Question 1

183-Day Rule

Accepted Answer

The so-called 183-day rule is a central component of most double taxation treaties (DTTs). It determines in which country wages are taxable when a person works temporarily abroad. It is becoming increasingly important in practice, particularly in the context of secondments, cross-border projects, or remote work.

The starting point here is the so-called worldwide income principle. According to this principle, a person is generally subject to taxation in their country of tax residence on their entire income—regardless of which country that income is earned in.

So, for example, someone who is resident in Italy must report their entire income there. However, double taxation treaties ensure that this income is not actually taxed twice by dividing the taxation rights between the participating countries.

Basic Principle of Taxation

In international tax law, the basic principle is that wages are taxed where the work is physically performed.

The 183-day rule represents an important exception to this. It means that, despite working abroad, the right to tax remains with the country of residence -but only if certain conditions are met.

This exception is provided for in double taxation treaties to simplify the administration of short-term work abroad and to establish a clear demarcation of taxing rights.

Requirements of the 183-day rule

For wages to continue to be taxed exclusively in the country of residence, three requirements must be met simultaneously.

Length of stay:
The employee does not stay in the country of employment for more than 183 days in total within the relevant period (e.g., calendar year or 12-month period).

Employer:
The remuneration is paid by an employer who is not resident in the country of employment. The decisive factor here is the economic perspective (who actually bears the responsibility and the risk).

Permanent establishment:
The remuneration is not borne by a permanent establishment or fixed base in the country of employment. This means, in particular, that the personnel costs are not economically attributable to that country.

If these requirements are met, taxation remains in the country of residence. If, however, even one of these conditions is not met, the right to tax generally passes to the country of employment.

In practice, it is often the question of whether a permanent establishment exists or who is to be regarded as the employer from an economic perspective that leads to uncertainty.

Calculation of the 183 Days

The 183 days are calculated based on actual physical presence in the country of employment. This generally includes arrival and departure days as well as weekends and vacation days.

It should also be noted that the relevant period may be defined differently depending on the double taxation treaty. In some cases, the calendar year is used as the basis; in others, a rolling twelve-month period.

If the 183-day limit is exceeded, this may result in the country of employment obtaining the right to tax retroactively from the first day of stay.

Examples: Residence in Germany – Work in Italy

A typical scenario is the secondment of an employee residing in Germany to Italy.

If the employee stays in Italy for less than 183 days for a project, the employer remains based in Germany, and the costs are not borne by an Italian permanent establishment, the wages are taxed exclusively in Germany. In this case, Germany continues to tax the employee’s entire worldwide income.

The situation is different if the stay in Italy lasts longer or if the work is economically attributable to an Italian permanent establishment. In this case, Italy obtains the right to tax the portion of the work performed there. Although Germany, as the country of residence, continues to tax the worldwide income, it must avoid double taxation, for example by exempting the income or crediting the Italian tax.

Specific case study:

Mr. Müller is a resident of Germany and is sent to Italy by his German employer for a project. He works there on-site from February 1 to July 20 (= 170 days). He then spends his vacation with his family in Italy from August 1 to August 31 (= 31 days).

Result: Italy, as the country of employment, has the right to tax the wages. Mr. Müller stayed in Italy for a total of more than 183 days during the relevant period. Since the vacation is closely connected in time to the previous employment, these days must also be included in the calculation. The 183-day limit is thus exceeded.

Germany, as the country of residence, continues to tax the entire worldwide income but must avoid double taxation, generally by exempting the Italian income subject to a progression clause.

Conclusion

The 183-day rule is an essential tool for determining taxing rights in cross-border activities. It is closely linked to the worldwide income principle and the provisions of double taxation treaties. A comprehensive assessment of all requirements and the specific individual case is always decisive.

Frequently Asked Questions (FAQ)

1. What does the worldwide income principle mean?
It states that a person resident in the country must pay tax on their entire worldwide income there.

2. When does taxation remain in the country of residence?
When all requirements of the 183-day rule are met.

3. Is it sufficient to stay for less than 183 days?
No, the requirements regarding the employer and the permanent establishment must also be met.

4. What happens if the 183-day limit is exceeded?
The country where the work is performed generally gains the right to tax, often retroactively from the first day.

5. How is double taxation avoided?
Through provisions in the respective double taxation treaty, usually through exemption or credit.

6. Why is the provision complex in practice?
Because several conditions must be examined simultaneously, and each double taxation treaty has its own specific provisions.

Question 2

A1 Certificate for Italy and the EU (ital.: certificazione A1) in the case of secondments and business trips

Accepted Answer

The A1 certificate confirms which social security system a person is subject to when working across borders. It serves as proof that an employee or self-employed person remains covered by social security in their home country and is not required to pay additional social security contributions in the country where they are working.

The A1 certificate is particularly relevant for postings, business trips, field work, short-term assignments, trade show visits, or work in multiple countries. It applies to assignments within the EU, the EEA, and Switzerland.

In principle, social security law follows the territoriality principle: social security contributions must be paid where the work is actually performed. However, under European coordination rules, a person on a temporary assignment abroad may remain in the social security system of their home country.

The A1 certificate documents this affiliation. It should be carried with you during your assignment abroad, as authorities in the country where you are working may require proof of this.

When and how must the A1 certificate be applied for?

The A1 certificate is typically applied for electronically by the payroll office through the INPS/NISF, both for employees and the self-employed. Approval is also required even if the assignment abroad lasts only a few hours.

The A1 certificate must be applied for before work begins abroad and requires a significant lead time. It is therefore all the more important to plan assignments abroad as early as possible.

Duration and Typical Cases

In the case of a standard assignment, social security coverage in the home country can generally be maintained for a period of up to 24 months. In addition, there are special regulations, such as for individuals who typically work in multiple countries, for self-employed individuals, or for exceptional agreements between the countries involved.

A1 Certificate and Posting Notification

The A1 certificate does not replace the labor law requirement to report a posting. Depending on the country of employment, additional reporting requirements, minimum working conditions, documentation obligations, or local regulations may also apply.

Penalties and Risks

Failure to present an A1 certificate during an inspection abroad can have significant consequences for both employers and employees. Sanctions are not uniformly regulated across the EU but are governed by the regulations of the respective country of employment.

Possible consequences include, in particular:

Administrative penalties or fines in the country of employment;
the obligation to pay back social security contributions in the country of employment;
Problems during inspections by labor inspectors, social security agencies, or customs authorities;
suspension of work or denial of access to construction sites, businesses, or event venues;
Additional risks if, in addition to the A1 certificate, labor law-related posting notifications or local documentation requirements are missing.

The A1 certificate is subject to particularly strict scrutiny in some EU countries, for example at construction sites, during installation projects, for transportation services, at trade shows, or during other short-term work assignments.

Companies are therefore advised to apply for the A1 certificate well in advance of the start of the assignment abroad and to make it available to the employee, at least in digital form. If the certificate has not yet been issued at the time of departure, the application—submitted in a timely manner—should at least be documented. Whether this is sufficient in the event of an inspection, however, depends on the regulations and administrative practices of the respective country of employment.

Question 3

Absorbable pay supplement

Accepted Answer

In Italian labor law, an absorbable pay supplement is an additional salary element that exceeds the minimum wages of the applicable collective bargaining agreement (CCNL) and may later be "absorbed" against certain wage increases.

The absorbable pay supplement element can be offset against future wage increases – i.e., gradually reduced. Typical cases:

Increase in minimum wages due to CCNL renewal,
Change of category,
Introduction of new contractual elements (e.g., third wage element in the collective agreement for trade and services)

Example:

CCNL minimum wage: €1,500
Wage element to be absorbable: €500
Total gross wage: €2,000

If the CCNL minimum wage increases by around €200 (to €1,700), the employer can offset this increase against the chargeable wage element:

New minimum wage according to CCNL: €1,700
Offsetable wage absorbable: €300 (€500 – €200)
Total gross wage remains: €2,000

The employee therefore does not experience a real wage increase because the absorbable pay supplement offsets the previously granted "advantage."

Certain wage components may not generally be "used up" via an absorbable wage element:

Seniority allowances
These are based on their own legal basis and may not be "used up" by an absorbable pay supplement.
Wage components protected by the CCNL
If the collective agreement stipulates that certain increases or allowances are non-offsetable, this rule takes precedence.
Expenses and social benefits
Pure cost reimbursements (travel expenses, meals, accommodation) are not remuneration and cannot be used as an absorbable pay supplement.

Question 4

Affiliated Company in Italy  (ital.: società collegata)

Accepted Answer

An affiliated company (società collegata) is a company over which another company exercises significant influence (influenza notevole) without controlling it.

The legal definition can be found in Article 2359 of the Italian Civil Code (Codice Civile).

When is a company considered affiliated?

Significant influence is presumed by law if a company can exercise, at the ordinary shareholders’ meeting, at least:

20% of the voting rights;
in the case of a publicly traded company, at least 10% of the voting rights.

Thus, the decisive factor is generally the voting rights and not solely the size of the equity stake. The percentages mentioned represent a legal presumption. Significant influence may also exist in individual cases based on other circumstances.

Example

Alfa GmbH holds 30% of the voting rights in Beta GmbH. No other shareholder holds a controlling majority.

Since Alfa can exercise more than 20% of the voting rights, it is generally presumed that it has significant influence over Beta. Beta is therefore considered an affiliated company (società collegata).

Why is this classification important?

Classification as an affiliated company can be particularly significant for financial reporting, the valuation of equity interests, and the disclosure of ownership relationships.

The relationship between companies is also relevant under tax law. However, certain tax regulations sometimes use their own definitions for affiliated or controlled companies. The corporate law concept of società collegata under Art. 2359 of the Swiss Civil Code (ZGB) cannot therefore be automatically applied to all tax regulations.

This applies in particular to cross-border business relationships and the Italian regulations on transfer pricing.

Question 5

Annual Financial Statement (ital.: bilancio d’esercizio)

Accepted Answer

The annual financial statement (Bilancio d’esercizio) is the document that summarizes a company’s economic, asset, and financial position at the end of a financial year. It is not only a statutory requirement but also an essential tool for assessing the company’s performance and for meeting tax and company law requirements. The information contained in the annual financial statement is also of great importance to shareholders, banks, business partners, and public authorities.

The annual financial statement must be prepared in a clear, truthful, and comprehensible manner and serves, among other things, as the basis for determining taxable income. For companies limited by shares, the provisions of Articles 2423 et seq. of the Italian Civil Code (Codice Civile) apply.

Principles of Proper Accounting

The annual financial statement is prepared in accordance with the so-called Principles of Proper Accounting (OIC). The most important principles include:

Clarity and comprehensibility of presentation
Truthfulness and completeness of information
The principle of prudence in the valuation of assets and liabilities
The accrual basis principle, whereby income and expenses are allocated to the correct financial year
Consistency of valuation methods to ensure the comparability of annual financial statements

These principles are intended to ensure that the annual financial statement provides a reliable picture of the company’s financial position.

