Transcript ITALIAN INDIVIDUAL TAXATION - Universita' degli Studi di

ITALIAN INDIVIDUAL
TAXATION
Antonio Uricchio
Università di Bari
Subjects to be analyzed
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INCOME TAX
OTHER TAXES ON INCOME
SOCIAL SECURITY CONTRIBUTIONS
TAXES ON CAPITAL
INHERITANCE AND GIFT TAXES
INTERNATIONAL ASPECTS
1. INCOME TAX
Taxable persons (1)
Resident individuals are subject to individual income tax
(Imposta sul reddito delle persone fisiche, IRPEf) on
their worldwide income. Non-resident individuals are
taxable on their income arising in Italy.
Resident individuals are those who for the greater part of
the tax year:
– are registered in the Italian civil registry; or
– have a residence or domicile in Italy, as defined in the Civil
Code.
“Residence" is the place of habitual abode; "domicile" is the
place where an individual has established his principal
centre of business and interests (centre of vital
interests).
Taxable persons (2)
An anti-avoidance provision applies to Italian nationals who claim to
be residents of tax havens. Accordingly, an Italian national is
deemed to be resident in Italy if he emigrates to a country
considered to be a tax haven, even if his name is removed from
the Italian civil registry. This is a rebuttable presumption: the
burden of proof that actual residence is outside Italy is shifted to
the taxpayer. For this purpose the Ministry of Finance has
published a list of countries considered to be tax havens.
Spouses are taxed separately on their earned income. Furthermore,
each spouse is taxed on half the income from community
property and on half the income of minor children.
Income from general or limited partnerships resident in Italy is
attributed to each partner in proportion to his share in the profits,
without regard to the actual receipt thereof. Under certain
conditions, limited liability companies and limited liability
cooperatives owned by not more than 10 or 20 individuals,
respectively, may opt to be treated as flow-through entities. In
such a case, the income of the entity is attributed directly to the
members.
Taxable income: general features
(1)
Resident individuals are subject to individual
income tax on their worldwide income, which
falls under any of the following categories:
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income from immovable property;
investment income;
income from employment;
professional income;
business income; and
miscellaneous income.
Taxable income: general features
(2)
The aggregate taxable income is calculated by adding the net income
of each category; only losses arising from carrying on a business or
exercising an art or profession may be deducted. Exempt income
and income subject to a final withholding tax are not taken into
account in determining aggregate income. Capital gains on the
disposal of shares and other securities and on the transfer or
redemption of debts or debt claims may be subject to a substitute
tax that replaces the individual income tax.
Payments on termination of an employment and capital gains on the
disposal of a business may, at the taxpayer's option, be taxed
separately. Under the separate taxation, the taxable base for the
termination payments is computed by deducting EUR 309.87 per
working year from the termination payment received. The tax rate
applicable to the taxable base is the average of the income tax rates
applicable to an income of reference which is computed as
follows:net termination payment/number of working years x 12
The average of the income tax rates applicable to the income of
reference may be determined by using the following method of
calculation: income tax on the income of reference/income of
reference x 100
Taxable income: general features
(3)
The following items of income received by a
resident individual are not subject to tax:
– some contributions or premiums related to a
work relationship;
– some benefits in kind related to a work
relationship; and
– some capital gains on immovable property
Employment income: salary
Income from employment consists of all compensation, in cash or in
kind, including gifts, received during a tax year in connection with
employment. Pensions of all types and equivalent allowances are
deemed to be income from employment.
Taxable income from employment does not, however, include:
– mandatory social security contributions paid by employers and
employees;
– contributions, up to EUR 2,065.83, for medical assistance made to
entities or funds whose sole purpose is social welfare in accordance
with the provisions of labour contracts or agreements; or
– premiums for life and accident insurance paid by the employer, up to
EUR 1,291.14 or 2% of the annual gross salary.
No deductions for expenses are allowed from employment income.
As a general rule, all reimbursements by the employer are taxable for
the employee, with the exception of the refund of travelling
expenses, subject to certain limits and conditions.
