What is tax minimization?
Tax minimization is a lawful concept used by Italian companies or foreign investors wanting to set up companies in order to avoid taxation by using financial planning techniques. Tax minimization is known also as tax avoidance by legal means. Italian companies are usually drafting financial plans for the successful development of their enterprises. For that purpose the law firms are usually hired which can explain in depth the legal solutions that can help companies to achieve their goals. They will provide you valuable information about the taxation system and different ways to implement tax minimization.
Tax minimization solutions
The most common tax minimization solutions include the following.
- To make use of the investment incentives the Italian government provides.
- To apply for tax deductions.
- To make donations.
- To make use of the partial and total tax exemptions the Italian tax authorities provide.
According to the new reform of the Italian taxation system, the corporate tax rate has been reduced to 27,50% and partial exemptions for capital gains taxes for companies that benefit from participation exemptions have been enabled. The group taxation has been introduced in Italy which provides for domestic and foreign companies the possibility to form a tax group that will only be taxed once.
Italian tax system
Italian tax system provides deductible burdens and tax allowances such as medical costs. Contributions to the national insurance fund can provide grounds for tax minimization in the country. It is noteworthy that some taxes are applied according to the type of company the investor decides to set up in Italy.
Foreign investments can provide good opportunities for opening new companies, but they can be an efficient instrument for tax minimization as well.
The Italian government supports the creation of industrial plants, companies that invest in research and development and encourages the creation of jobs for the Italian workforce. The incentives may come as tax credits, free grants that will help companies reduce expenses and incentives based on the location of the company.