Components of the Annual Financial Statement

The Annual Financial Statement generally consist of the following documents:

Balance Sheet (Stato Patrimoniale) – The balance sheet shows the company’s financial position as of the balance sheet date. Assets are shown on the asset side, whilst equity and liabilities are shown on the liabilities side.
Income Statement (Conto Economico) – The income statement or profit and loss statement compares income and expenses for the financial year and shows whether a profit or loss was made.
Cash Flow Statement (Rendiconto Finanziario) – The cash flow statement documents change in liquidity and cash flows from operating, investing, and financing activities.
Notes to the Annual Financial Statement (Nota Integrativa) – The notes supplement the figures in the annual financial statement with explanations, valuation methods, and further information necessary for understanding the company’s financial position.

Depending on the size of the company, simplifications may be permitted, for example for small or micro-enterprises.

Deadlines for Approval and Filing

The annual financial statement must generally be approved by the shareholders within 120 days of the end of the financial year. Under certain conditions, this deadline may be extended to 180 days. The annual financial statement must then be filed with the Register of Companies (Registro delle Imprese) within 30 days.

Basis for the Tax Return

The annual financial statement is not only significant under company law but also forms the central basis for determining taxable profit. Based on the profit or loss under commercial law, the adjustments required for tax purposes are made to determine taxable income.

The annual financial statement thus forms the basis for preparing tax returns and, in particular, for calculating corporate income tax (IRES) and the regional tax on productive activities (IRAP).

Conclusion

The annual financial statement is far more than a legal obligation. It provides transparency regarding a company’s financial performance, serves as the basis for business decisions, and forms the foundation for determining taxable profit and preparing tax returns. Preparing it correctly and on time is therefore of paramount importance for any company operating in Italy.

Question 6

Annual VAT declaration (ital.: dichiarazione annuale IVA)

Accepted Answer

The annual VAT declaration (Dichiarazione annuale IVA), is a key tax return for businesses and freelancers in Italy. This return summarises the VAT data for an entire calendar year.

The return serves to finalise the VAT that has already been calculated monthly or quarterly. The result is either a VAT liability, a VAT credit or a balanced figure.

The annual VAT declaration should therefore not be confused with the periodic VAT settlement or the quarterly VAT report (LIPE). While the periodic VAT communications are submitted during the year, the annual declaration provides the final summary of the entire tax year.

Who is required to submit the annual VAT declaration?

In principle, all Italian VAT-registered entities are required to submit it. These include, in particular:

Freelancers and sole traders under the standard VAT scheme
Companies and permanent establishments
Foreign companies with direct VAT registration or a fiscal representative in Italy

Exceptions apply, amongst others, to taxable individuals under the flat tax regime (regime forfettario) or to entities that carry out exclusively VAT-exempt transactions. Whether an exemption actually applies must always be assessed on the basis of the specific activity.

What is included in the annual VAT declaration?

The annual VAT declaration primarily includes the following details:

Outgoing transactions and the VAT due on them
Incoming invoices and deductible input VAT
intra-Community purchases and sales
Periodic VAT payments already made
VAT credits offset via F24
the final VAT liability or the final VAT credit

The basis for this is provided by the VAT registers, electronic invoices and periodic VAT calculations. Errors in these areas can have a direct impact on the annual VAT declaration.

Deadline for submission

The annual VAT declaration must be submitted electronically to the Italian revenue agency between 1 February and 30 April of the following year.

Example: The annual VAT declaration for the year 2025 must be submitted in 2026.

Submission must be made exclusively electronically, either directly by the taxable person or via an authorised intermediary, such as a Chartered Accountant.

Outcome of the annual VAT declaration

If the annual VAT declaration results in a liability, the balance must generally be paid by 16 March using form F24.

Under certain conditions, payment may also be made in instalments. Interest is charged on late instalments. Furthermore, in certain cases, payment may be deferred until the deadlines for the income tax return; in such cases, a surcharge generally applies.

If, on the other hand, the return shows a VAT credit, this can be carried forward, offset against other taxes or, under certain conditions, refunded. Additional formal requirements may apply to the offsetting of larger credits, such as a certification notation (auditors' report).

VAT refund from the annual VAT declaration

A refund is particularly relevant where a business consistently pays more input VAT than it owes on output turnovers. Typical cases include substantial investments, a high volume of export turnovers, or other non-taxable or VAT-exempt turnovers.

The application for a refund is made directly in the annual VAT declaration.

A refund is not possible in every case. The Italian VAT regulations stipulate certain conditions. Typical cases include:

the business mainly generates turnover subject to lower VAT rates, but makes purchases subject to higher VAT rates
a significant proportion of the business consists of non-taxable or tax-exempt turnovers, such as export sales
the VAT credit arises from the purchase of capital goods
the business has ceased trading and a VAT credit remains
the business is a foreign company with direct VAT registration or a fiscal representative in Italy

In many cases, the VAT credit must exceed 2,582.28 euros. For refunds of up to 30,000 euros, neither a bank guarantee nor a certification notation, auditors' report is generally required. For higher amounts, additional formal requirements apply, in particular a certification notation, auditors' report or a bank guarantee.

Before submitting an application, you must therefore always check whether the legal requirements are actually met.

Why is the annual VAT declaration important?

The annual VAT declaration is not merely a formal obligation. It is also an important control mechanism. The revenue agency can cross-check the data contained therein against electronic invoices, quarterly VAT reports, payments and other declarations.

Typical sources of error include:

incorrectly recorded incoming invoices
incorrect application of the reverse charge mechanism
unreported foreign invoices
discrepancies between VAT registers and quarterly VAT reports
incorrectly calculated or uncarried-forward VAT credits

Careful day-to-day bookkeeping therefore makes it easier to prepare the annual return correctly.

Conclusion

The annual VAT declaration in Italy summarises all VAT-relevant data for a given year and determines the final VAT balance. It is mandatory for most businesses and freelancers with an Italian VAT number.

As the return is based on current accounting data, the correct recording of invoices, registers and periodic VAT returns is crucial.

Question 7

Asset account

Accepted Answer

An asset account is a central element of double-entry bookkeeping. It records the individual asset and liability items of a company and thus forms the basis for the balance sheet.

What is a balance sheet account?

A balance sheet account records asset and liability items on the balance sheet on a specific date. It thus reflects the current "balance" of an account – in contrast to income statement accounts, which show changes over a period of time (expenses and income).

Balance sheet accounts are opened at the beginning of the fiscal year with the opening balances from the opening balance sheet and closed again at the end of the year via the closing balance sheet. The balances recorded in these accounts are entered directly into the balance sheet.

A distinction is made between:

Asset accounts (use of funds): e.g., property, plant, and equipment, inventories, bank, cash, receivables
Liability accounts (use of funds): e.g., equity, liabilities, provisions

In Italian financial statements, the balance sheet accounts reflect the individual items of the balance sheet that must be reported in accordance with the provisions of the Civil Code and the accounting rules of the OIC principles (see lexicon entry "Balance sheet in Italy").

Examples of balance sheet accounts

Asset accounts are divided into fixed asset accounts and current asset accounts:

Fixed assets (tied up in the company for the long term):
- Tangible assets, e.g., buildings, machinery, office equipment (see glossary entry "Depreciation (ammortamento)")
- Financial assets
Current assets (available in the short term or intended for sale):
- Inventories (goods, raw materials)
- Cash / bank
- Trade accounts receivable
- Other receivables

Liability accounts are divided into equity and debt capital:

Equity:
- Subscribed capital / share capital
- Other equity (e.g., retained earnings, reserves)
Debt capital:
- Shareholder loans
- Liabilities to suppliers
- Tax and social security liabilities
- Other liabilities

Together, these balance sheet accounts form the structure of the balance sheet and show how the company is financed and how its funds are used.

Significance for entrepreneurs and HR managers

A basic understanding of balance sheet accounts is important for decision-makers in the company. It helps to:

manage liquidity
Bank, cash, and short-term liabilities show how much financial leeway is currently available and what payment obligations are due in the short term.
plan investments
Asset accounts, depreciation, and any leases provide information about how much the company has already invested and what financial impact new investments may have.
better classify personnel decisions
Wage and salary liabilities as well as provisions for severance pay/TFR reveal what long-term obligations exist towards employees (see glossary entry "TFR – Severance pay in Italy").
prepare for financing discussions
Balance sheet accounts form the basis for key figures such as the equity ratio or debt ratio, which are particularly important for banks and investors.

The balance sheet accounts thus provide the "raw data" for key balance sheet ratios, which play a decisive role in practice in credit negotiations, credit checks, and subsidy applications, among other things.

Question 8

Ateco Code (ital.: Codice Ateco)

Accepted Answer

The ATECO code is the system used in Italy to classify the economic activities of companies and freelancers. The abbreviation ATECO stands for “Attività Economiche”, i.e. economic activities. It is based on the European nomenclature NACE Rev. 2.1, which has been adapted by the Italian statistical office ISTAT to the specific characteristics of the Italian economy.

Purpose and areas of application

The ATECO code was originally developed for statistical purposes, such as the collection and evaluation of economic data. Today, it also plays a central role in many areas of administration:

Taxes: e.g. allocation to the reliability indices ISA (Indici Sintetici di Affidabilità fiscale) and determination of the income coefficient in the flat tax regime.
Social security (INPS): basis for allocation to the correct contribution classes and for the statistical classification of employers.
Subsidies and contributions: many grants, subsidies and PNRR measures are linked to specific ATECO codes.
Occupational safety / risk classes: assignment to industry risks and related training obligations.

Important: The ATECO code does not replace the detailed description of activities that must be provided to the Register of Companies in accordance with the Civil Code, particularly when founding or setting up a company.

Structure of the ATECO code

The classification is hierarchical and consists of letters and numbers:

Sections: 1 letter (macro sector, e.g. “C” – manufacturing)
Divisions: 2 digits
Groups: 3 digits
Classes: 4 digits
Categories: 5 digits
Subcategories: 6 digits

The new ATECO 2025 classification comprises over 3,250 activity codes and around 10,000 explanatory notes. When determining the ATECO code, companies must select the most precise available code that corresponds to their main activity. In addition to the main activity, further activities may be reported as secondary activities.

The transition to ATECO 2025

The new ATECO 2025 classification has been formally in force since 1 January 2025, replacing ATECO 2007 (updated in 2022). Its operational application in administration and practice began on 1 April 2025.

Key points:

For new registrations (new companies, freelancers or newly added activities) from 1 April 2025, activity codes are assigned according to the ATECO 2025 classification.
For existing companies, the Chamber of Commerce automatically carries out the reclassification based on a transition table developed by Istat. During an initial transition period, both the old ATECO 2007 code and the new ATECO 2025 code are visible in the extract from the commercial register.

Although the reclassification of activities is carried out automatically by the Chamber of Commerce, the previously reported old activity codes initially remain in the personal tax box of the Revenue Agency. There is therefore no immediate need for action – the update to the new activity codes according to ATECO 2025 will take place in the course of the first subsequent change notification.

Question 9

Attendance List/Time Sheet/Attendance Record (ital.: lista presenze)

Accepted Answer

The attendance register, in Italian lista presenze, is used for the monthly recording of the hours actually worked and employees’ absences. It is an important basis for the correct processing of payroll.

What is recorded in the attendance register?