Employment income: benefit in kind
(1)
As a general rule, benefits in kind are taxable in the hands
of the employee if their amount exceeds, in the tax
period, EUR 258.23. Benefits in kind include those
received by family members of the employee and the
right to obtain them from third parties.
The following are not included in the taxable income:
– food served in canteens or equivalent services (up to
a daily ceiling);
– transportation between home and work, even if
contracted out to third parties;
– the value of services provided by the employer for the
benefit of all employees for education, recreation,
health and religious purposes and social assistance;
– exceptional and non-recurring payments (up to an
amount of EUR 258.23) to all employees or specific
categories of employees;
Employment income: benefit in kind
(2)
– the value of the shares offered to all employees up to EUR
2,065.83, subject to the condition that the shares are not
repurchased by the employer or otherwise transferred within 3
years (if so transferred, the exempt value is taxable in the period in
which the transfer occurs);
– the difference between the value of the shares on the date of
assignment and the price paid by the employee, provided that the
amount paid by the employee be equal at least to the fair market
value of the shares at the date on which the shares were offered,
and subject to the condition that (i) the option cannot be exercised
before 3 years from the offer have elapsed, (ii) the employee
maintains for at least 5 years shares representing at least the
difference between the fair market value of the shares at the time of
exercise and the price paid by the employee, and (iii) at the time of
exercise the shares are listed on a regulated market. The exemption
does not apply if the shares held by the employee represent more
than 10% of the voting rights or of the capital of the issuing
company.
The last two exemptions also apply to shares issued by a resident or nonresident company controlling, or controlled by, the employer, or by a
company controlled by the same person controlling the employer.
Employment income: benefit in kind
(3)
Benefits in kind are deemed to constitute income equal to
their market value, with some exceptions. Where a car or
motorcycle is made available by an employer to an
employee, the taxable benefit is equal to 50% of the
amount determined on the basis of published tables
assuming a yearly use of 15,000 km. With respect to a
low-interest loan to an employee from an employer or
through financing agreements with a third-party lender,
the taxable benefit is equal to an amount corresponding
to 50% of the difference between the legal rate of
interest and the actual rate of interest in force at the end
of each year.
Employment income: pension
income
Pensions are generally taxed as employment income.
However, periodical payments made by pension funds
on the basis of private insurance policies are taxable
only for 87.5% of their gross amount.
Lump-sum payments from pension funds are subject to
separate taxation: the taxable base is limited to that part
that exceeds the individual's contributions to the fund,
provided that they do not exceed 4% of his annual
income. A deduction is granted from the lump-sum
payment up to EUR 309.87 for each year of
employment, but only in proportion to the part of the
termination payment that was contributed to the fund.
Employment income: director’s
remuneration
Remuneration paid to the members of the
board of directors and the supervisory
board is taxed as employment income. It is
taxed as professional income (see above)
if the functions carried out by the director
or supervisor are typical of their
professional activity.
Business and professional income
(1)
Professional income is derived from habitual independent
activities other than business activities, e.g. from
exercising an art or a profession. Taxable income is the
difference between any fees received and related
expenses, including:
– hotel, restaurant and entertainment expenses, deductible up to
2% of the fees received in the tax year; and
– depreciation on fixed assets used for the profession.
Depreciation on vehicles that for the greater part of the tax year
are not used exclusively for a profession is only allowed up to
50% of the costs recognized for tax purposes.
Business income is generally taxed at the progressive rates
of individual income tax.
Business and professional income
(2)
Individuals who set up a new business or
professional activity may opt for their
income (if their proceeds are not more
than EUR 30,987.41 for services and EUR
61,974.83 for other activities) to be subject
to a 10% substitute tax, if certain
requirements are met. The incentive is
available for the first 3 years of activity.
Individuals already carrying out small
activities (proceeds not more than EUR
25,822.84) may opt for a 15% substitute
tax. No time limitation applies.
Investment income (1)
As a rule, income from immovable property is determined
on the basis of the cadastral value by applying the
schedule of estimated values established for each
category and class or, with respect to buildings with a
special or particular purpose, by a direct estimate under
the cadastral law. A deduction up to the cadastral value
may be claimed from the aggregate taxable income
derived from owner-occupied dwellings. If the dwelling is
let, the taxable base is the higher of (a) its cadastral
value or (b) its rental value reduced by the maintenance
expenses up to a maximum of 15% of the rental value. A
further flat deduction of 30% of the taxable income as
determined above is provided for rentals of dwellings
located in major cities, if rents are those that have been
agreed upon between the landlords' and tenants'
associations.
