When you decide to open a company in Italy or in other European country, you usually calculate firstly your expenses in order to find out if your business is gainful or you will have to pay a big amount for doing business in a country that seems to be very attractive for foreign investors. At expenses, you may count the taxes you should pay for your business.
The main taxes for doing business in Italy are:
- IVA or VAT (Value Added Tax);
- INPS – social security contributions;
- IRPEF – personal income tax;
- IRES – income tax for corporate income;
- IRAP – corporate revenues tax.
The values of these taxes may vary from time to time, so you have to check if there was any change in the financial legislation, in order to be sure that you calculate right your costs related to taxes.
There are two forms of taxation in Italy – direct and indirect related to the type of firm and the income generated by production activities. The main direct taxes are IRPEF, IRES and IRAP. Besides these, there is a municipal tax (IMU) for the buildings and lands which are properties of the limited liability companies and other types of firm that own a property which is used for their daily activities. The direct taxes are calculated on the income of different type of company and the indirect taxes are to be paid when you sell different things or services.
The indirect taxes you must pay for your business are: VAT (with values between 4% and 22%, depending of business sector in Italian economy), registration tax for registering different kind of documents, such as contracts, land registry tax paid after land transactions and mortgage tax after sales or other movements of property.
Italian citizens and residents are subject to the following taxes:
Individuals are taxed progressively on their income, and the maximum rate applied currently is 43%. However, the tax legislation also allows for personal tax deductions for certain categories of individuals. Also, foreign citizens working in Italy will be taxed only on the income they make here. They are also entitled to several tax benefits. Our local agents can provide you with more information about the taxation of foreign citizens in Italy.
During your business activities in Italy, you may have to pay other type of taxes, such as stamp duty and excise duties, advertising and occupation of public spaces taxes, etc.
At the end of every tax year, the representative of the company will submit online an income tax return form which presents its income for taxation, the amount of tax and the expenses. Detailed information is available at Agenzia dell Entrate’ website.
If you have problems or you need more information about the taxes you should pay for your company in Italy, you can contact our local agents who can introduce you to local accountants.