Italian tax system
The Italian tax system is managed by the Agenzia delle Entrate (Italian Inland Revenue). The Tax Year in the country runs from 1st January to 31st December. All workers are subject to taxation of their income or other benefits, except for daily allowances paid for business trips and lunch tickets. The amount of tax to be paid depends on the type and duration of the contract.
Depending on your status in Italy (resident or not) you will be subject to different taxation.
Taxes to be paid
Taxes to be paid in Italy if you are resident:
- IRPEF (Personal Income Tax). Personal Income Tax rates range from 23% to 43%. In addition, a regional surcharge ranging from 1.23% to 2.03% is levied under IRPEF depending on the level of income and region of residence together with a municipal surcharge of up to 0.9% depending on the municipality of residence.
- Social security. The rate depends upon the classification of the employer for social security purposes and the position of the employee. Generally an employee pays approximately 10% of gross salary whilst the employer’s contribution is between 28% and 30% of gross salary.
- Accident insurance. This type of insurance, compulsory for all employers hiring workers in activities which the law defines as risky, protects workers from any kind of damage resulting from work-related accidents and occupational diseases freeing employers from any civil liability.
- Regional tax on productive activities (IRAP). A regional tax of 3.90% on net production value is levied on the company income of non-commercial bodies and professionals.
Taxation fo foreigners in Italy
The taxation basis for foreigners living in Italy but who are not classified as residents is different to the residents’ basis. Non-residents are only taxed on income and gains arising in Italy, compared to worldwide income and gains for residents.
Income tax is deducted at source by employers on the basis of the estimated annual income. The balance of tax due is calculated at the end of the year. If you are an employee, it is not usually necessary to complete a tax return, unless you have several sources of income. The self-employed must complete a tax return and pay the tax due on their income. Tax is payable a year in advance (in June and November) on the basis of the previous year’s income.