Investment income (2)
Effective for tax periods starting on or after 1 January 2004,
Italy applies a classical system of taxation of corporate
profits. The former imputation system is abolished and
replaced by a 95% participation exemption for corporate
shareholders and a 60% exemption for individual
shareholders who hold the participation in a business
capacity. Individual shareholders not holding the
participation in a business capacity are also entitled to
the 60% exemption if they own more than 2% of the
voting power or 5% of the capital in listed companies, or
more than 20% of the voting power or 25% of the capital
in other companies (substantial participation). Otherwise,
dividends derived by individuals are subject to a final
withholding tax at a rate of 12.5%.
Investment income (3)
Interest from domestic and foreign sources is generally
subject to a final withholding tax (see futher). The term
"interest" for individual income tax purposes has a broad
meaning: it includes the proceeds from zero bonds and
deep discount and similar instruments.
No expenses are deductible from dividends and interest in
determining the taxable base.
Income derived from royalties on copyrights, patents,
trademarks, know-how and similar rights is taxable as
professional income (see above) if received by the
author or inventor and as miscellaneous income if
received by other persons. A flat 25% deduction for
expenses is allowed from the gross amount if the
recipient is the author or inventor or if the assets which
produce the royalty income were acquired for
consideration.
Capital gains: business gains
Capital gains derived in the course of a business or
profession are taxable as ordinary income of those
categories.
Capital gains, including goodwill, derived from the disposal
of a business owned for more than 5 years are taxed
separately. The tax is calculated by applying to the
amount received the rate applicable to half the
aggregate net income of the taxpayer during the 2-year
period prior to the year in which the amount is received.
If in 1 of the 2 previous years there was no taxable
income then the rate applicable to the aggregate net
income of the other year must be used. The first tax rate
in the scale must be used in the absence of taxable
income in both of the 2 years.
Rollover relief applies where a business is transferred
either by gift or by succession upon death.
Capital gains: immovable property
Capital gains derived (other than in the course of a
business or profession) by individuals on the disposal of
immovable property situated in Italy are taxed as
miscellaneous income. However, such gains are exempt
from tax if the seller has held the property for more than
5 years. Gains on land zoned for construction do not
qualify for this exemption. In the case of capital gains
derived (other than in the course of a business or
profession) by an individual taxpayer on the disposal of
immovable property and land zoned for construction
within a 5-year ownership period, the taxpayer may elect
to be subject to a substitute tax at the rate of 20%
instead of the normal progressive income tax.
Capital gains on residential buildings that have been mainly
used as the principal dwelling of the owner are not
subject to tax. Also, capital gains on land and buildings
acquired by way of inheritance or donation are exempt.
Capital gains: shares and other
securities
Gains on the alienation of shares, financial instruments assimilated to
shares and interests in resident companies or partnerships that are
held by an individual in a business capacity are tax exempt for 60%,
provided (i) the participation has been held at least from the first day
of the 12th month preceding the alienation (the LIFO method
applies), (ii) the participation is classified as financial assets in the
first balance sheet closed after the acquisition and (iii) at least since
the beginning of the third tax period preceding the alienation the
participated company has been engaged in a business activity.
Individual shareholders not holding the participation in a business
capacity are also entitled to the 60% exemption if, in any 12-month
period, they alienate more than 2% of the voting power or 5% of the
capital in listed companies, or more than 20% of the voting power or
25% of the capital in other companies and provided the amount held
has exceeded the above thresholds at least once in the 12-month
period. Otherwise, capital gains derived by individuals are subject to
a substitute tax at a rate of 12.5%.
