Taxation of international executives
Employer and employee
An individual who works in Italy is subject to various compulsory Italian social security contributions.
The employer’s share of these numerous and complex contributions ranges from approximately 29 percent to 32 percent of taxable compensation, depending on many different criteria, such as the seniority of the employee, the kind of the activity, the number of the employees, the collective bargain applicable, and so on.
The employee’s share of these contributions ranges from 9.19 percent to 10.49 percent of taxable compensation, depending on the classification of the employee (worker, executive, or manager) and depending upon the employer’s activity (manufacturing, trading, tourism, and so on). The employer withholds the employee’s social security contributions from the monthly salary.
For any employee enrolled in the social security system after December 31 1995, an earnings cap of EUR 101,427.00 (2018) applies to pension contributions only.
Italy has full or partial social security treaties with some countries (such as the EU countries) and, in general, employees assigned from these countries may continue to pay their national social security charges.
In case of partial or lacking social security treaty between Italy and the country, the social security representative of the foreign company must be appointed in Italy for the remittance of Italian (total or partial) social security contributions.
The foreign investment declaration has to be filed by tax resident individuals who own foreign investments during the tax year.
This declaration is a different declaration from the tax return and if due, it is mandatory even if the Italian income tax return is not due. For example the assignee’s spouse who owns joint investment accounts must personally file it.
Since by this information the Italian Tax Authorities may determine higher individual’s Italian taxable income, there are severe penalties for failure to complete this declaration.
These penalties could amount:
As of October 2006, Italian inheritance and gift tax has been reintroduced in Italy.
The tax is applicable to all Italian residents and also to non-residents who have properties in Italy. The tax rates are as follows.
When real estate properties are inherited or given as a gift, the cadastral tax and the mortgage tax is applicable with tax rates of 1 percent and 2 percent respectively. If the concerned real estate is the principal dwelling of the taxpayer, the cadastral and mortgage taxes are substituted with a fixed tax of EUR200.
Real estate and land situated in Italy are subject to personal income taxes on the basis of their cadastral value. A tax exemption applies to income arising from the first habitual dwelling. Rental income from real estate is included in aggregate taxable income and it is calculated on the rent received by the owner, reduced by a flat deduction of 5 percent.
IUC is the tax on real estate located in Italy and it is the sum of IMU, TARI (Tax on Waste) and TASI (Tax on Inseparable Services). TASI does not replace IMU and is calculated based on the same principle as IMU, and each Municipality has the authority to decide the percentages of tax. However, IMU and TASI together cannot exceed the maximum percentage established by the law (currently 10.6%).
As of 1 January 2016 (Stability law 2016), IMU and TASI are no longer due on the property which qualify as primary house, so called 'abitazione principale', unless the property qualifies in the luxury category.
If the taxpayer owns other real estate, different from principal residence, IMU and TASI are due. If the property is situated in the same Municipality from the principal house, taxpayer should pay also 50 percent of Irpef (and local taxes) of the Cadastral income.
Yes. The rate depends on the kind of goods sold; however, the common rate is 22 percent.
Stamp duties are levied on certain documents, contracts, and registers as specified in the stamp duty law. The tax usually takes the form of a nominal lump sum. However, in certain circumstances, it is levied as a percentage of the value of the obligation or the right referred to within a contract.
This tax is due on acts and contracts which are subject to registration in public registers or which are placed voluntarily in such registers, which are outside the scope of VAT regulations. Generally speaking, written contracts concluded in Italy for the transfer of property of any kind are subject to registration. The rate of tax varies according to the value transferred. The standard rate varies from 3 percent up to 15 percent.
Is there a requirement to declare/report offshore assets (e.g., foreign financial accounts, securities) to the country’s fiscal or banking authorities?
As mentioned above, a Foreign Investment Declaration (RW form) has to be filed to the Italian Tax Authority by tax resident individuals who own investments (immovable properties and finanzial activities) out of Italy, including foreign offshore assets.
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