Italy

Tax rates 2012 Italy

Corporate tax

Rate

The corporate tax rate of Italy is 27.5% plus a regional tax rate, which is generally 3.9%. Taxable income consists of net income earned within the financial period, income from trade, passive income such as dividends, interest and royalties, but also capital gains is deemed for taxation.

Taxation of dividends

From January 2004, the tax credit applicable for resident recipients of dividends was abandoned.

1. Companies are taxed at a rate of 5% for dividends distributed by resident companies, a rate of 0% where the dividend is paid between two members of a consolidated group.

2. Individuals and partnerships are taxed on only 40% of the value of dividends received, if they own more than 20% of the share capital of the company paying the dividend. If they own less than 20%, the full dividend is taxed at a flat rate of12.5%.

As from 4 July 2006, dividends derived directly or indirectly from subsidiaries located in low tax jurisdictions will be subject to full taxation unless a favorable ruling is obtained.

Capital gains

Generally capital gains are treated as an ordinary income, and is taxed at the flat rate of 27.5% corporate income tax rate.

Capital gains on assets where the holding period is for less than three years, are taxed in the year in which they are realized. Capital gains arising from stock transfers are partially exempt, under specific conditions where they relate to financial assets owned for an uninterrupted period of at least 12 months.

Losses

Losses may be carried forward indefinitely, even losses occurred from previous year. However 20% of that year’s taxable income cannot be offset, due to that level will be due for the the corporate taxation rate. Losses occurred by a company during it’s first three taxable periods, may however be carried forward in its entirely.

Withholding tax

Dividends paid to non residential corporations are generally subject to a withholding tax rate of 20%. This rate may be reduced under a tax treaty or the EU parent-subsidiary directive in which the rate is 1.375%.

Any dividends paid that represent profits from previous fiscal years will be subject to previous years’ rules.

In line with the EC parent-subsidiary directive, no withholding tax is levied on dividends paid to a parent company in another EU Member State if both the parent and the subsidiary are qualifying companies under the directive and the parent has held at least 10% of the capital of the subsidiary continuously for at least one year.

 

Individual tax

General

Individuals living or regularly residing, having a domicile status in Italy is considered a resident for tax purpose. Individuals are taxed on their worldwide income. Nonresidents are just taxed on their income from Italy sourced work. Effectively this means that if an individual spends more than 6 months he or she is considered a resident, or being registered in the census office.

Taxable income

Taxable income for an individual is considered to conclude employment, trade or profession, capital, rent or leasing or similar income such as worldwide income. Income from private investments, including capital gains.

Rates

Taxable Income (EUR) Tax Rate

Up to 15,000 23%

15,001 – 28,000 27%

28,001 – 55,000 38%

55,001 – 75,000 41%

Over 75,000 43%

Capital Gains

An individual is subject to taxation on the entire capital gains, a flat 20%(no more than 25% for unlisted companies),

Deductions

Deductions for certain family circumstances are available, by calculating the taxable income.

Real Estate

Individuals are subject to a 0.76% tax rate of the property value is levied. Properties within principal residences may benefit from a lower rate of 0.4%.

Net Worth Tax

There exist no net worth tax in Germany, but there is a taxation for financial assets held abroad(etc bank accounts). 0.1% is levied on these assets.

Inheritance Tax

Rates ranges between 4,6,8% based on the proximity between the deceased and the beneficiaries. Up to EUR 1 million may be exempt to close relatives.

Social Security

Employed individuals contributes to the social security. The individuals employer contributes purely depending on what sector, title.

VAT

VAT applies to all sales of goods, services and imports. The VAT is 21%. A lower rate of 4 and 10% exists. Certain exemptions may apply to certain financial services, medical, gaming & gambling, export sales.

 

Other

Tax year. Calendar year.

Tax treaties. Italy currently has 75 treaties.

Filing requirements. Electronic preliminary VAT return must be filed at latest in end of February and also by the end of September(for the preceding calendar year.

Registration (for VAT purpose). All companies in Italy must register for a VAT number and a tax identification code.

 

Links

Tax authorities. Ministry of Finance (Agenzia delle entrate)

Consulate

Local Tax Resources

Chamber of commerce

(Online realtor/stock exchange)