Personal credits
From 1 January 2007, the system of personal allowances has been
repealed and the tax credits system has been reinstated. Under this
system, the following amount can be deducted from the tax due
(rather than from the taxable income):
For a dependent spouse not legally or actually separated an amount
varaible between 800 and 690 € depending on the amount of the
income
For each child: EUR 800 (EUR 900 for those under 3 years) increased
by EUR 220 for children with disabilities. In the case of more than
three children, the amount is increased by EUR 200 for each child
after the first. The actual allowance is obtained by multiplying the
above amount by the following formula: (95,000 - total
income)/95,000. The amount of 95,000 is increased by 15,000 for
each child after the first.
For each dependent relative: EUR 750 x (80,000 - total
income)/80,000.
The above credits apply only upon the condition that the children and
other dependants do not have an annual income exceeding in the
aggregate EUR 2,840.51 before deductions.
Earned income credits
A tax credit is granted to taxpayers deriving income from
employment or pension. The amount of the credit
depends upon the level of the aggregate income of the
taxpayer. It is available for income not higher than EUR
55,000. The maximum credit is EUR 1,840 for
employment income and EUR 1,725 for pension income.
A tax credit is also available for persons earning income
from self-employment or miscellaneous income. Such
credit cannot be granted concurrently with the credit for
income from employment. The credit is EUR 1,104 for
income up to EUR 4,800. For income between EUR
4,801 and 55,000, the credit is calculated under the
following formula:
EUR 1,104 x [(55,000 - total income)/50,200]
Credit for expenses
A credit equal to 19% of certain personal expenses is granted,
including:
– expenses for surgery, medical specialists and dental prostheses for the
amount exceeding EUR 129.11;
– interest paid on mortgage loans on owner-occupied dwellings, up to a
maximum credit of EUR 686.89;
– private life and health insurance premiums, up to a maximum credit of
EUR 245.32;
– expenses for secondary and university education, not exceeding the
amount of state tuition fees; and
– expenses paid to a real estate intermediary, up to a maximum credit of
EUR 190.
A tax credit is granted for certain expenses incurred for the
refurbishment of the taxpayer's dwelling. The expenses in respect of
which the credit is available are limited to EUR 36,000 per dwelling.
The credit is equal to 36% of the expenses incurred. The credit must
be spread over a period of either 5 or 10 years.
Losses
Losses incurred in a small business or in a profession may
be set off against the aggregate income of the same tax
year. The term "small business" means an enterprise
with annual turnover less than EUR 185,924.48
(enterprises engaged in services) or EUR 516,456.90
(enterprises operating in other sectors). No carry-over is
allowed.
Losses of a business other than a small business may be
offset against other business income of the same year or
be carried forward for 5 years. Losses incurred in the
first 3 tax years of a business, however, may be carried
forward indefinitely.
Other losses may not be deducted or carried over.
Rates
The following rates apply in tax year 2007:
up to 15,000
23%
15,001 - 28,000
27%
28,001 - 55,000
38%
55,001 - 75,000
41%
over 75,000
43%
The above rates are increased by a regional
surcharge varying between 0.9% and 1.4%,
depending on the region. They may also be
increased by a local surcharge varying between
0% and 0.5%, depending on the municipality
Withholding taxes (1)
Salaries and other remuneration from employment paid by
companies, businesses and professionals are subject to
an advance withholding tax, which is creditable against
the recipient's income tax liability. The tax is withheld
applying the ordinary income tax rates corresponding to
the brackets adjusted according to the period for which
the payment is made.
Professional fees paid by companies, businesses and
professionals are subject to an advance withholding tax
at a rate of 20%.
Interest on loans is subject to a 12.5% advance withholding
tax, which is creditable against the recipient's income tax
liability.
Withholding taxes (2)
A final withholding tax of 27% applies to:
– interest on current accounts with bank and post offices; and
– interest on bonds, issued by banks and listed and unlisted
companies, with a maturity of less than 18 months.
A final withholding tax of 12.5% applies to:
– interest on state bonds;
– interest on bonds issued by banks and listed companies with a
maturity of at least 18 months (in this case the withholding tax is
replaced by a substitute tax of the same rate); and
– interest on bonds issued by non-listed companies with a maturity
of at least 18 months, provided that, at the date of issue, the
interest rate was not higher than (a) 200% of the official discount
rate, in the case of bonds listed on an EU-regulated market or (b)
166% of the official discount rate, in the case of other bonds.
Administration
For individual taxpayers, the tax year is the calendar year.
Taxpayers who derive taxable income in excess of certain limits must
file an annual tax return between 1 May and 30 June of the year
following the tax year (31 July for electronic filing).
In principle, the self-assessment method is used. The tax office is
authorized to issue assessments to taxpayers who have not filed a
tax return or whose tax return has not been prepared in accordance
with the law. In such cases, the tax office estimates the taxpayer's
income on the basis of the information in its possession. Taxpayers
and tax offices are allowed to compromise on the amount of tax and
penalties due.
Individuals must make two advance payments of income tax during the
tax year. The balance of the tax due, based on the results shown in
the annual tax return, must be paid by 16 June of the following year.
Any excess tax is refundable.
2. OTHER TAXES ON
INCOME
General feature
For the regional tax on productive activities,
see sledes on corporate income taxes.
With respect to individuals, the tax only
applies to those engaged in a business or
profession
3. SOCIAL SECURITY
CONTRIBUTIONS
General features
A complicated system of social insurance covering life
insurance, health, maternity, disability, unemployment
and family allowances is in operation for all employees.
The contributions are withheld from the employees'
salaries. The contributions are generally approximately
10% of the total gross salary, depending on the type and
size of the business and the rank of the employee.
A system of social insurance covering life and health
insurance is also in operation for taxpayers engaged in a
business or profession. The amount of contributions
made varies according to earnings.
4. TAXES ON CAPITAL
General features
There is no net wealth tax in Italy.
The municipal tax on immovable property is levied
on the possession of immovable property
(buildings, development land, rural land) located
in Italy. The taxable base is the imputed income
as determined by the immovable property
registry, multiplied by a certain coefficient equal
to 100 for residential property and to 50 for
business property (with some exceptions).
The rate ranges from 0.4% to 0.7% depending on
the municipality. This tax is not deductible for
income tax purposes.
5. INHERITANCE AND GIFT
TAXES
General features
Inheritance and gift taxes have been reintroduced with
effect from 1 January 2007. Under the new legislation,
the inheritance and gift tax applies as follows (per
beneficiary):
– transfers to the spouse and of direct descendants or ascendants
are subject to tax at a rate of 4% on the value of the inheritance
or the gift exceeding EUR 1 million;
– transfers to brothers and sisters are subject to tax at a rate of 6%
on the value of the inheritance or the gift exceeding EUR
100,000;
– transfers to all other relatives up to the fourth degree, or
relatives-in-law up to the third degree, are subject to tax at a rate
of 6% on the entire value of the inheritance or the gift;
– transfers to any other beneficiary are subject to tax at a rate of
8% on the entire value of the inheritance or the gift.
6. INTERNATIONAL
ASPECTS
Resident individuals: foreign
income and capital gains (1)
A resident individual is taxable on his worldwide
income.
Foreign-source income from immovable property
which is used in the course of a business or the
construction or trade of which is the object of a
business is deemed as business income and is
subject to tax accordingly. In all other cases,
income from immovable property is added to the
taxable income of the resident owner for whom
the taxable base is calculated by the rules of the
country within which the property is located.
Resident individuals: foreign
income and capital gains (2)
Dividends received by resident individuals from participations in nonresident companies are taxed as follows:
(1) if the participation is not held in a business capacity and is not a
substantial participation, it is taxed by way of a 12.5% final tax
withheld by the resident intermediary through which the payment
is made (a 12.5% substitute tax applies on the income declared
on the tax return if the payment is not made through such an
intermediary);
(2) if the participation is a substantial participation (see above) not
held in a business capacity, only 40% of the income must be
included in the taxable income of the recipient and is assessed
to income tax at the ordinary graduated rates. The income is,
however, subject to a 12.5% advance withholding tax applied on
the 40% of the income;
(3) if the participation is held in a business capacity, only 40% of
the income must be included in the taxable income assessed to
income tax at the ordinary graduated rates.