For each employee, the following information in particular should be recorded:

hours worked,
overtime or additional hours,
holidays and rest days,
illness and accidents,
paid and unpaid absences,
other absences, e.g. maternity leave or parental leave.

This information is required for the so-called Libro Unico del Lavoro (LUL). The LUL is the statutory unified employment register in Italy and must contain a calendar of employees’ daily attendance.

How must attendance be recorded?

No specific format is prescribed for the company’s internal attendance register. Working hours can be recorded, for example, by means of a time clock system, HR software or a suitable Excel spreadsheet.

It is important that the information is complete and traceable and that it can be clearly assigned to the respective employee and month.

Attendance data should be provided to the payroll office in good time. As a general rule, the Libro Unico del Lavoro must be completed by the 16th day of the following month with the data relating to the respective month.

Correct attendance recording is particularly important for calculating salary, overtime, holidays and absences.

Further information can be found in our glossary articles on working hours and rest days as well as on the contents of a payslip.

Frequently asked questions (FAQ)

1. Is an attendance register mandatory in Italy?
A separate company attendance register is not mandatory. However, employees’ daily attendance data must be recorded in the Libro Unico del Lavoro.

2. What must the attendance register contain?
In particular, working hours, overtime, holidays, rest days as well as paid and unpaid absences.

3. Can the attendance register be kept in Excel?
Yes. In principle, internal attendance recording can also be carried out using Excel or other suitable software.

4. Must overtime also be recorded?
Yes. Overtime hours must be indicated separately in the attendance calendar.

5. How long must the Libro Unico del Lavoro be retained?
As a general rule, the LUL must be retained for five years from the last entry.

Question 10

Blood donation (ital.: donazione sangue)

Accepted Answer

Blood donations make an important contribution to healthcare provision. To make it easier for employees to give blood, Italian law provides for a paid day off under certain conditions. The rule applies to voluntary blood donations at an authorized blood donation center and obliges the employer to grant the corresponding time off work.

Who is entitled to paid time off?

All employees in the private sector are eligible, regardless of category or sector, including apprentices, domestic workers and agricultural workers. The following are not eligible:

self-employed persons and freelancers,
collaborators registered with the INPS Separate Account.

What conditions must be met?

In order for the employee to be entitled to the day off with pay and for the employer to be able to claim reimbursement, the following conditions must be met:

At least 250 grams of blood must be donated;
The donation must be made at an authorized blood donation center (e.g. AVIS);
The donation must be confirmed by a medical certificate. This must include, amongst other things, the tax number of the center, the donor’s details, and the date and time of the donation.

Duration of time off

Time off work for blood donation covers the entire day of the donation, regardless of the actual duration of the procedure.

Ineligibility for donation

If the employee is assessed as unfit to donate, they are not entitled to a full paid day off. Only the time required to determine the unfitness, carry out the associated procedures and return to work is remunerated. In this case too, an official certificate from the center is required. Possible reasons for ineligibility to donate include, for example, abnormal blood pressure, pulse or temperature, low iron levels or the use of certain medications.

Reimbursement to the employer

The remuneration advanced by the employer may be offset against the contributions owed to the INPS as part of the monthly contribution statement.

Question 11

Business trip (ital.: trasferta)

Accepted Answer

Definition

In Italy, “trasferta” refers to an employee’s temporary assignment at a location other than their usual place of work or the one specified in their employment contract. Field work may take place either within the country or abroad. Typical examples include business trips, client visits, or service or installation assignments.

During off-site work, the employee remains employed by their employer, insured, and properly registered.

Difference Between Business Travel, Posting, and Local Staff

The difference from a secondment is that, in the case of a business trip, the employee continues to perform their work under the direction and on behalf of their own company. In the case of a secondment, however, the employee is integrated into the host company’s organization and must follow its instructions.

In the case of a business trip abroad, the term “secondment” is often (and, in fact, incorrectly) used in practice. Consequently, the guidelines on secondment apply, for example, regarding the A1 certificate, any declarations required in the country where the work is performed, or the 183-day rule. Here you will find more details on posting to Italy.

If, on the other hand, an employee already resides in the country where they will be working, this is generally not considered a secondment but rather a so-called “local employee.” In this case, the person must be registered and insured through a local employer or an Italian company. Further details on this topic are available under “Registration as an Employer” in Italy and setting up a subsidiary in in Italy.

Expense Reimbursement and Compensation for Field Work

Various forms of expense reimbursement are provided for the duration of field service. For the duration of the business trip, the employee receives a so-called travel allowance. The travel allowance is exempt from taxes and social security contributions within the established limits if it covers expenses incurred outside the municipal area.

Provisions in the Employment Contract

Especially when business travel is scheduled on a regular basis, it is advisable to address this in the employment contract or in a separate written agreement. In this regard, it is recommended to specify in which cases field work may be required, what the employee’s usual place of work is, which expenses are reimbursable, and what method of expense reimbursement applies. Clear contractual provisions ensure legal certainty, prevent future disputes, and facilitate proper handling for payroll tax and social security purposes.

Frequently Asked Questions(FAQ)

1. Is a business trip the same as a secondment?
Not always. In common parlance, the two concepts are often confused. In the case of a business trip, the employee continues to work for their employer. In the case of a business trip abroad (which is commonly referred to as a “secondment”), registration requirements, the A1 certificate, and the minimum conditions stipulated by labor law in the country where the work is performed may also become relevant.

2. When is a business trip allowance tax-exempt?
In the case of a business trip outside the municipality where the employee’s usual place of work is located, a lump-sum amount of up to 46.48 euros per day in Italy or 77.47 euros abroad may remain tax-exempt. If expenses for lodging or meals are also reimbursed, these limits are reduced.

3. Do expenses always have to be documented with receipts?
If you submit a detailed expense report, yes. Expenses related to hotels, restaurants, trains, flights, taxis, or similar services must be supported by invoices, receipts, and proof of payment. Without adequate documentation, the reimbursement may become taxable.

4. What should companies regulate internally?
Companies should establish who authorizes business travel, which expenses are reimbursed, what supporting documents are required, which payment methods are permitted, and by when expense reports must be submitted.

Question 12

Cadastral category (ital.: categoria catastale)

Accepted Answer

The cadastral category describes the tax and cadastral classification of a property unit in the Italian building cadastre. It specifies the type of property, for example, a flat, office, shop, warehouse, garage, hotel or industrial building.

The cadastral category is shown on the cadastral extract. This document usually also contains further details about the property, such as the parcel number, building unit, cadastral class, type of property, area and cadastral yield.

The cadastral yield is a tax value assigned to every property unit recorded in the cadastre. It forms an important basis for various tax calculations, in particular for the cadastral value, the municipal property tax and certain taxes relating to purchase, gift or inheritance.

Difference between cadastral category and cadastral class

The cadastral category describes the type and intended use of the property. The cadastral class describes, within a category, the property’s yield level; in simple terms, this refers to its quality or tax yield potential in relation to comparable units.

An overview of the main building categories

The Italian cadastral categories are divided into groups. Groups A, C and D are particularly relevant in practice.

Category	Description	Typical examples
Group A	Flats, offices and similar units	A/1: High-end flats A/2: Flats of a standard quality A/3: Basic flats A/4: Basic or traditional flats A/7: Small villa-style residential buildings A/8: Villas, estates A/10: Offices
Group B	Buildings for public or community use	Schools, non-profit hospitals, public offices, libraries, museums, boarding schools, barracks
Group C	Business premises, warehouses, workshops and ancillary rooms	C/1: Shops and retail premises C/2: Storage rooms, cellars, storerooms C/3: Workshops C/6: Garages, parking spaces and carports C/7: Canopies
Group D	Properties with a specific commercial or industrial purpose	D/1: Production buildings D/2: Hotels and guesthouses D/7: Buildings for industrial activities D/8: Buildings for commercial or service activities
Group E	Properties with a specific public purpose	Railway stations, airports, bridges, lighthouses, buildings for public services or special public purposes
Group F	Provisional or special cadastral units	F/1: Urban areas F/2: Units at risk of collapse or unusable F/3: Buildings under construction F/5: Terraces or flat roofs

Why is the correct cadastral category important?

The correct cadastral category is important in several areas:

IMU and GIS: The category and the cadastral value determine the basis for calculating the municipal property tax (IMU); in South Tyrol, this is known as the GIS.
Purchase and sale: In the case of property transfers, the category is relevant to the tax assessment basis.
Gifts and inheritance: The cadastral category affects the basis of assessment for inheritance and gift tax, as well as for mortgage and cadastral tax.
Tax relief: Many forms of relief apply only to specific categories, such as relief for a primary residence and the flat-rate tax on the letting of residential property (cedolare secca).

Change of cadastral category

The cadastral category should correspond to the actual condition and permitted use of the property. If the use changes or structural alterations are carried out, an adjustment to the cadastral data may be required. A change to the cadastral category is effected via a technical cadastral notification submitted by an authorised technician.

Conclusion

The cadastral category is a key element of the Italian building cadastre. It not only indicates the type of property in question but also affects tax calculations, property transfers, lettings and tax relief.

Anyone buying, selling, letting, converting or using a property for business purposes in Italy should therefore check whether the category stated in the cadastral extract is correct and corresponds to the actual use.

Question 13

Cadastral income

Accepted Answer

The cadastral income is a fiscal value in Italy assigned to every real estate unit, specifically both buildings (fabbricati) and land (terreni). It does not represent the actual, real income generated by a property, but rather defines the normally average achievable income that a real estate unit should be capable of generating.

The cadastral income plays a central role in the taxation of real estate. It is crucial for:

Municipal real estate taxes (imposte municipali degli immobili) – based on this, the basis for calculating the municipal real estate tax IMU or GIS (Autonomous Province of Bolzano) and ILIA (Friuli Venezia Giulia Region) is determined.
The cadastral value (valore catastale) – this is derived from the cadastral income and forms the assessment basis for inheritance and donation taxes as well as mortgage and cadastral taxes.
The taxation of income from property (redditi fondiari) – it is used for the determination of income from property.

Determination of cadastral income for buildings

The cadastral income is determined by the responsible cadastral offices (uffici del catasto). Two factors are decisive here:

The size (consistenza catastale) – depending on the cadastral category, it is expressed in different units of measurement:
- Category A (residential units and offices): in rooms (vani)
- Category B (buildings with a social or community character, e.g., schools, hospitals, or libraries): in cubic meters (m³)
- Category C (buildings for commercial or diverse activities, e.g., shops, garages, or cellars): in square meters (m²)
- Category D (buildings with a special purpose, e.g., factories, hotels, or industrial facilities): in square meters (m²)
The valuation rate (tariffa d'estimo) – this is a numerical coefficient created by the cadastral offices. This varies depending on the location of the property and the typology or customary use (cadastral category or class).

The cadastral class (classe catastale) serves to further differentiate objects within the same cadastral group by taking into account, for example, the amenities and the size of the rooms.

For real estate units with a special purpose (Group D), the determination of the cadastral income is not carried out using standard tariffs, but through a direct appraisal by the responsible cadastral office.

