Tax

Which taxes and mandatory contributions does an entrepreneur have to pay? How much?

Please click here for an overview of the taxes in Italy. The taxes commonly applicable for entrepreneurs are

Corporate Income Tax (IRES) – 27.50%

Also known as IRES, is a tax imposed on businesses incorporated in Italy and which derive income from within Italy. The IRES rate in Italy is 27.50%. For financial and insurance entities an additional 8.5% is levied and for companies operating in the oil, gas or electrical energy industry an additional 6.5% is imposed. The same applies for entities with a determined governmental exclusive right to provide services which are charged at an additional rate of 4.20%.

An additional 10.5% windfall tax is levied on companies (i) having revenues higher than EUR 25 million in the relevant fiscal period and (ii) carrying on their activities in one of the following fields:

research and exploitation of hydrocarbon
oil refining, production and sale of petrol, gasoline, gas, lubricating oil, liquefied gas of petrol and natural gas
production and sale of electricity.

After three years the additional charge will be reduced to 6.5%

Regional Business Tax (IRAP) – 3.9%

IRAP is a local regional production tax which account to 3.9%.

Value Added Tax (VAT) – 22%

VAT is an indirect tax on the consumption of goods and services. A person that is registered for VAT is called vendor. VAT must be included in the selling price of every taxable supply of goods or services made by a vendor. The current standard VAT rate in Italy is 22%.

Stamp Duty - €168 or 1% to 15%

Stamp duty is a tax that is levied on legal documents. The rate of duty varies according to the nature of the document. The transfer of property is also subject to imposta ipotecaria and imposta catastale. Stamp duty and property transfer duties are either fixed, € 168 or proportional to the value of the asset being transferred. E.g.3% to 15% rates applies for stamp duties depending on the instruments or assets involved, 2% for imposta ipotecaria, and 1% for imposta catastaria.

Real Estate Tax (IMU) – 0.4 to 1.06%

Companies as well as individuals are required to pay taxes on the value of real estate property. It is charged at a variable rate ranging from 0.4% to 1.06% of property value. It has to be paid on an annual basis and can be completed in two installments (June and December).

Social Security Contributions

Social Security Contributions (Istituto Nazionale della Previdenza Sociale - INPS) apply to everyone in the workforce. Employers withhold 9% to 10% of the employee's wage and furthermore the employer contributes 30% to 35% of gross pay.

Mandatory contribution for work termination (TFR)

It is a sort of severance pay, or deferred salary, applied to all employed workers in the private sector. It consists of 6.91% of current salary kept by the employer as book reserves and it is paid to the employee at termination of employment.

How and when do I pay for my tax?

The Italian Revenue Agency oversees all the taxation in Italy. For more information please refer to this page.

Income tax must be paid by 16 June for income earned in the preceding calendar year. Advance tax payments must be made, equal to 96% of the preceding year’s tax liability.

The tax year in Italy ends on December 31st. Advance payments of tax are made on the following basis.

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.
A Self-Employed Individual is obliged to pay 100% of the tax forecast for a year, or an amount that is the equivalent of 98% of the tax paid in the previous year (whichever is lower). The pre-payment is made in two instalments; 40% of the total is paid by June 20th and the remaining 60% is paid on November 30. 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.
A limited company is required to submit Financial Statements within 30 days of the date of approval of the Statements. Up until the date of approval of the Statements, the Company is obliged to pay the amount of tax due for the previous year as well as 40% of the advance on account of the tax forecast for the current year.

Starting or running a business?

Tax