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Tax Planning in Italy

Tax Planning in Italy

The Italian taxation system is made up of national, regional and municipal taxes. During the last years, the Italian taxation system has undergone significant changes that were implemented in order to simplify the fiscal regime. The tax assessment is based on whether an individual is a resident or notIndividuals living in Italy must file a tax return unless the only income they earn comes from employment and taxes are levied at source.

Because of the differences between the taxation of residents and non-residents, foreign individuals are advised to seek tax planning advice with an Italian law firm.

What are the taxes in Italy?

Permanent residents are taxed on their worldwide income and gains in Italy. An individual is subject to the personal income tax and the productive activity exercised tax in Italy. The income tax is applied progressively from 23% for an income that does not exceed 15,000 euros per year and up to 43% for incomes exceeding 75,000 euros per year. Other taxes that apply to Italian residents are the tax on property rental, the capital gains, the inheritance and gift tax, the property tax, the stamp duty and the sales tax. Additionally, Italian employees must pay social security contributions.

Taxation of foreigners in Italy

Non-residents are taxed only on the income and gains they earn in Italy. However, certain incomes, such as Italian bonds and interests, are not subject to taxation, if they are received by an individual living in Italy who has residency in a country that has a double taxation agreement with Italy.

Sole traders in Italy are subject to a regional tax on productive activities. This tax is usually paid in advance. According to the new tax regime, expats living in Italy are classified as residents or non-residents. Individuals living in Italy for at least 183 days per year and registered with the Population Register or foreigners who have opened a company in Italy are considered residents.

Financial planning in Italy

Foreign individuals should start tax planning strategies based on whether they will become or not Italian residents. The first step should be calculating the number of days the individual will spend in Italy and then to register with the Population Register. Before moving to Italy, foreign individuals will usually request the services of a tax adviser authorized by the Italian regulator.

Our lawyers in Italy will offer clients the following tax planning solutions:

  • – advice on the best options and tax structure based on the type of company to register in Italy,
  • – analyzing the structure for foreign payments, such as dividends and interests,
  • – advice on tax returns filings,
  • – advice on the preparation of documentation for transfer pricing policies.

For customized financial planning solutions, please contact our Italian lawyers.