Determination of cadastral income for land

The cadastral income for land is calculated differently than for buildings. For every plot of land used for agriculture, there are two values:

The ownership income (reddito dominicale) – this refers to the income attributed to the mere ownership of the land.
The agricultural income (reddito agrario) – this refers to the income attributed to the cultivation of the soil.

For both the ownership income and the agricultural income, there are officially determined valuation approaches (tariffe di estimo) per hectare. These depend on the type of use (qualità di coltura) of the land (e.g., grassland, forest, fruit growing) and the quality (classe) of the soil.

The ownership income and the agricultural income result from the multiplication of the land area by the respective valuation approaches.

Question 14

Cadastral value

Accepted Answer

The cadastral value (valore catastale) is a central fiscal value in Italy used for calculating taxes and duties related to the ownership and acquisition of real estate.

It is not intended to reflect the market value of a property, but rather serves as the tax assessment base on which the rates of various property-related taxes are applied. These include registration tax, mortgage and cadastral tax, gift and inheritance tax, as well as municipal property tax.

The cadastral value is calculated on the basis of the cadastral income of the respective property, which can be obtained from the cadastral extract.

For the calculation, the cadastral income must first be increased by 5 %. The revalued cadastral income is then multiplied by the following coefficients depending on the cadastral category:

Cadastral category	Description	Coefficient
A and C (except A/10 and C/1)	Dwellings and their appurtenances	120 or 110 in case of main dwellings
B	Public buildings such as schools, libraries or museums	140
A/10 and D	Offices, industrial buildings, hotels	60
C/1 and E	Shops and special properties such as bridges, churches	40.80

Example

From the cadastral extract of an office property in category A/10, a cadastral income of € 2,912.82 is shown. The cadastral value is then determined as follows:

first, the cadastral income is increased by 5 %, i.e. € 2,912.82 × 1.05. The resulting revalued cadastral income of € 3,058.46 is then multiplied by the coefficient of 60 for category A/10.

This results in a cadastral value for the office of € 3,058.46 × 60 = € 183,507.66.

Question 15

Cash limit in Italy

Accepted Answer

The cash limit defines the maximum amount that may be paid in cash in Italy. The purpose of this rule is to combat money laundering and tax evasion as well as to promote traceable payment flows.

Since 1 January 2023, the cash limit in Italy has been set at 4.999,99 €. Cash payments from €5,000 onwards are therefore not permitted and must be made using traceable payment methods:

Bank transfer
Debit or credit card
Bank or cashier’s cheque

Foreign tourists are exempt from this rule and may therefore make purchases of up to 15.000 € also in cash.

Prohibition of artificial splitting

It is not permitted to artificially divide a single transaction into several smaller cash payments below the threshold. Such an arrangement is considered an inadmissible circumvention of the cash limit.

Sanctions for violations

Sanctions range from 3.000 € to 50.000 € and apply to both the payer and the recipient. For amounts above 250.000 €, the penalty is multiplied by five.

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Question 16

Certification notation/Auditors' report (ital.: Visto di conformità)

Accepted Answer

The certification notation or auditors' report (Italian: Visto di conformità) is a formal audit note under Italian tax law. It was introduced by Decree Law No. 241/1997 and serves to confirm the formal correctness of certain tax information and its conformity with the available documentation.

It is a declaration of conformity issued by an authorised external expert which, unlike a substantive audit, ensures the formal consistency of the data before it is used for tax purposes.

Formal vs. qualified review

A basic distinction is made between:

"Visto leggero" – simple declaration of conformity:
The expert confirms only the formal correctness of the information and documents.

"Visto pesante" – qualified/extended declaration of conformity:
This involves a more in-depth review of the content in terms of tax applicability and compliance with legal requirements.

A certification notation is therefore a simple declaration of conformity (Visto leggero).

When is a certification notation required?

The certification notation is required in the following legally relevant cases in particular:

Compensation of large tax credits: If tax credits (VAT, Ires, Irpef, Irap) are to be used to offset other tax liabilities (horizontal offsetting), a certification notation is mandatory as soon as they exceed the threshold of 5,000 euros (*).

Refund of VAT credits without guarantee: When applying for a VAT refund of more than €30,000 (*) without providing a bank or insurance guarantee, the revenue agency requires the certification notation to confirm the formal legitimacy of the refund.

Superbonus and other tax benefits: For certain tax benefits such as the Superbonus (110% tax deduction for energy refurbishment, energy rehabilitation), the certification notation is also generally mandatory if the benefit is used directly in the tax return. In practice, it also had to be available for options such as the transfer of tax credits in order to formally prove that the requirements were met.

(*) Companies and freelancers can raise the thresholds mentioned when they hit a certain level of credibility in the ISA (Indici sintetici di affidabilità fiscale) reliability index calculation.

Who is authorised to issue a certification notation?

A certification notation may only be issued by authorised professionals. These must meet certain legal requirements and generally belong to one of the following groups:

Chartered accountants and tax advisors
Labour law consultants
Managers of tax assistance centres CAF (Centro di Assistenza Fiscale)

Additional requirements include authorisation to submit tax returns electronically to the revenue agency (Italian: Agenzia delle Entrate) and proof of appropriate professional liability insurance covering potential damages resulting from errors in the audit.

How does the certification notation work?

The process can be summarised in two steps:

Preliminary check: The authorised specialist checks the formal consistency between the declared tax data and the underlying documents (receipts, invoices, etc.).
Affixing the certification notation: After a successful review, the certification notation is affixed to the tax return or the relevant form – usually by signing or marking it accordingly – and the return is submitted to the revenue agency.

Why is there a certification notation?

The certification notation was introduced to achieve several objectives:

Prevention of abuse: It prevents the unauthorised compensation of large tax credits or the unlawful use of tax advantages.
Formal assurance: The certification notation gives the revenue agency the assurance that the information provided is consistent with the documentation.
Efficiency in audit procedures: It reduces the need for the revenue agency to identify simple formal errors itself.

Conclusion

The certification notation is an important formal legal instrument in the Italian tax system. It ensures that certain tax information and tax reliefs are formally correctly documented and checked before they are used for tax purposes. The obligation to attach it depends on the type of compensation or tax relief.

Question 17

Certified Email Address (PEC)

Accepted Answer

The PEC address (Posta Elettronica Certificata) is a certified electronic mail address, which, in Italy, has evidentiary value comparable to that of a registered letter with return receipt. When messages are exchanged between two PEC addresses, acceptance and delivery receipts are generated automatically. These receipts provide legally relevant proof of the date, time and integrity of the transmitted message. The content of the message, including any attachments, is also documented and protected against subsequent alterations.

Companies, corporations, freelancers and numerous commercial activities are legally required to use a PEC address. This address must be filed with the Companies Register. Since 2025, this obligation has also included the appointed directors of Italian companies: each director must apply for a personal PEC address and also register it with the Companies Register.

PEC enables efficient, secure and legally recognized communication with authorities, business partners and clients. It facilitates the management of deadlines, the documentation of notifications and various organizational processes.

Nevertheless, there are limitations: the PEC only has full legal effect within Italy and only if both the sender and the recipient have a PEC address. Messages sent to ordinary email addresses lose their certified status.

Although it is a paid service, PEC represents a key instrument of digital administration in Italy. Planned adjustments to the European eIDAS standards are expected to further harmonize and professionalize its use in the future.

Question 18

ComUnica (Comunicazione unica d’impresa)

Accepted Answer

The single business communication ComUnica (Comunicazione unica) is the central procedure through which sole proprietorships and companies in Italy have been able, since 2010, to submit all major notifications to the competent authorities in a single step. These include the establishment of a business, changes to company data, and the termination of business activities.

Instead of submitting several separate applications, the information is automatically forwarded to the Companies Register, the Italian Revenue Agency (Agenzia delle Entrate), INPS (the national social security institute), INAIL (the national Institute for Insurance against accidents at work), and — depending on the type of activity — to the competent craft authorities and municipalities.

The filing is carried out exclusively electronically, using a digital signature and a certified email address (PEC).

Since ComUnica informs several authorities at the same time, the procedure is primarily intended to simplify bureaucratic requirements and ensure a uniform and efficient notification process. In practice, ComUnica is usually prepared and submitted by a notary or the competent tax advisor.

Question 19

Controlling Company (ital.: società controllante)

Accepted Answer

A controlling company (società controllante) is a company that can exercise significant or controlling influence over another company. The other company is referred to as a controlled company (società controllata).

The basic definition can be found in Article 2359 of the Italian Civil Code (Codice Civile).

When is a company considered a controlling company?

In particular, a company is considered controlled if another company:

holds the majority of voting rights at the ordinary shareholders’ meeting;
even without an absolute majority, holds sufficient votes to exercise controlling influence over the ordinary shareholders’ meeting;
is subject to controlling influence due to specific contractual relationships.

In the first two cases, voting rights that can be exercised through controlled companies, trustees, or intermediaries are also taken into account. Thus, control can also exist indirectly across multiple corporate levels.

Example

Alfa GmbH holds 70% of the voting rights in Beta GmbH. Alfa is therefore the controlling company (società controllante), while Beta is the controlled company (società controllata).

However, a stake of more than 50% is not always required. For example, if a shareholder permanently holds sufficient votes to determine the decisions of the shareholders’ meeting due to a highly fragmented ownership structure, a controlling position may also exist.

What is the significance of control?

The existence of a controlling relationship may be relevant, among other things, for financial reporting, consolidated financial statements, taxation, and obligations under corporate law. In this context, certain tax regulations sometimes apply their own criteria to the concept of control.

For corporate groups, the regulations on the management and coordination of companies (direzione e coordinamento) may also be relevant. In these cases, there are, among other things, special transparency and disclosure obligations.

Question 20

Cooperatives (ital.: società cooperative)

Accepted Answer

A cooperative is a specific type of company in which the primary focus is not solely on making a profit, but above all on promoting the interests of its members. The members join together to pursue economic, social or professional objectives collectively.

The legal basis for cooperatives is set out in Articles 2511 et seq. of the Italian Civil Code.

Characteristics of a cooperative

A cooperative is characterized in particular by the following features:

Open membership: New members may be admitted subject to certain conditions; members may also resign.
Member participation: In principle, each member has one vote, regardless of how much capital they have contributed.
Benefits for members: The cooperative’s activities are primarily aimed at promoting the economic or professional interests of its members.

Cooperatives may, for example, be established by employees, producers, farmers or consumers.

Predominantly mutual

An important distinction is that between cooperatives with predominant mutuality and other cooperatives.

A cooperative has this status if it carries out its activities predominantly with or for the benefit of its members. This classification is particularly relevant for the application of certain tax concessions.

Formation and registration

The following steps, in particular, are required to set up a cooperative:

Drafting of the memorandum and articles of association by a notary
Entry in the Register of Companies
Entry in the Register of Co-operatives

In principle, a cooperative can be formed with just a small number of members, provided the legal requirements are met.

Taxation of cooperatives

Cooperatives are generally subject to the Italian corporate tax (IRES). Further information on IRES can be found in our glossary entry on IRES.

Special tax rules apply to cooperatives. In particular, cooperatives with a predominantly mutualist structure may, under certain conditions, benefit from tax advantages, for example in connection with the allocation of profits to indivisible reserves.

