Taxes - Italy
The Italian tax system is comprised of various forms of direct and indirect tax which depend either on the legal form of the company or the characteristics of the activity which produces turnover.
Direct taxes relate to the company's profitability, and are therefore calculated on the basis of the company's income. The main ones are:
- personal income tax (IRPEF): applied to revenues of sole proprietorships;
- corporate income tax (IRES): applied to revenues of business corporations;
- Italian regional tax on productive activities (IRAP): applied to sole proprietorships, partnerships and business corporations.
These are taxes which are levied on capital when it is transferred (e.g. the sale of goods) or is spent (e.g. performance of a service).
- Value added tax (VAT): is levied on the added value of each stage of production and exchange of goods and services in Italy, at a standard rate of 20%, or 4% and 10% in cases stipulated by the law for certain business sectors.
- Registration tax: applied at the time of registration of documents for specific transactions (e.g. the transfer of property, contracts, registered documents, etc.) at a fixed rate or one that is proportional to the specific case.
- Legal transcription fee: these are levied on transcriptions, inscriptions and updates in public property registers which follow transactions, donations, inheritance of property and the setting up of a tenancy or other beneficial rights, at a fixed rate or one that is proportional to the case.
- Cadastral tax: these are levied on cadastral transactions following transaction, donation or inheritance agreements, at a fixed rate or one that is proportional to the specific case.
- Municipal tax on property: is levied on the value of the property (factories, farm and building land) according to a rate set by the municipality.
- Excise duties ;
- Stamp duties ;
- Publicity tax ;
- Tax on the occupation of public spaces and areas (TOSAP) ;
- Tax on the disposal of solid urban waste (TARSU).
Income tax return
The business owner/the company submits an income tax return (single form), for each tax year (which generally corresponds to the calendar year), in which it indicates its taxable income and the amount of tax (for IRPEF, IRES, IRAP and VAT) based on the income and the costs recorded for the business year.
Submission is made online via the Revenue Agency website, using Entratel and Fisconline channels, generally within 30 September of the year after the income was received.
The payment of taxes and social security contributions must be made online using the F24 form (in which the specific tax code must be stated, along with the amount).
The fiscal guide for foreigners provides the main fiscal information and instructions for carrying out the most important administrative tasks regarding:
- the attribution of a tax identification number, a health insurance card and a VAT number;
- leasing contracts;
- tax refunds;
- formal declarations of irregularities and statements of accounts.
There are a number of fiscal incentives in Italy, for businesses which can periodically be made use of. These are aimed at supporting entrepreneurial development, promoting employment, developing certain areas and regions, primarily in the South of Italy (Abruzzo, Molise, Campania, Basilicata, Apulia, Calabria, Sicily and Sardinia) and supporting research and innovation.
The support measures available are:
- Investment aid: financial aid is provided to businesses which buy new materials and equipment destined for organisations and specific areas of Basilicata, Calabria, Campania, Apulia, Sicily, Abruzzo, Molise and Sardinia. Aid is granted as part of public regional aids.
- Research aid: funding covers up to 40% of the costs. Maximum coverage is provided when the costs of research and innovation sustained by businesses refer to contracts drawn up with universities and public research bodies. Research aid cannot exceed EUR 50 million per tax period.
- Aid aimed at boosting employment in the South of Italy: businesses increasing the number of employees with open-ended contracts may benefit from tax relief (in the form of tax credit).
- Start-up of businesses in duty-free urban zones: Small companies starting up business in these areas have numerous benefits: lower credit taxes, lower regional tax on productive activities (IRAP) for the first five tax periods, lower municipal property tax (ICI) and reduction of the tax wedge (viewed as the sum of tax payments and contributions which affect the wages of employees). As yet, these incentives are not operational.
Check also the legislation on this topic in: