Taxation in Italy
|An aspect of fiscal policy|
Taxation in Italy is levied by the central and regional governments and is collected by the Italian Agency of Revenue (Agenzia delle Entrate). Total tax revenue in 2012 was 44.4% of the GDP. The total tax receipts in 2013 were €782 billion. The most important revenue sources are income tax, social security, corporate tax and value added tax, which are all applied at the national level. Personal income taxation in Italy is progressive.
Employment income is subject to a progressive income tax, IRPEF (Imposta sul reddito delle persone fisiche) applying to all workers.
In 2013, the personal income tax rates were as follows:
|Income range||Tax rate|
|€0 — €15,000||23%|
|€15,000 — €28,000||27%|
|€28,000 — €55,000||38%|
|€55,000 — €75,000||41%|
Every region has a different tax addition (between 1,23% and 3,33%) and communal addition (up to 0,8%).
Individuals are considered resident for tax purposes if for the greater part of the tax year they satisfy any of the following conditions:
- their habitual abode is in Italy,
- the centre of their vital interests is located in Italy, or
- they are registered at the Office of Records of the Resident Population in Italy.
Due to the different types of income, exemption from IRPEF is determined at:
- 8,000 euros, for subordinate workers, if their employment period coincides with the entire year;
- 7,500 euros, for pensioners under 75 years of age, if the pension is cashed in for the entire year, and for those receiving palimony from ex spouses;
- 7,750 euros, for pensioners aged 75 or older, with a pension period that coincides with the whole year;
- 4,800 euros, no matter how many days they work a year, for taxpayers with other types of income.
The area exempt from IRPEF increases further if there are dependent family members.
Italian corporate entities are subject to Corporate Income Tax, IRES (Imposta sul reddito delle società) and to Regional Production Tax, IRAP (Imposta regionale sulle attività produttive).
- The rate of corporate income tax (IRES) since 1 January 2017 is 24% (previously it was 27.5%). Some corporations are exempted from corporate tax, such as charitable foundations, church institutions and sports clubs.
- The standard rate of regional tax (IRAP) is 3.9%, although regional authorities may increase or decrease the standard rate by up to 0.92%. In addition, different IRAP rates may apply to different sectors of the economy in different regions (for instance, the rate for banks and other financial institutions is 5.57% in Abruzzo, Apulia, Lazio, Lombardy, Piedmont and Veneto, but only 4.65% in Emilia-Romagna). The tax is calculated differently from IRES, adding the cost of fixed-term workers (before 2016 the cost of every employee was counted). Up to 10% of regional tax (IRAP) is deductible in calculating the tax base for corporate income tax (IRES) purposes.
Value added tax
Value added tax or VAT (Imposta sul valore aggiunto, IVA) is a consumption tax charged at a standard rate of 22%. Reduced VAT rates apply at 10% for listed pharmaceuticals, passenger transport that is not specifically exempted, admission to cultural and entertainment events, hotels, restaurants and 4% on certain foodstuffs, medical and books. The Italian VAT regime is part of the European Union value added tax system.
Social security contributions (Istituto nazionale della previdenza sociale - INPS) apply to everyone in the workforce. Employers withhold 9.19% of the employee's wage and the employer contributes 34.08% of gross pay.
Self-employed individuals must enroll with the Gestione Separata INPS, unless other specific rules apply (for example, certain professionals, such as lawyers, engineers and accountants, are required by law to enroll in specified pension plans). The contributions to the INPS are calculated at a flat rate ranging from 18% to 27.72% on annual income up to a maximum income of €96,149 in 2012.
Tax evasion and lack of guarantees
Italy has the largest number of "major tax evaders" in Europe, counting, according to the estimated figures, tax evasion for over €180 billion. On the other hand, evasion is sometimes seen by evaders as the best way to ensure the right of defense from the alleged excessive tax claim of the State.
- OECD revenue as a share of GDP statistics "Revenue Statistics". OECD. 2014-06-25. Retrieved 2014-06-25.
- Redazione internet Agenzia Entrate. "Agenzia delle Entrate - Income tax for individuals". .agenziaentrate.gov.it. Retrieved 2014-10-29.
- https://www.guidafisco.it/calcolo-irap-aliquote-851 guidafisco.it
- "Going to Italy" (PDF). expat.hsbc.com. HSBC.
- Buonomo, Giampiero (2015). "Codice del processo tributario, un convegno fa chiarezza". L’ago e il filo. – via Questia (subscription required)