Question 21

Corporate Income Tax IRES in Italy (Imposta sul Reddito delle società)

Accepted Answer

IRES is the Italian corporate tax – that is, the tax on the profits of companies. It is a proportional tax: the tax rate remains the same, regardless of the amount of profit. It is governed by the Consolidated Income Tax Law (TUIR, Presidential Decree No. 917/1986). IRES replaced the former IRPEG in 2004.

Who is liable to pay IRES?

According to Article 73 of the TUIR, the following, amongst others, are liable to pay IRES:

companies with registered offices in Italy: limited liability companies (Srl), public limited companies (SpA)
cooperatives with their registered office in Italy
public and private bodies with their registered office in Italy
permanent establishments or branch offices of foreign companies in Italy

Companies resident in Italy are taxed on their worldwide income (worldwide income principle). Bilateral double taxation agreements apply to prevent double taxation.

Partnership companies, sole traders and freelancers are not subject to IRES. Their profits are attributed to the partners or owners and taxed under IRPEF.

The IRES tax rate for 2026

The standard IRES rate is 24%. It has remained unchanged since 2017 and will also apply for the 2026 tax year.

Certain credit institutions and financial intermediaries are generally subject to a supplementary IRES tax. In addition, further special provisions apply to individual companies.

Historical IRES rates

Year	Corporation tax rate
2000	37% (IRPEG)
2001–2002	36% (IRPEG)
2003	34% (IRPEG)
2004–2007	33%
2008–2016	27.5%
from 2017	24%

Special case: ‘IRES premiale’ (tax year 2025 only)

The 2025 budget law (Act No. 207/2024, Art. 1, paras. 436–444) introduced a one-off reduction in the tax rate from 24 per cent to 20 per cent – the so-called ‘IRES premiale’. The implementing provisions are set out in the Ministerial Decree of 8 August 2025. However, several conditions must be met simultaneously (e.g. investment in new capital goods in the Transition 4.0 or 5.0; the average number of work units must not fall below the three-year average; and at least 80 per cent of the 2024 profit must be allocated to a non-distributable reserve and retained in equity until the end of 2026). Consequently, very few companies made use of this incentive.

The tax relief applies exclusively to the 2025 tax year. The 2026 budget law did not extend the measure.

How is the tax base calculated?

The starting point is the profit as shown in the balance sheet. From this, the taxable profit is calculated:

Pre-tax profit under commercial law as shown in the income statement (profit and loss account)
Tax adjustments (rettifiche fiscali) increase or reduce the result. Examples include:
- Car expenses that are not deductible or only partially deductible
- Telephone expenses that are only partially deductible
- Income not subject to tax
- Interest that is not deductible due to the interest limitation rule
This step is referred to as the tax plus-minus calculation.
Further deductions, e.g. the set-off of loss carry-forwards

Loss carry-forward

Losses from the first three financial years: no time limit and available for full offset.
Subsequent losses: can be carried forward indefinitely, but only up to 80% of the tax base for the respective year.

Calculation example

Item	Amount
Profit	€100,000
Tax adjustments	+ €30,000
Taxable income	€130,000
IRES 24%	€31,200

Payment and deadlines

IRES is paid electronically using form F24 – in two instalments (acconti) and a final payment (saldo):

Balance payment for the previous year and 1st advance payment (40% or 50%): by the last day of the sixth month – i.e. 30 June for a financial year coinciding with the calendar year. Tax Code 2003 or 2001.
Second advance payment (50% or 60%): by 30 November or the eleventh month following the end of the financial year. Tax Code 2002.

For entities applying the ISA, the advance payments are split 50% and 50%. The deadlines are frequently extended by decree – for example, to 20 July in 2026. Payment within 30 days of the due date is possible subject to a surcharge of 0.4% – 0.8%. The balance payment and the first advance payment may also be paid in instalments.

IRES, IRAP and IRPEF compared

	Subject to tax	Tax rate
IRES	Income of limited companies	24%
IRAP	Regional net production value; personnel and financing costs are partially non-deductible	generally 3.9%, varying by region
IRPEF	Income of natural persons	progressive by tax bracket

Corporations pay both income taxes: IRES and IRAP. During profit distribution to shareholders, dividends are subject to further taxation.

Question 22

Depreciation

Accepted Answer

Depreciation refers to the annual reduction in value of a company's tangible and intangible fixed assets. In Italy, depreciation is regulated both in the civil code and in the Income Tax Consolidation Act (in particular Articles 102 and 103 of the Income Tax Consolidation Act).

Under civil law and tax basis

Under civil law, depreciable assets must be depreciated as soon as they are ready for use. The distribution is made over the expected useful life.

For tax purposes, the Income Tax Consolidation Act determines the extent to which depreciation is deductible as a business expense:

Tangible capital goods, investment goods, fixed assets (e.g., machinery, vehicles, office equipment): Section 102 Income Tax Consolidation Act
Intangible capital goods, investment goods, fixed assets (e.g., patents, trademarks, software): Art. 103 Income Tax Consolidation Act

Since commercial and under tax law regulations can differ, temporary differences between the commercial and tax balance sheets often arise.

Depreciation rates and depreciation tables

The depreciation rates permitted for tax purposes are taken from the depreciation tables. These tables differentiate between industries and types of assets and specify a maximum rate per year.

Key points in practice:

In the year of acquisition, only half of the annual rate may generally be applied to tangible fixed assets (half-year rule).
Low-value assets with an acquisition value of up to €516.46 can be depreciated in full immediately in the year of purchase.

Tangible and intangible capital goods, investment goods, fixed assets

Tangible capital goods, investment goods, fixed assets

Typical examples:

Buildings and structures
Machinery, technical equipment, production facilities
Vehicles, office equipment, hardware

Depreciation begins in the financial year in which the asset is ready for use and is calculated using the maximum rates specified in the tables.

Intangible capital goods, investment goods, fixed assets

Typical examples:

Usage rights and copyrights, patents
Trademark rights
Licenses, concessions, software
Goodwill

Special tax limits often apply to intangible assets, e.g.:

Certain rights: depreciation only up to a specified percentage per year
Trademarks and goodwill: often very long depreciation periods (e.g., 18 years)

Depreciation methods in Italy

The following depreciation methods are permitted and commonly used in practice:

Straight-line depreciation
The same percentage is applied each year. This method is the most widely used.
Declining balance depreciation
Higher depreciation rates in the first few years, then decreasing. It is only used in certain cases or under special regulations.
Performance-based depreciation
Depreciation is based on actual use, e.g., number of units produced or operating hours. It is rather exceptional and must be compatible with the maximum tax rates.

Plausibility, documentation, and consistent application are crucial for tax recognition.

Significance for earnings and taxes

Depreciation has both accounting and tax implications:

In the income statement, it reduces the annual result.
In the balance sheet, it reduces the book value of the assets and reflects their performance.

For tax purposes, depreciation reduces the tax base for corporate income tax and regional taxes, within the permissible limits. For more detailed information, please refer to our glossary entries on corporate income tax and personal income tax.

Frequently asked questions (FAQ)

1. When can I start depreciation on a new asset?
From the financial year in which the asset is ready for use. The delivery date is not decisive.

2. Do I always have to depreciate at the maximum rates in the tables?
No. The tables set tax limits. Under commercial law, a different economically justified expected useful life can be applied.

3. What happens if I depreciate more than is permitted for tax purposes?
The commercial balance sheet remains unchanged. For taxes, the excess amount is corrected off-balance sheet and is only deductible in later years.

4. Can low-value assets be depreciated immediately?
Yes, immediate depreciation is possible up to a value of €516.46 per asset.

5. How is intangible assets such as software depreciated?
Fixed tax rules apply to intangible assets, e.g., limited maximum rates or prescribed expected useful lives. Under commercial law, a realistic, different expected useful life can be chosen.

Question 23

Direct taxes

Accepted Answer

Direct taxes are assessed and collected directly from the taxpayer and represent one of the State’s most important sources of revenue. The most important direct tax is income tax.

Substitute taxes (Imposte sostitutive)

Substitute taxes are flat or special taxes that apply to certain types of income instead of regular IRPEF or IRES. They are often used to simplify taxation and are usually charged at a fixed rate.

Flat tax on rental income (cedolare secca)
Substitute tax for small taxpayers (regime forfettario)

Question 24

Double taxation agreement (ital.:  accordo sulla doppia imposizione)

Accepted Answer

Double taxation of income occurs when two countries have the right to tax the income. This results in a taxation conflict.

To protect taxpayers, double taxation agreements (DTAs) have been concluded. As a rule, these protect against double taxation in transactions with other contracting states. The template for this is provided by the OECD Model Tax Convention, which countries use as a guide when concluding and drafting their bilateral double taxation agreements.

Double taxation agreements generally take precedence over domestic tax regulations. In Italy, this is stipulated in Article 75 of Presidential Decree No. 600/1973 (DPR 600/1973). However, national tax law remains in force and is merely superseded by the agreement, not replaced.

Insofar as domestic regulations are more favourable to the taxpayer, they may also be applied in deviation from the double taxation agreement in accordance with Article 169 of the Italian Income Tax Code (TUIR).

Typical types of income in the DTA

Income from employment

In the case of employment, the taxation rights of the country of residence and the country of employment often overlap.

However, most double taxation agreements stipulate that taxation is generally the responsibility of the country of employment, i.e. the country in which the work is actually performed. However, special exceptions may apply to short-term work assignments of less than 183 days.

Company profits / self-employment

Under the system of double taxation agreements, company profits and income from self-employment are generally taxed in the country of residence. The country of employment only has a right of taxation if there is a permanent economic establishment or a permanent establishment there.

Dividends, interest, royalties

Dividends, interest and royalties are capital income-related earnings arising from the transfer of capital or the use of rights.

Double taxation agreements therefore regularly restrict the right of taxation of the source country and assign the main right of taxation to the recipient's country of residence.

Real estate

Income from immovable property, in particular from the letting, leasing or sale of real estate, has a close territorial connection. Real estate is location-bound and cannot be moved across borders.

Double taxation agreements therefore generally assign the right of taxation to the country in which the real estate is located. The taxpayer's country of residence avoids double taxation by exempting or crediting the tax levied in the country where the property is located.

Artists and athletes

Under double taxation agreements, income earned by artists and athletes is generally taxed in the country where they perform, regardless of the length of their stay.

The above lists are not exhaustive, but cover the types of income that are most relevant in practice for companies in connection with their activities in Italy.

In principle, double taxation agreements do not treat income randomly, but follow a clear economic logic: taxation takes place where a service is provided, assets are located or capital is used.

Practical information on relief or exemption from withholding tax (DTA)

The tax relief provided for in double taxation agreements does not take effect automatically in practice. Therefore, applications for exemption from withholding tax must be submitted regularly or, if the tax has already been withheld, applications for refunds must be submitted in the country of origin.

The nature and procedure of these processes are governed by the domestic law of the respective source country and, in addition to the application for exemption or reduction of withholding tax, usually require proof of tax residence and DTA eligibility.