Resident individuals: foreign
income and capital gains (3)
Regarding (2) and (3), the rules do not apply if the
distributing company is able to deduct fully or partially
the dividend paid in its state of residence, or if it is a
resident of a state or territory which has a privileged tax
regime for CFC purposes, unless, in the latter case, a
ruling has been obtained that the holding in the CFC
does not achieve the localization of income in such a
state or territory. If the rules do not apply, a 12.5%
advance withholding tax applies on 100% of the income
(reduced by the amount already subject to tax under
CFC rules, if any) in the hands of the recipient. Unilateral
relief provisions apply in the form of an ordinary tax
credit: any foreign withholding tax may be credited
against the Italian individual income tax due, up to the
amount attributable to the foreign income. In the case of
partially exempt income, the creditable foreign tax is
reduced proportionally to the income taxable in Italy.
Resident individuals: foreign
income and capital gains (4)
A circular letter issued by the Ministry of Finance has
clarified that the 12.5% final or advance withholding tax
mentioned above applies on the income effectively paid
to the resident individual, i.e. as reduced by the
withholding tax possibly levied by the state of residence
of the paying company. If such withholding tax is higher
than the one allowed under the applicable tax treaty and
the resident individual holding a non-substantial
participation receives a refund of the difference, this
amount is treated as a dividend for tax purposes, whilst
in case the resident individual holds a substantial
participation, the 12.5% advance withholding tax is
applied on the amount effectively received but 40% of
the gross amount of the income will be included in the
taxable income of the recipient, who will be granted a
credit up to the maximum withholding tax allowed under
the relevant treaty.
Resident individuals: foreign
income and capital gains (5)
Foreign-source interest received through resident
intermediaries, such as banks and other
financial institutions, is subject to a final
withholding tax (or an advance withholding tax in
case of interest derived in the course of a
business) at the following rates:
– 12.5% on interest on bonds and other securities with
a maturity of at least 18 months; and
– 27% on interest on bonds and other securities with a
maturity of less than 18 months.
Resident individuals: foreign
income and capital gains (6)
When not received through a resident intermediary, the
interest (other than interest derived in the course of a
business) is subject to a substitute tax at the same rates
as the withholding tax. Both in the case of the final
withholding tax and the substitute tax, no foreign tax
credit is granted. However, the taxpayer may opt to
include the interest in his taxable income subject to the
income tax rates and thus benefit from the foreign tax
credit. Foreign-source interest income derived in the
course of a business is added to the taxable business
income of the recipient.
Foreign-source royalties derived in the course of a
business are added to the taxable business income of
the recipient. Non-business royalties derived by
residents may be classified as professional or
miscellaneous income.
Resident individuals: foreign
income and capital gains (7)
Business and professional income earned abroad is
included in the taxable income of those categories.
Capital gains on foreign-situs assets that are used in a
business or profession are included in
business/professional income. Foreign-source capital
gains on shares and other securities derived by private
individuals are treated in the same manner as domestic
gains. The 60% exemption is subject to the condition
that at least since the beginning of the third tax period
preceding the alienation the company has not been a
resident of a state or territory which has a privileged tax
regime for CFC purposes, unless a ruling has been
obtained that the holding of the shares in the CFC does
not achieve the localization of income in a state having a
privileged tax regime.
Resident individuals: double
taxation relief
International double taxation is
avoided by an ordinary foreign tax
credit. The mechanism is the
same as for companies
Resident individuals: special rules
for expatriates
Income derived by employees from an activity permanently
performed abroad is taxable on the basis of salaries
determined annually by a decree of the Ministries of
Labour and Social Security, instead of the salary actually
received. This applies only if the activity performed
abroad is the exclusive object of the employment and the
employee stays abroad for more than 183 days in the
contractual year.
Employment or professional income derived by researchers
who start working in Italy between 2 October 2003 and 1
October 2008 and therefore become resident in Italy for
tax purposes will be exempt for 90% from income tax
and fully exempt from the regional tax on productive
activities. This regime only applies for 3 tax years.
