Taxation in Italy
Italy’s taxation framework is a complex system that is fundamental to the country’s economic strategy, achieving a balance between generating revenue and promoting growth and investment. This framework includes various taxes, each subject to intricate regulations and rates. A thorough understanding of this landscape is crucial for businesses, investors, and individuals for effective financial management and compliance.
Taxation system
Italy’s taxation system aims to be consistent with its internal fiscal policies as well as international commitments, providing a systematic yet flexible method of taxation. This system might include a mixture of flat rates, progressive scales, and specific exemptions, mirroring the nation’s economic goals and social aims. Grasping the complexities of these tax mechanisms is essential for maximizing financial results, maintaining compliance, and taking advantage of legal opportunities.
Capital gains tax
In Italy, capital gains are not subject to a distinct tax; rather, they fall under the regular income tax framework. The usual tax rate for most financial assets, such as stocks, bonds, and real estate, is set at 26%. Nevertheless, capital gains from the sale of shares in eligible companies may be 95% exempt from taxes under the PEX regime, given that certain criteria are fulfilled, including a minimum holding period of 12 months and classification as a financial fixed asset. This leads to a significantly reduced tax rate for those qualifying gains.
Corporate taxation
The standard rate for corporate income tax (IRES) is typically 24%, in addition to a regional tax on productive activities (IRAP) of 3.9%. Financial institutions and banks are subject to a higher tax rate of 27.5%. Companies that do not engage in operations are taxed at a rate of 34.5%. Corporate taxes are imposed on resident companies based on their global income and on non-resident companies on income sourced in Italy.
Personal income taxation
In Italy, personal income tax rates are progressive, starting at 23% for income up to €15,000 and increasing to 43% for income over €50,000. There are also additional regional tax rates that range from 0.7% to 3.33%, while municipal tax rates fall between 0% and 0.8%. This tax is applicable to residents based on their worldwide income and to non-residents based on income sourced from Italy.
Dividend taxation
Typically, a 26% withholding tax applies to dividends paid to resident individuals. On the other hand, dividends distributed to resident companies are not subject to withholding tax; rather, they are liable for corporate income tax. For non-resident companies or individuals, dividends are similarly subject to a 26% withholding tax, which may be reduced according to a tax treaty or exempted under the EU Parent-Subsidiary Directive.
Property tax
In Italy, the main property tax is known as IMU (Imposta Municipale Unica), which is a wealth tax levied by municipalities on real estate ownership. The standard rate for IMU is set at 0.86% of the property’s taxable value, but local municipalities have the authority to adjust this rate between 0.76% and 1.06%. Furthermore, TARI is a tax on waste that property owners must pay, which is calculated based on the volume of waste generated. These taxes are applicable to both residents and non-residents, with specific regulations regarding exemptions and reductions.
Inheritance taxation
In Italy, inheritance tax is imposed on the value of inherited assets and rights. The tax rate ranges from 4% to 8%, influenced by the relationship between the deceased and the heir, with closer relationships resulting in lower rates. Various exemptions and allowances are applicable depending on both the relationship and the estate’s value. This tax is applicable to residents and non-residents alike, concerning assets situated in Italy.
International taxation
Italy’s international tax framework imposes taxes on resident companies based on their global income, whereas non-resident companies are taxed solely on income generated within Italy. The standard corporate income tax rate (IRES) is typically 24%. Furthermore, there is a regional tax on productive activities (IRAP) assessed at a basic rate of 3.9%. The tax system encompasses regulations for controlled foreign companies (CFCs), transfer pricing guidelines, and foreign tax credits. Additionally, Italy has adopted the EU Pillar Two directive to guarantee a minimum global tax rate of 15% for large multinational corporations.
Cryptocurrency taxation
In Italy, the tax on cryptocurrency is mainly a 26% tax on profits that exceed €2,000, classified as miscellaneous income. There is also an alternative where taxpayers can choose to pay a 14% tax based on the declared value of their digital assets as of January 1 each year. Additionally, the system permits the deduction of losses over €2,000, which can be carried forward for a maximum of five years. Both short-term and long-term trades are taxed in the same manner.
VAT system
In Italy, VAT is applied to the sale of goods and services as well as on imports. The standard rate is set at 22%, while reduced rates of 4%, 5%, and 10% apply to certain goods and services. Most business transactions require VAT, and businesses can deduct input VAT on their VAT return for the year the right arises or when the invoice is received.
Our taxation solutions
In a tax landscape that is continually changing, expert advice is essential. Our firm provides a range of specialized tax solutions customized to address the varying requirements of individuals, corporations, and investors in Italy. Our services aim to effectively handle the intricacies of the tax code, reduce liabilities, and guarantee complete adherence to regulations.
- Personal tax advisory: Tailored advice to minimize tax exposure while ensuring legal compliance.
- Corporate tax strategy: Comprehensive planning to maximize tax efficiency and leverage incentives.
- Capital gains optimization: Expert guidance to manage and reduce taxes on capital gains.
- International tax planning: Advanced strategies for optimizing cross-border tax outcomes.
- Cryptocurrency advisory: Compliant tax strategies for both individual and corporate crypto activities.
- Inheritance and estate planning: Strategic planning for efficient wealth transfer and reduced inheritance taxes.
- VAT compliance: Full-service support for VAT registration, reporting, and optimization.
Book a consultation
In the intricate realm of taxation, obtaining professional guidance can greatly impact your situation. Reach out to us now to arrange a consultation with our team of tax specialists. We will collaborate with you to create a customized tax strategy that meets your goals and guarantees complete adherence to Italy’s regulatory framework.
Disclaimer
Tax laws and regulations are continually evolving and can differ according to personal circumstances. The information shared here serves merely as general guidance and may not represent the latest updates. It is strongly advised to seek the assistance of a qualified tax professional for specific and current advice tailored to your situation.