Question 25

DURC (ital.: Documento Unico Regolarità Contributiva DURC)

Accepted Answer

The DURC (Documento Unico di Regolarità Contributiva) is a certificate confirming that a company is compliant with its social security and insurance contribution obligations in Italy. It verifies that no outstanding contribution debts exist towards the competent authorities.

The document is mainly issued/verified by:

INPS (social security authority)
INAIL (workers’ compensation authority)
Construction funds (Casse Edili), where applicable

When is a DURC required?

A DURC is mandatory in various situations, including:

participation in public tenders
execution of public contracts
payment of public grants or subsidies
construction and works contracts
certain private contractual relationships with general contractors

Without a valid DURC, payments may be suspended or contracts may not be finalized.

Who is affected?

Generally:

employers
companies with employees
construction companies
self-employed individuals subject to contribution obligations

A valid DURC is often required throughout subcontracting chains.

Frequently Asked Questions (FAQ)

1. How long is a DURC valid?
Generally 120 days from the date of issue.

2. Can a company without employees need a DURC?
Yes, for example in public contracts or if registered with INAIL.

3. What happens in case of contribution arrears?
A deadline is granted to regularize the situation; otherwise, the DURC will be negative.

4. Is a DURC required for private contracts?
Often yes, especially in construction and works contracts.

5. Who can apply for a DURC?
The company itself or an authorized professional (e.g., labour consultant or tax advisor).

Question 26

Duties and Liabilities of Directors in Italian Srl Companies

Accepted Answer

The directors (amministratori) of an Italian limited liability company (Srl) bear a central responsibility for the management, control, and crisis prevention of the company. Their duties are governed by the Italian Civil Code (Codice Civile), particularly in Articles 2475 et seq. and 2476 of the Civil Code.

Organizational forms of management

The management of an Srl can be structured in different ways:

Sole director (amministratore unico)
Several directors with individual signing authority (amministrazione disgiuntiva)
Several directors with joint signing authority (amministrazione congiuntiva)
Board of directors (consiglio di amministrazione) as a collective body

Depending on the structure, the decision-making and representation powers vary. In a board of directors, representation is usually held by the president or the delegated directors.

Main duties of directors

The directors represent the company externally and are responsible for its ordinary and extraordinary management. They must:

establish an adequate organizational, administrative, and accounting structure;
implement early warning systems for identifying business crises;
promptly adopt appropriate restructuring measures in the event of a crisis;
prepare the annual financial statements and – where required by law – a half-year report;
fulfill the statutory bookkeeping and filing obligations.

Liability in case of losses

If the company’s share capital decreases significantly, specific obligations apply under Articles 2482-bis and 2482-ter of the Civil Code.

Loss exceeding one third of the share capital (Art. 2482-bis Civil Code)

When a loss exceeding one third of the company’s share capital is ascertained, the director must convene a shareholders’ meeting within 30 days.

The meeting may decide to:

carry the loss forward to the following financial year;
restructure the company’s debts;
have shareholders make capital contributions to cover the losses;
evaluate a merger or transformation.

If the loss persists in the following year, a reduction or recapitalization of the share capital becomes mandatory.

Loss below the statutory minimum capital (Art. 2482-ter Civil Code)

If the capital falls below €10,000, the company must either:

make additional capital contributions;
reduce and simultaneously increase the capital;
transform into a company form without a minimum capital requirement; or
resolve to liquidate the company.

Liability of directors (Art. 2476 Civil Code)

Directors are jointly and severally liable towards the company, its shareholders, and third parties for damages resulting from intentional or negligent breaches of their duties.

They are particularly liable for:

violations of laws or the company’s articles of association;
inadequate supervision of delegated functions;
impairment of the company’s assets.

An action for liability may be brought by the company, the shareholders, or the creditors if the company’s assets are insufficient to satisfy their claims.

Criminal liability always remains personal to the director. Each shareholder may, in the event of serious irregularities, bring an action for liability and request the dismissal of the director.

Duties of directors under the Code of Business Crisis and Insolvency

With the entry into force of the Code of Business Crisis and Insolvency (Codice della crisi d’impresa e dell’insolvenza, Legislative Decree No. 14/2019), the responsibilities of directors in the field of crisis prevention and management have been significantly expanded. The aim is to identify business crises at an early stage and adopt appropriate measures to prevent insolvency.

In addition to the obligations already mentioned, directors must carry out the following activities:

implement internal early warning systems (indicatori della crisi);
take appropriate restructuring measures at the first signs of financial distress;
where applicable, use the legal instruments provided for the out-of-court settlement of crises (e.g. composizione negoziata della crisi).

Failure or delay in taking such measures may be considered a breach of duty and may entail both civil and criminal consequences. The crisis legislation thus emphasizes the preventive responsibility of directors to ensure business continuity and protect the interests of creditors.

Frequently Asked Questions (FAQ)

1. Who qualifies as a director of an Italian Srl?

Directors (amministratori) are the persons responsible for managing and representing the Srl, such as the sole director or the board of directors.

2. What are the main duties of directors?

They must ensure proper organization and accounting, identify risks early, and take appropriate measures to manage financial crises.

3. When are directors personally liable?

Directors are personally liable for breaches of duty, violations of law, or gross negligence, both civilly and in some cases criminally.

4. What happens if more than one third of the capital is lost?

The director must convene a shareholders’ meeting within 30 days to decide on actions such as recapitalization or liquidation.

5. What does the Business Crisis Code require from directors?

It requires directors to implement early warning systems and adopt restructuring measures to prevent insolvency.

Question 27

Electronic invoice (ital.: fattura elettronica)

Accepted Answer

Electronic invoicing has been mandatory in Italy since 1 January 2019 and replaces the traditional invoice in paper or PDF form. It must be created in a standardized XML format and transmitted via the state exchange system SdI (Sistema di Interscambio) to the Italian tax authority (Agenzia delle Entrate).

After transmission, the SdI checks the invoice for formal and technical criteria and then forwards it to the invoice recipient.

Affected are companies and freelancers who hold a VAT number. Excluded are healthcare services provided to private individuals. For these services, there is a permanent prohibition—due to data protection reasons—on transmitting invoices electronically via the SdI.

Legal relevance

Outgoing invoices that have not been transmitted electronically to the SdI in XML format are deemed not issued and have no legal relevance.

Process of electronic invoicing

Creation of the electronic invoice in the form of an XML file
Electronic transmission to the SdI via software or an online portal
Verification and feedback by the SdI

Important:

Delivery to the recipient

Identification and delivery of the recipient

The identification of the invoice recipient is based on:

the VAT number (for companies and freelancers), or
the tax code (for private individuals and organizations without a VAT number).

For technical delivery, the following details are relevant:

Special cases

If the recipient is a private individual, a foreign customer, or an organization without a VAT number for whom no recipient code or certified email address (PEC) is available—or if these details are not known—the following recipient code must be used:

0000000 for customers based in Italy
XXXXXXX for customers based abroad

In these cases, the SdI cannot deliver the invoice to the customer. The issuer is therefore obliged to additionally provide the recipient with a copy in paper or PDF form.

Registration of a preferred channel

In the online portal of the Italian tax authority, a preferred receiving channel for electronic invoices can be registered. In this case, the SdI automatically assigns all invoices to this channel—regardless of whether the individual invoice indicates a recipient code, a PEC email address, or no delivery channel (code “0000000”).

Status notifications by the SdI

After completion of the verfication, the invoice issuer receives one of the following status notifications:

Rejected (scartato): The invoice was rejected due to technical or formal errors and must be corrected and resubmitted.
Delivered to the recipient (consegnato al destinatario): After successful verification, the invoice was properly delivered to the customer.
Delivery failed: The invoice was accepted after verification but could not be delivered due to missing delivery channels. A copy in paper or PDF form must additionally be provided. The invoice is nevertheless considered tax-compliant and legally valid.

Additional statuses for public bodies

If the invoice recipient is a public body (e.g. a municipality), a further 30 days are available after delivery for substantive review:

Accepted (accettata)
Not accepted (non accettata): The invoice was rejected due to substantive deficiencies and must be corrected
Time limit expired (decorrenza termini): No feedback within 30 days; the invoice is automatically deemed accepted

Frequently Asked Questions (FAQ) on Electronic Invoicing

1. Since when has electronic invoicing been mandatory in Italy?
Electronic invoicing has been mandatory in Italy since 1 January 2019. It replaces the traditional invoice in paper or PDF form and must be transmitted in XML format via the state exchange system SdI (Sistema di Interscambio).

2. Who is obliged to issue electronic invoices?
Companies and self-employed professionals with an Italian VAT number are obliged to issue electronic invoices. Excluded are healthcare services provided to private individuals, for which a permanent prohibition on transmission via the SdI applies for data protection reasons.

3. What is the legal effect of an invoice not transmitted electronically?
Outgoing invoices that have not been transmitted electronically to the SdI in XML format are legally deemed not issued and have no tax or legal relevance.

4. What happens if an electronic invoice is rejected by the SdI?
If an invoice is rejected by the SdI due to formal or technical errors (scartato), it is considered not transmitted. In this case, the invoice must be corrected and retransmitted electronically.

5. How is delivery handled if no recipient code or PEC is available?
If no recipient code or certified email address (PEC) is available or known, the following recipient code must be indicated:

“0000000” for customers based in Italy and
“XXXXXXX” for customers based abroad.

In these cases, the SdI cannot deliver the invoice. The issuer must therefore additionally provide the recipient with a copy in paper or PDF form.

Question 28

Employer of Record (EOR) in Italy

Accepted Answer

An Employer of Record (EOR) is a model in which an employee is not directly employed by the company for which they actually work, but by an intermediary “provider”. This provider is the formal employer. It typically handles the employment contract, payroll processing, salary payments, and the withholding of income tax and social security contributions. However, the actual work is performed for another company, which also manages the work from a technical standpoint and defines the employee’s tasks, goals, and operational assignments.

It is precisely this separation between the formal employer and the actual user of the work that is the legally sensitive issue in Italy:

An Employer of Record is not automatically equivalent to a traditional staffing agency. In Italy, however, a model of this type may be legally classified as staffing, depending on its specific configuration. What matters is not the name, but who actually acts as the employer and who exercises managerial authority.

Therefore, particular caution is required with EOR structures in Italy. This is because not every provider is permitted to “assign” employees to third parties. Decree 276/2003 requires staffing agencies to be registered with the Ministry of Labor. Anyone wishing to engage in temporary staffing must obtain the necessary legal authorization.

This is precisely why an Employer of Record model can become problematic if it functions economically like a staffing arrangement without the provider having the necessary authorization.

Frequently Asked Questions (FAQ)

1. What is an Employer of Record?
An Employer of Record is a service provider that formally hires employees and assumes the administrative obligations of an employer, while the work is often performed for another company.

2. Is an Employer of Record permitted in Italy?
It is not the name that matters, but the actual structure. In Italy, an EOR model may fall under the category of temporary staffing and is therefore permitted only within the limits set by law.

3. Why is the right to issue instructions so important?
Because the legal classification depends on who actually directs and controls the work. If this function lies with the user of the labor, this indicates temporary staffing.

4. Is direct employer registration in Italy the same as EOR?
No. In the case of employer registration, the foreign company directly hires the employee and directly fulfills its obligations as an employer in Italy. In EOR, however, a third party acts as the formal employer.

5. What are the risks associated with an EOR model?
Primarily labor law risks related to unauthorized temporary staffing. In addition, tax and social security issues may also arise.

Question 29

Employer-provided housing

Accepted Answer

If an employer provides an employee in Italy with an apartment, this generally constitutes a fringe benefit, as it is an advantage that the employee receives not in cash but in the form of a benefit in kind.

The tax treatment depends on whether the apartment is provided free of charge, whether the employee pays rent or a contribution toward costs, and whether the use of the accommodation is mandatory for work-related reasons.

Basic rule: Apartment as a fringe benefit

According to Art. 51(4)(c) of the TUIR, for apartments provided to the employee for rent, use, or loan, the rent paid by the employer is not simply treated as a taxable benefit. The decisive factor is generally the difference between the property’s Cadastral income, increased by the housing-related costs borne by the employer, and reduced by the amount the employee pays for its use.

Example:

The employer rents an apartment for an employee. The cadastral value of the apartment is 1,200 euros per year. In addition, the employer covers 1,000 euros annually in ancillary costs, such as condominium fees, electricity, heating, or water. The tax base is therefore 2,200 euros per year.

If the employee pays no contribution toward the costs, 2,200 euros must generally be reported as a non-cash benefit on the pay stub. If, however, the employee pays 1,500 euros annually to the employer, the taxable non-cash benefit is reduced to 700 euros.

What if the employer rents the apartment themselves?

It generally makes no difference to the employee whether the apartment belongs to the employer or whether the employer rents it from a third party. The rent actually paid by the employer is not automatically the amount that is taxable for the employee. The specific valuation under Art. 51 TUIR remains decisive.

However, the actual rent is important for the employer, particularly regarding the extent to which the costs are tax-deductible.

What if the apartment is used by multiple employees?

If the same apartment is made available to several employees, the calculated total value must be apportioned. If the apartment is used equally by two employees and the total taxable value is 2,200 euros per year, 1,100 euros per employee would be allocated.

In cases of unequal use, such as rooms of different sizes or differently allocated living spaces, a pro-rata allocation based on actual use may be more appropriate.

Is it necessary for the employee to change their registered residence?

For the employee’s taxation, it is generally not necessary for the employee to change their registered residence to the provided apartment. Even an apartment used only during the week or for professional reasons is relevant for tax purposes.

The change of residence is primarily relevant from the employer’s perspective. Rent and maintenance costs for apartments provided to employees can only be deducted up to the amount of the non-cash benefit taxed to the employee. A more favorable rule applies if the employee moves their registered residence to the municipality where they work for professional reasons: In this case, the costs for the year of the move and the two subsequent tax periods may generally be fully deductible.

Are there special cases in which the above calculation does not apply?

Employees required to live in the accommodation: If there is a genuine work-related obligation to reside in the accommodation—such as for certain janitorial, concierge, or on-call duties—a special rule applies. In this case, only 30 percent of the calculated difference is treated as a taxable non-cash benefit. However, this rule should only be applied if the residency requirement is justified in a comprehensible manner under the employment contract and organizational structure.

Tourism: If an employee is merely provided with a staff room as part of “board and lodging” under the collective agreement, this is not treated as a benefit in kind; instead, the daily rates prescribed by the collective agreement are deducted.

Conclusion

An apartment provided by the employer in Italy must generally be assessed as a potential benefit in kind. If the employee pays nothing, the taxable housing value is included on the pay stub. If the employee contributes to the costs, this reduces the benefit. In the case of shared use, the total value must be apportioned.

Question 30

Employment contract (ital: contratto di lavoro)

Accepted Answer

Il contratto di lavoro disciplina il rapporto tra datore di lavoro e lavoratore. Il lavoratore si impegna a svolgere la propria attività secondo le direttive del datore di lavoro; il datore di lavoro, a sua volta, è tenuto a corrispondere la retribuzione concordata.

Il contratto di lavoro deve essere scritto?

In linea generale, un contratto di lavoro può essere concluso anche verbalmente. Nella pratica, tuttavia, la forma scritta è fondamentale. Alcuni elementi, come il periodo di prova, il termine del rapporto o particolari condizioni di lavoro, devono essere concordati per iscritto e sottoscritti prima dell’inizio dell’attività per essere validi.

Inoltre, in Italia il datore di lavoro è soggetto a specifici obblighi informativi nei confronti del lavoratore. Devono essere comunicate in modo chiaro le condizioni essenziali del rapporto, in particolare mansioni, luogo di lavoro, orario di lavoro, retribuzione e contratto collettivo applicato.

Cosa dovrebbe contenere un contratto di lavoro?

Un contratto di lavoro italiano contiene generalmente le seguenti informazioni:

Particolarmente importante è il contratto collettivo applicato, il cosiddetto CCNL. Esso disciplina molti aspetti pratici, come retribuzione minima, inquadramento, periodo di prova, termini di preavviso, straordinari, ferie e fondi integrativi. Si veda anche la voce del lessico Contratto collettivo in Italia.

Rapporto con il contratto collettivo

Il contratto individuale di lavoro non può derogare in peggio alle disposizioni di legge e al contratto collettivo. Eventuali deroghe sono generalmente ammesse solo se più favorevoli per il lavoratore. Per questo motivo è particolarmente importante una corretta classificazione in base all’attività svolta e al contratto collettivo applicabile.

Conclusione

Un contratto di lavoro chiaro e ben strutturato crea certezza giuridica ed evita successive incertezze. Per le imprese in Italia rappresenta un documento centrale in ogni assunzione e dovrebbe essere sempre coordinato con le disposizioni di legge e con il contratto collettivo corretto.

Question 31

Enasarco (Ente nazionale di assistenza per gli agenti e i rappresentanti di commercio)

Accepted Answer

ENASARCO is the national welfare and assistance institution for commercial agents and representatives in Italy. Registration and the payment of contributions are mandatory for all commercial agents and representatives operating on Italian territory.

ENASARCO benefits

Old-age pension.
Disability pension.
Pension in case of incapacity for work.
Survivor’s pension.
F.I.R.R. (Fondo Indennità di Risoluzione Rapporto), a fund that pays an indemnity to the agent upon termination of the agency relationship.

Contribution requirements

The contribution obligation to ENASARCO applies to agents and representatives who carry out their activity in Italy on behalf of Italian or foreign principals with a registered office or branch in Italy. Registration must be completed by the principal within 30 days from the beginning of the mandate.

Contributions are calculated quarterly on all amounts due to the agent (commissions, reimbursement of expenses, bonuses), even if they have not yet been paid (accrual principle).

Agents operating as sole proprietorships or partnerships

For agents operating as a sole trader or partnership company, specific contribution rates apply, along with minimum and maximum contribution thresholds, which are adjusted annually.

The minimum and maximum thresholds depend on whether the agent is a Monomandatario or Plurimandatario. A Monomandatario is contractually obliged to work exclusively for one principal, whereas a Plurimandatario may work for multiple principals.

Contribution rate 2026: 17.00%.
Allocation: 8.50% payable by the principal and 8.50% payable by the agent.

Contribution amounts and thresholds (for 2026):

Agency relationship	Maximum commission threshold	Minimum amount
Monomandatario (one principal)	45.717 €	1.026 € (256,50 € per quarter)
Plurimandatario (multiple principals)	30.478 €	515 € (128,75 € per quarter)

Important rules on thresholds

The maximum commission amount cannot be reduced, even if the agency relationship begins or ends during the year.
The minimum contribution is only due if the agency relationship generates commissions during the year (productivity principle).
The difference between the contributions actually paid and the statutory minimum must be fully borne by the principal.

Agents operating as corporations

For commercial representatives operating as corporations, different rules apply:

No minimum or maximum thresholds are provided.
Differentiated contribution rates are applied:

Commission brackets	Total contribution rate	Principal’s share	Agent’s share
Up to 13 million €	4%	3%	1%
From 13 million € to 20 million €	2%	1,5%	0,5%
From 20 million € to 26 million €	1%	0,75%	0,25%
Above 26 million €	0,5%	0,3%	0,2%

Periodic reporting to ENASARCO

The principal is required to submit a quarterly report electronically via the ENASARCO website indicating all commissions, even if the maximum commission threshold has already been reached.

Deadlines for contribution payments

Reference period	Due date
First quarter	20 May
Second quarter	20 August
Third quarter	20 November
Fourth quarter	20 February (of the following year)
F.I.R.R.	31 March (of the following year)

F.I.R.R. (Fondo Indennità di Risoluzione Rapporto)

The FIRR is a severance indemnity payable to the agent upon termination of the mandate. The contributions are paid annually by the principal to ENASARCO. As of 2024, the agent must personally apply to ENASARCO for payment of the accumulated FIRR; only the FIRR relating to the last year of activity is paid directly by the principal to the agent.

Frequently Asked Questions (FAQ)

1. What is the difference between a Monomandatario and a Plurimandatario?
A Monomandatario works exclusively for one principal, whereas a Plurimandatario may work for multiple principals.

2. Who is responsible for registering the agent with ENASARCO?
Registration is mandatory and must be completed by the principal within 30 days.

3. What happens if commissions exceed the annual maximum?
No additional contributions are due on the excess, but it must still be reported.

4. Is the minimum contribution due even without commissions?
No, it applies only if commissions are generated (productivity principle).

5. Who bears the cost if minimum thresholds are not reached?
The principal bears the full difference.

6. What is the FIRR and when is it paid?
It is a severance payment. Contributions are paid annually; since 2024 agents must request payment personally.

Question 32

Equity (ital.: patrimonio netto)

Accepted Answer

In business administration and accounting, equity capital (patrimonio netto) represents the portion of a company's assets that belongs to the owners or shareholders after all liabilities have been deducted. As a key balance sheet item, it forms the basis for assessing the financial substance and stability of a company.

Significance of equity

Equity plays a decisive role in many contexts:

Financial stability: A high equity ratio is considered a sign of financial strength, as the company is less dependent on external capital (e.g. bank loans).
Creditworthiness: Banks and investors often evaluate companies based on their equity ratio – the ratio of equity to total capital. A high value improves creditworthiness.
Risk buffer: In the event of economic difficulties, losses are initially covered by equity before lenders are affected.

What does equity consist of?

Equity consists of various balance sheet components that reflect both the funds contributed by the owners and the profits retained by the company. Examples include:

Shareholders’ capital shares:
The share capital contributed by the shareholders at the time of formation or a capital increase.
Retained earnings:
Profits retained from previous financial years that remain in the company to finance investments or cushion future losses.
Net profit or net loss for the year:
The profit or loss for the current financial year is added to or deducted from equity and reflects the current business performance.

These components provide a comprehensive overview of how much capital the owners have contributed, what funds remain in the company and how profits are used.

Equity in the context of the balance sheet

In the balance sheet, equity is reported on the liabilities side, alongside borrowed capital. It shows how the company’s assets are financed – through the owners’ own funds or through obligations to third parties.

A high equity ratio strengthens a company’s economic resilience, as more of its own funds are available to cover risks. A low equity ratio, on the other hand, indicates a higher dependence on debt and potentially greater risks.