Non-resident individuals: general
rules
Non-resident individuals are subject to individual
income tax on income from Italian sources. The
tax is computed in the same way as it is for
resident individuals. As a general rule, income
tax is assessed on the aggregate income
derived from Italy. However, investment income
and professional income are subject to a final
withholding tax or to a substitute tax. Where the
withholding or substitute tax is not applied, the
non-resident is, upon filing a tax return, subject
to taxation at the ordinary income tax rates
Non-resident individuals:
employment income
Income from employment (including
pensions) is subject to taxation in Italy if
the work is performed in Italy. Pensions,
similar allowances and termination
payments are also subject to taxation in
Italy if paid by the state, residents of Italy
or Italian permanent establishments of
non-residents.
Non-resident individuals: business
and professional income
Income from a business carried on in Italy is only taxable if
it is earned through a permanent establishment. Income
from a profession carried on in Italy by a non-resident is
subject to a 30% final withholding tax if the payer is a
withholding agent. Income from a profession includes
directors' fees paid by a resident company.
Non-residents are also subject to the regional tax on
productive activities with respect to the net value of
production derived from a business or profession carried
on in Italy through a permanent establishment or a fixed
base for at least 3 months.
Non-resident individuals:
investment income (1)
Dividends are subject to a final withholding tax of 27%
(12.5% in case of saving shares, e.g. shares without
voting rights) unless a lower rate applies under a tax
treaty. If tax was also paid on the dividends in the
recipient's country of residence, a refund equal to the tax
paid, up to four ninths of the Italian withholding tax, may
be claimed.
In general, interest payments to non-resident individuals
are subject to a final withholding tax at the rates
applicable to interest paid to residents. However, a 27%
rate applies to loan interest paid to individuals resident in
a country or territory outside the European Union with a
preferred tax regime.
Non-resident individuals:
investment income (2)
In addition, interest paid to non-residents on deposit accounts with
banks and post offices is exempt. Interest paid to non-residents on
bonds issued by the state, banks or quoted companies, and with a
maturity of at least 18 months, is exempt if the beneficial owner is a
resident of a country with which Italy has an adequate exchange of
information system. In order to benefit from this exemption, the nonresident must deposit the bond with a resident bank or other
approved intermediary.
Royalties paid to non-residents are subject to a 30% withholding tax,
which is generally applied to 75% of the gross amount of the
payment, resulting in an effective rate of 22.5%. However, if the
recipient is not the author or the inventor and the underlying right
was acquired without consideration the tax is applied to the whole
amount of the royalties.
Income from immovable property located in Italy is subject to income
tax.
Non-resident individuals: capital
gains (1)
Capital gains arising from the disposal of
immovable property are subject to
individual income tax by way of selfassessment.
As a general rule, capital gains from the sale
of shares or other securities are taxable in
Italy if they are held in Italy.
Non-resident individuals: capital
gains (2)
However, the following are exempt in the hands of nonresidents:
– capital gains on the transfer of non-substantial participations in
Italian listed companies;
– capital gains from the alienation or redemption of nonparticipating securities (e.g. bonds, investment fund units,
deposit certificates and similar securities with the exception of
those representing goods) and collective notes exchanged on
Italian or foreign regulated markets;
– income from derivative contracts concluded and traded on Italian
or foreign regulated markets; and
– capital gains and other proceeds from the alienation or
redemption of debt claims, financial instruments and other
contract concluded on Italian or foreign regulated markets which
give right to payment dependent on an uncertain future event.
Non-resident individuals: capital
gains (3)
Moreover, capital gains, including income from
derivative contracts but excluding gains from
substantial participations, realized by qualifying
non-residents are exempt. Qualifying nonresidents are those who are resident in a state
with which Italy has concluded a tax treaty that
contains an exchange of information clause and
who are not resident in a country or territory
outside the European Union with a preferred tax
regime.
Non-resident individuals: taxes on
capital
There is no net wealth tax. A non-resident
individual may be subject to the municipal
tax on immovable property in respect of
immovable property located in Italy.
Non-resident individuals:
inheritance and gift tax
The inheritance and gift taxes are levied
without regard to the residence of the
deceased/donor or the beneficiary if the
transfer is executed in Italy or if the assets
are located in Italy.
Non-resident individuals:
administration
Non-residents must file an annual tax return
in respect of income from Italian sources,
other than income subject to a final
withholding tax or to the substitute tax.
The procedure is the same as for resident
individuals.