SIMPLE TAX GUIDE FOR FOREIGNERS IN ITALY

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Taxation in Italy
Taxation in Italy

You are considered a tax resident if you stay in Italy for 183 days or more, registered in the Office of Records of the Resident Population, work or have a main business in the country.

If you are going to be living in Italy for at least more than 183 days, it’s only natural to want to know what the tax system is like in Italy because you will be required to pay taxes. Taxation in Italy is levied by the central and regional governments and is collected by the Italian Agency of Revenue (Agenzia delle Entrate), which is the national legal authority for taxation.

The taxation system in Italy can be divided into three different types:

  • Direct Taxes
  • Indirect Taxes
  • Other Taxes

Please keep reading as we take you through a simple guide to know all about the tax system in Italy, the various types of taxes, and the rates that apply to you.

Direct Taxes

Under direct Taxes, we will take a look at the following:

Personal Income Tax or IRPEF(Imposta sui Redditti delle Persone Fisiche )

Personal income tax applies to salaries, pensions, interests, and dividends. It is progressive, which means the more you earn, the higher taxes you pay. These taxes are withheld monthly on the income you receive from your employer. If you are a permanent resident in Italy, you must pay taxes from income received abroad. While if you are a foreigner working and residing in Italy, you must pay taxes only on income you receive.

If you are a permanent resident in Italy, you must pay taxes from income received abroad.

Italy has several double taxation avoidance agreements in place with several other countries. It will be important to check if it applies to your specific situation.  Useful information on double taxation can also be found in the Italian Revenue Agency web page dedicated to foreign citizens moving or already working and/or living in Italy

Rates are set annually by the government. Below are the current tax brackets in Italy:

Income EURIncome USDTax Rate
1—15,0001—1,65023%
15,000—28,00016,500—30,80027%
28,000—55,00030,800—60,50038%
55,000—75,00060,500—82,50041%
Over 75,000Over 82,50043%

Besides these rates, which are established nationally, you have to pay regional taxes and municipal taxes on your income . These regional taxes are progressive as well and can go from 1.23% to 3.33%, depending on your income level. Municipal taxes range from zero to 0.9% depending on where you are residing.

Corporate Income Tax :IRPEG or IRES ( Imposta sur Redditi delle Persone Giuridiche )

Simply put, corporate income tax is the tax paid on the Income of limited liability and joint-stock companies – SRL or SpA. From 1 January 2004, the Irpeg was replaced by the IRES , in order to regulate the tax regime of capital and companies following the model prevailing in the member countries of the European Union .

Regional Tax: IRAP ( Imposte Regionale sulle Attività Produttive  )

This is a business tax paid by production activity carried out in each region by companies and entities, including state bodies and administrations provided that there is a habitual exercise of an autonomously organized activity aimed at the production or exchange of goods or the provision of services.

The ordinary IRAP rate applied to the value of net production is 3.9%.

INDIRECT TAXES

Under indirect Taxes, we will take a look at the following:

Value Added Tax: VAT OR IVA

This is a consumption tax that applies to supply of goods and services and imported goods carried out in Italy. The standard VAT rate is 22%. however, some goods and services expressly listed in Presidential Decree n. 633/72 are exempt from VAT, for example education, insurance services, specific financial services, supply, leasing of particular immovable property.

In other cases, reduced rates are provided for several supplies of goods and services, such as 4% for listed food, drinks and agricultural products or 10% for electric power supplies for listed uses and listed drugs

Registration Tax ( Imposta di Registro  )

This is a tax required by the state for the registration of certain acts which affects transfers of wealth , for example, buying a house. The Register is kept at a specific Office of the Revenue Agency and lists all the deeds subject to registration in chronological order.

Mortgage and Land Registration ( Imposte Ipotecarie e Catastali )

The mortgage tax is paid when mortgages or real rights of use are established.Mortgage tax is payable at 2% of the secured amount (further 0.5% is due in case of deletion of the mortgage).

The land registry tax or in Italian “imposta catastale” is a fixed fee that varies from 50€ (if you purchase a house from a private seller) to 200€ (if you purchase the house from a registered company in Italy). This is due in order to change the ownership of the property in the cadastral lists.

Revenue Stamps (Imposta di Bollo)

The stamp duty is a tax of variable amount applied to the production, request or presentation of certain documents.
The stamp duty can be proportional or fixed: for example, for promissory notes it is equal to eleven per thousand, for bills drawn it is equal to twelve per thousand, for appeals it is equal to 16 euros, for applications presented to the Register of Companies by joint-stock companies it is equal to 65 euros, for applications submitted to the Register of Companies by partnerships it is equal to 59 euros, for deeds authenticated by notaries it is equal to 230 euros, and so on.

Excise Duties (Accise o Imposte di Fabbricazione e consumo)

This is a tax on the manufacture , sale and sometimes of some particular imported consumer goods like energy products (including fuels and heating fuels), alcoholic products, manufactured tobacco and electricity and weighs on quantity rather than price. In Italy , in items of expenditure (eg in bills ) the duty is often replaced with “consumption tax” or “tax production ” or “tax revenue “. Excise duty constitutes an important financial instrument for the State that can also be effectively used for extra-tax purposes. In Italy, the management of excise duties is handled by the Customs and Monopolies Agency .

OTHER TAXES

There are other taxes payable to central, regional, provincial or local governments. These are usually paid once a year.

  • Car Tax (Bollo Auto), which includes the tax on your car radio and the stamp duty on your Italian driving license
  • Motorbike Tax (Bollo Moto)
  • Scooter Tax (Bollo Motorino)
  • TV Tax(Canone RAI)
  • Garbage Tax (Tassa Rifiuti)
  • Municipal Property Tax (Imposta Comunale Sugli Immobili- ICI)

I would like to hear from you: What are your thoughts on this subject. You can share your thoughts and experiences with me and others in the comments section below!

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