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Income Tax

Italy - Income Tax

The personal income tax (imposta sul reddito delle persone fisiche or IRE) in Italy has progressive tax brackets and is calculated on the total worldwide income of each resident in Italy. It is also applied to the income made in the country by non-residents of Italy.

There are no special concessions for particular items received by expats in Italy. There are also no income categories that are exempt from taxation on the grounds that the taxpayer is an expat.

For tax purposes, a resident is one who is registered as a resident at the Municipal Registry or has established their main center of business and interest in Italy or has his or her habitual residence in Italy, for a period of 183 or more consecutive or non-consecutive days in a year.

Individuals who are tax resident in Italy but work and stay outside the country for more than 183 days in a year are taxed on a conventional salary. This is an amount specified every year by a decree of the Italian Ministry of labor, Treasure and Finance. The amount is usually used to pay Italian social security contributions when the resident is working in a non-social security treaty country. For Italian employees working abroad, their Italian employers are required to withhold income tax on the monthly conventional salary of those employees. In some cases, an Italian employee working abroad may be subject to double taxation if they are still considered resident of Italy. This can be prevented through the tax credit mechanism.

Income tax is calculated on the following income categories: income from property, income from capital, self-employed income, business income, income earned as an employee and others. Non-residents in Italy may have to pay tax on any income earned in Italy, although this depends on the international conventions on double taxation agreed between various countries.

In order to calculate personal income tax, begin with the total income comprising of the sum of the different types of income calculated separately for each taxable income category. Tax-deductible burdens and allowances are then reduced from the total income and progressive IRE rates pertaining to the various income brackets are applied to the remaining figure. The gross tax which results may be further reduced by any applicable deductible burdens.

Deductible burdens refer to expenses that can be used to reduce the total income. These may include certain types of medical expenses, donations to universities or religious institutions, national insurance contributions and cadastral income of an individual’s primary residence. Other expenses such as medical expenses, education expenses, donations to political parties and passive interest on mortgages can be used to reduce the total amount of gross tax due. There are specific rules that apply to different types of expenses. Most of these deductible burdens are not applicable for the income of non-residents in Italy. Tax allowances include the ‘no-tax area’ (a tax-free basic allowance) and allowances for dependent spouses and/or children.

Taxpayers inform the financial administrative authority of their income obtained within a certain tax period through the tax return document. The tax period refers to the calendar year, from 1st January to 31st December.

In the case of employees, the employer deducts income tax and social security payments from the salary. Those who do not have any other income source are not required to file an annual return. Those who need to file annual returns can do so online before the deadline. In specific cases, it may be possible to file annual returns in paper form at a later date.

Instead of the regular tax return form, employees and pensioners may submit a simplified form with the assistance of their employer or the Fiscal Assistance Center.

Those who have not conducted any professional or business activity or have not received any type of income or have received income that has already been taxed or exempt, are not required to file a tax return.

Sanctions ranging from 10 percent to 30 percent may be applied in case of late payment or non-payment of taxes. Those who fail to submit their tax return or submit it after the deadline may also be subject to certain sanctions.

Useful Resources

Italian Revenue Agency (Agenzia Entrate)
Tel: 848.800.444
(to call by cellular phone: 06-96668907)
(to call from abroad: 0039 0696668933)
Email: cop.pescara@agenziaentrate.it

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