| Personal Income Tax Rates – Employment Income |
|
| Tax rate |
Progressive personal income tax rates from 23% – 43%. On top of this, an addition 1/2% of local taxes (Regional and Municipality) must be considered. There is a tax free personal allowance ranging from € 4.800 to € 8.000, depending on the type of income. Special tax regime for inbound workers are available under certain conditions. |
| Tax period |
Calendar Year. |
| Tax residency / Domicile according to domestic law |
Italian tax residency is determined pursuant to art. 2 of TUIR (Italian tax law), which establishes that an individual is considered resident in Italy for tax purposes when, for the greater part of the fiscal year (i.e. for more than 183 days in a calendar year) 1. he/she is enrolled at the Register or Population (so called “Anagrafe”) of an Italian Municipality, or 2. he/she has his/her “residence” in Italy (habitual abode), or 3. he/she has his/her “domicile” in Italy (principal centre of business, economic and social interests, e.g. the family). If one of the aforementioned conditions is met, the individual qualifies as tax resident for Italian tax purposes. Morevoer, an anti-abuse rule provides that Italian citizens who transfer residence to so called “tax havens countries”, are deemed to qualify as tax resident in Italy even if they were cancelled from the Register or Population (so called “Anagrafe”), unless the individuals provide proof of their non tax residence status. |
| Tax registration |
Registration with Italian Tax Office (“Agenzia delle Entrate”) is mandatory to obtain an Italian Fiscal Code, which is a 16 digit unique taxpayer reference number (for individuals). |
| Employment income definition |
Employment income includes salary, bonuses and other payments which are equivalent to cash, as well as certain non-cash benefits (fringe benefits or benefits in kind) received by the employee in relation to his employment services, including cost of living, housing, tax reimbursement, car, profit sharing, bonuses, etc. Compensation paid in cash are fully taxed at 100% whilst there are specific law provisions for travel allowances, moving expenses reimbursements, relocation allowances, housing benefit, etc. Under certain conditions, special tax regimes are applicable to employment incomes (typically for inbound and outbound expats). |
| Examples of tax exemption |
Payments for social welfare, accident insurance, medical insurance expenses, employee meals where available to all employees and within certain thresholds., annual the reimbursement of business expenses upon presentation of the original receipts are exempt from taxation. Under certain conditions, there could be exemption or partial exemption for travel allowances, moving expenses reimbursements, employer contributions to insured medical benefits, housing benefit, company car, interest on loans granted by the employer, etc. Furthermore, employer and employees can setup specific agreements (so called “welfare aziendale”) which allows to compensate employees with benfits free of social contributions. |
| Specific expatriate concession |
Outbound expats who keep tax residence in Italy can be taxed, under certain conditions, according to a specific tax regime which establishes a forfait taxable basis instead of the salary received. Inbound expats who move to Italy and become tax resident in our country can be taxed on 50% of employment income tax basis if they meet certain requirements. Inpatriate tax regime starts from the year in which the individuals become Italian tax residents and for the following four fiscal years. |
| Income of board members |
In general terms, board members remuneration is assimilated to employee compensation. |
| Tax returns |
Self-assessment tax returns are filed on an individual basis (in certain conditions, joint filing is admitted) by – 30th September following the end of the tax year if the individual submits form “Modello Redditi Persone Fisiche” – 23rd July following the end of the tax year if the individual submits form “730” Late filing and late payment penalties apply. N.B. not all individuals are required to file Italian tax returns. However, filing will apply in most expatriate cases. |
| Tax payments |
Payment is required by 30th June following the end of the tax year. Payments on account are required in certain cases by 30th June and 30th November 30th following the end of the tax year. This might apply, for example, where there has been insufficient payroll withholding in the previous year. |
| Tax on real estate property |
Property owners, whether or not resident in Italy, are liable for property tax (IMU) on buildings and land owned in Italy as investments. This tax is not applied if the real estate is used as a primary abode by the owner. The basic tax rate is 0.76% if the taxable value of the property, but each Municipality can resolve upon an increase or reduction up to 0.3% on the standard rate. |
| Social contribution (CSS) to be paid with tax |
|