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Employment Taxation for Expats in Italy

Submitted: March 2014

Residence

Generally you will be considered to be tax resident once you have stayed Italy for more than 183 days during a calendar year. However you may be considered resident even though you have spent less than 183 days in the country during the year. This may be because you have a home and/or family in Italy, or if you have the larger part of your business and interests are in Italy, or simply because you have maintained a registration on the Resident Population Register (Anagrafe) for most of the year. If it comes down to a dispute with the court or tax authorities, then such things as whether you can show that you are taxed as a resident of another country may become important.

It is important to be aware of the terms of any tax treaty that exists between Italy and your home country, as this may well dictate how you are treated with regards to residency and tax. For more details see: Taxation – Tax Treaty Considerations for Expats in Italy.

As a resident you will be taxable on your worldwide income and gains. If you remain non-resident you will only be taxed Italian-sourced income.

Tax rates and allowances

The tax year runs from 1 January to 31 December.

For both residents and non-residents, your Italian employer will withhold tax from your wages or salary. They will also deduct social security contributions. After the end of the year your employer will give you your annual compensation certificate (CUD). This shows your total pay and deductions for the year. If you are a non-resident working for a non-resident employer, you will become self-assessed and will have to pay your tax at the same time as you file your tax return.

If you have more than one source of income, or are self-employed, you will generally become self-assessed. If this is the case, you may have to make advanced payments of tax in June and November.

The following table shows the progressive tax rates in Italy for residents:

Income (€)Rate
Up to 15,00023%
From 15,001 to 28,00027%
From 28,001 to 55,00038%
From 55,001 to 75,00041%
Over 75,00043%

Once the tax payable has been calculated using the table above, personal allowances in the form of tax credits can then be deducted from the total, producing the final amount of tax owing for the year. The value of the personal allowances varies depending whether you are an employee or self-employed. There is also a flat rate of tax of 10% which applies on income up to €2,500 for employees earning less than €40,000, and working unsocial hours in order to increase a company’s productivity.

If you are a self-employed resident, you will be subject to a 20% withholding tax which must be deducted by whoever makes payments to you for work you have done. The amount withheld acts as a tax credit against your income tax for the year.

If you are a non-resident and self-employed, you will be subject to a 30% withholding tax which must be deducted by whoever makes payments to you for work done. This is a final tax, and there is no need for you to complete a tax return.

You will also have to pay social contributions amounting to approximately 10% of your gross wage or salary.

Tax returns for the year must be sent in by 30 September of the following year. Under certain circumstances an extension of 90 days may be granted. There are penalties for late or incorrect returns.

 

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