Personal income tax (IRPEF, Imposta sul Reddito delle Persone Fisiche)

This tax is personal and progressive.

The requirement for this tax is the possession of income, in cash or in kind, falling into one of the categories stipulated by law. The tax period corresponds to the calendar year.

Persons liable for tax The following persons are liable to tax:

  • natural persons resident on Italian territory in respect of the entire income owned;
  • natural persons not resident on Italian territory solely for the income produced in Italy. Italian residents include natural persons who, for most of the tax period, meet at least one of the following conditions;
  • they are registered in the registers of the population resident on the national territory;
  • they are domiciled in Italy (domicile to be understood as the principal office for business and interests, including moral and company interests);
  • they are resident in Italy (regular residence).
Tax assessment basis Tax is applied to the overall income, i.e. the sum of the income of each category, minus any losses deriving from the practice of arts or professions and/or commercial businesses.The relevant categories include:

  • land income, relating to land and buildings situated on the Italian territory;
  • capital income;
  • income from employment;
  • income from self-employed;
  • company income;
  • sundry income, not acquired from the exercise of business, arts or professions.

Once the gross overall income has been determined, any deductions stipulated by law are applied.

The gross tax is calculated by applying the increasing rates by income increments to the net overall income.

The rates currently in force (2015) are as follows:

Income Rates
  • Up to EUR 15,000: 23%
  • From EUR 15,001 to EUR 28,000: 27%
  • From EUR 28,001 to EUR 55,000: 38%
  • From EUR 55,001 to EUR 75,000: 41%
  • Over EUR 75,000: 43%

For tax calculation purposes, tax deductions are available to reduce overall taxable income.

Deductions are usually equal to 19% of the charges borne, reducing the gross taxation applicable.

Until fiscal year 2016 an additional 3% tax will apply to income exceeding EUR 300,000.

Regional and municipal IRPEF surcharges

In addition to the tax calculated, two additional payments have to be made to the local authorities (Region and Municipality) in which the taxpayer is resident:

  • a regional of between 1.23% and 3.33% (established by the regional government on a yearly basis);
  • a municipal surcharge comprising of a first rate established each year by the state and applied throughout the national territory and a second rate not exceeding 0.8% p.a. established by the individual municipality (under some circumstances the rate could rise further by a further 0.3%).

Expatriates benefiting from the dedicated Italian special tax regime

An important development is likely to take place in 2015 affecting internationally mobile personnel in Italy.

Pursuant to the EU infringement procedure n. 2027 of 25 April 2013, Italy amended its approach to personal tax of non-resident taxpayers who earn at least 75% of their income in Italy.

The Italian Government is committed to adopt a new scheme under which expatriates (non-residents taxpayers), residents in the EU or EEA (European Economic Area), will benefit from full deductions and allowances on their taxable income (so-called “Schumacher-rule”).

Under the new provision, non-resident taxpayers who respect this rule will be treated the same as Italian residents in respect of their tax calculations.

© 2015 Italian Company Formations
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