing of accounts:
  • Filing with the Trade Register should be within 30 days from approval.

Penalties for late filing of Accounts
In case of late filing of Accounts with the Trade Register the penalties are charged to Companies and Directors by Chamber of Commerce. Penalty for late filing amounts at 206 EUR (depends on the region).

Books

Following company books are obligatory for SRL in Italy:
  • Books of decisions of shareholders;
  • Books of decisions of Directors (in case of more than one director);
  • Book of meetings of Collegio Sindacale.

Accounting books:
  • Libro Giornale (Day Book);
  • Book reporting all accounting operations;
  • VAT Registers;
  • Libro Inventari: book reporting accounts of the company and stock inventory.

Annual Return

It is not required to prepare and file annual return of S.R.L. in Italy.

Audit

Audit is required in each of the following cases:
  • Share capital equal or more than 120.000 EUR;
  • Companies obliged to draw up a consolidated accounts or controlling another company in which audit is required;
  • Whenever the company exceeds for 2 consecutive years the limits: total assets more than 4.400.000 EUR; revenues more than 8.000.000 EUR; average workers more than 50 units.

    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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