Important equity ratios

The following ratios are particularly relevant for assessing the financial stability and structure of a company:

Equity ratio:
Equity / Total capital × 100
Measures the proportion of equity in relation to total capital. A higher ratio indicates greater independence from borrowed capital.
Debt-to-equity ratio:
Debt / Equity
Shows the ratio of debt to equity. A low value indicates low indebtedness.
Return on equity (ROE):
Net income / Equity × 100
Measures the profitability of equity and indicates how efficiently the owners’ funds are being used.

Conclusion

Equity (patrimonio netto) is a key indicator of a company’s financial health. It shows what proportion of the assets belong to the owners, how stable the financing structure is and how efficiently the capital is being used. Key figures such as the equity ratio, debt ratio and ROE provide entrepreneurs and investors with valuable information for decision-making in the areas of financing, investment and risk management.

Question 33

Excise duty (ital: accisa)

Accepted Answer

Excise duty (accisa) is an indirect tax on the production and consumption of certain goods. It is levied as soon as the products are released for consumption. Formally, the tax is payable by the manufacturer or distributor, but the economic burden is borne by the end consumer via the product price.

In Italian expense reports or invoices, the term excise duty (accisa) is often replaced by one of the following terms: consumption tax, production tax or state tax.

Key features of excise duty

Compared to value added tax, which is also an indirect tax, excise duty has the following special features:

Limited scope of application: Excise duty only applies to selected product categories.
Quantity-based assessment basis: The physical quantity of a product (e.g. litres, kWh) is taxed, not its value.
One-off levy: Excise duty is usually levied once in the production or distribution process, typically when the product is first placed on the market.

Excise duties serve to generate fiscal revenue, but are also used to implement economic, political or social objectives.

Product groups and classification

Excise duties are an important source of revenue for the Italian state and regions. Excise duties and similar levies (production taxes, monopolies) have historically accounted for a significant proportion of indirect taxes.

Typical product groups subject to excise duty in Italy are:

Energy products (including mineral oils and fuels)
Electrical energy
Alcohol and alcoholic beverages
Tobacco products

Which specific goods are subject to excise duty depends on their classification in the Combined Nomenclature (CN) of the European Union.

Administration and legal basis

In Italy, excise duties are administered by the Customs and Monopolies Agency (Agenzia delle Dogane e dei Monopoli).

The central national legal basis is the Consolidated Law on Excise Duties (Testo Unico Accise). At European level, directives on the general excise duty system and, in particular, on energy products and electricity regulate the basic structure and minimum requirements.

Calculation and assessment bases

As excise duties are quantity-based, the tax rates are applied to physical units, for example:

Fuels (petrol, diesel): litres
Alcohol: anhydrous litre (unit of volume without water)
Natural gas / methane: cubic metres
Electricity: kilowatt hour (kWh)
Beer: hectolitres per degree Plato

The specific rates are based on national tariff tables, which are adjusted regularly.

Excise duties in the European context

The structure and basic principles of excise duties are harmonised within the European Union. Member States generally set their own tax rates, but must comply with minimum requirements under EU law.

Important principles:

Taxable liability arises: upon manufacture or importation of the goods into the EU territory.
Maturity: when goods are released for consumption, e.g. when they leave the tax warehouse or after final importation.
Tax suspension: goods may be held in a tax warehouse or during intra-Community transport under tax suspension without excise duty being immediately payable.
Cross-border transport: when goods are transported under duty suspension to another Member State, excise duty is payable in the country of destination at the rates applicable there.
Refund: if goods that have already been taxed are transported to another Member State and taxed again there, a refund of the excise duty paid in the country of origin can be requested.

An electronic administrative document (e-AD – electronic Administrative Document) is used for the movement of excise goods under duty suspension within the EMCS (Excise Movement and Control System); a simplified electronic document (e-SAD) is used for goods that have already been taxed.

Question 34

FAQ: Transfer of an employee to Italy

Accepted Answer

Especially since the Covid-19 pandemic, working from home has become an established and proven work mode. Hence, there is no longer need for a physical workplace. Consequently, more and more employees of German companies move their residence abroad (e.g. to Italy) and continue to work remotely for their employer.

Question: In case of transfer of an employee's residence to Italy, is it possible to file a posting communication?

Answer: No, if employees transfer their residence to Italy and continue to work for the German company, no posting communication in the classic sense of that term may be filed. On the one hand, the requirement of having an employer in Italy (company incorporated under Italian law) is not met. On the other hand, employees are not considered to be posted, if they are resident in the country they work in.

Instead, the company and the employee shall be registered in Italy for payroll processing purposes in accordance with Italian law and for the purposes of paying social security contributions and taxes in Italy.

Question: Which requirements shall be met for the registration of a foreign company in Italy?

Answer: As is the case in Germany, in Italy companies also act as tax withholding agent paying, in this capacity, taxes and contributions, including those payable by the employee, by means of the F24 form to public authorities or bodies.

Hence, companies need to register with the various authorities/bodies using, among others, an Italian fiscal code.

We will be glad to take care of all communications and registrations. For more details with respect to the procedures to be followed for the registration of the company in Italy as an employer please visit https://www.graber-partner.com/en/international-companies/employees-employers-in-italy.html.

Question: In the event of a transfer of residence to Italy, is it necessary to enter into an employment agreement under Italian law?

Answer: Yes, in view of payroll processing under Italian law, both the company and the employee are subject to the applicable Italian collective bargaining agreement (so-called CCNL). The CCNL regulates, inter alia, the remuneration, the number of month's pay, the holidays, the remuneration in the event of illness and accident, the probation period and the notice period.

Hence, it is in any case necessary to enter into an employment agreement under Italian law, referring to the applicable CCNL.

In Italy, both the drafting of the employment agreement and the payroll processing is carried out by accountants/labour law consultants. Hence, there is no need to refer to a law firm for the drafting of the employment agreement, since we offer an one-stop service. For further information please refer to our opinion at https://www.graber-partner.com/en/international-companies/employees-employers-in-italy.html.

Question: Is there any permanent establishment risk of the foreign company in case of an employee working from home in Italy?

Answer: Yes, the remote work does not automatically exclude the permanent establishment risk in Italy. Hence, it is necessary to verify if also other requirements are met. In this regard, please refer to our opinion on permanent establishments in Italy.

Question: Which requirements need to be met by an employee in the event of transfer of residence to Italy?

Answer: Before starting to work form home in Italy, the employee shall request an Italian fiscal code and register with the registration office. Subsequently, it will be possible to file the communications with the competent authorities and bodies.

For advice and assistance to employees with regard to the application for the fiscal code, the real estate purchase/rent, the registration with the registration office, the application of low-tax schemes for employees transferring their residence to Italy etc., the employees shall refer to the competent authority and/or a trade union organisation.

Please do not hesitate to contact us via mail at info@graber-partner.com for a non-binding and free first meeting. According to our experience, it is preferable that the responsible contact person is part of our client company.

Question 35

Fee note (ital.: parcella)

Accepted Answer

In Italy, invoices issued by freelancers (e.g. solicitors, tax advisors or architects) are often referred to as fee notes. These constitute tax-relevant statements of account and, unlike standard invoices, contain industry-specific details, particularly in relation to withholding tax.

Note: In practice, a fee statement is often sent first as a request for payment. However, only the proper invoicing is relevant for tax purposes; depending on the circumstances, the tax liability arises in accordance with the provisions of Italian VAT law (date of performance or payment).

Contents of the fee note

The specific content varies according to the professional group and the type and scope of the mandate, but generally follows a standardised structure. Typical components are:

Fees: Remuneration for the service with details of the service content, billing period and, if applicable, flat rate or hourly rate.
Expenses and incidental costs: Reimbursable expenses to be shown separately (e.g. travel expenses).
Contributions to professional or pension funds: Mandatory contributions required by law or professional regulations, depending on the respective profession.
VAT: Unless the service is tax-exempt or falls outside the scope of Italian VAT.
Withholding tax: Tax deduction to be withheld by the client on the fee, in particular for services between companies and self-employed persons.

Withholding tax on fee notes

With freelance services, there's often a withholding tax deduction. This is an advance payment on the freelancer's income tax, which is withheld and paid by the client as a tax substitute.

The deduction regularly applies to services provided to companies or self-employed clients; private individuals are generally not considered tax substitutes.

Withholding tax is usually 20% of the relevant net fee (excluding VAT); expenses may be included or excluded depending on qualifications. The payment is made using the F24 payment form. For freelancers, the withholding tax is not a final tax, but a creditable advance payment that is offset against the final tax liability in the tax return.

Question 36

Flat Tax Regime in Italy (ital.: regime dei minimi, regime forfettario)

Accepted Answer

The Italian flat tax regime (regime forfettario) is a simplified tax regime for natural persons who carry out a commercial, freelance or artistic activity. It is primarily aimed at sole traders and freelancers with manageable turnover and allows for a lump-sum profit determination with a fixed substitute tax.

Requirements and Turnover Threshold

The key requirement is that the annual revenues achieved in the previous year do not exceed €85,000. If this threshold is exceeded, the regime can no longer be applied in the following year. In the case of revenues exceeding €100,000, exclusion takes place immediately with transition to ordinary taxation including VAT.

The regime is available exclusively to natural persons who are tax resident in Italy or resident in an EU or EEA state and who earn more than 75% of their total income in Italy. Corporations are excluded.

Grounds for Exclusion

In addition to the turnover threshold, the following important grounds for exclusion apply:

Participation in partnerships, family businesses or transparently taxed corporations
Non-residence in Italy
Receipt of income from employment or pension exceeding €35,000 in the previous year
Activity carried out predominantly for a current or former employer

An exception applies if the employment relationship was terminated in the previous year and no ongoing employment income exists.

Tax Treatment

The flat tax regime replaces the progressive personal income tax (IRPEF), the regional and municipal surcharges as well as IRAP.

Instead, a flat substitute tax of 15% applies. For start-ups, a reduced substitute tax of 5% may apply during the first five years – provided certain requirements are met.

The taxable profit is not determined on the basis of actual operating expenses but is calculated on a lump-sum basis. A sector-specific profitability coefficient (depending on the ATECO code) is decisive. The revenues are multiplied by this percentage; the result represents the taxable profit.

Actual costs are not tax-deductible. Only the social security contributions paid reduce the lump-sum (notional) taxable income.

Simplified Example

An IT consultant generates revenues of €40,000 in each of the tax years 2025 and 2026. For this activity, a profitability coefficient of 78% applies. The consultant is registered with the Italian National Social Security Institute (INPS – Gestione Separata). The applicable social security contribution rate is 26%. In 2025, the consultant paid a total of €8,112 in social security contributions.

Revenues 2026	40.000
Profitability coefficient	78 %
Lump-sum taxable income (notional income)	31.200	40.000 * 78%
Deductible social security contributions (paid in 2025)	- 8.112	31.200 * 26%
Taxable income 2026	23.088
Flat income tax rate	15 %
Substitute tax 2026	3.463	23.088 * 15%
Social security contributions 2026 (calculated on notional income)	8.112	31.200 *26%
Total tax and social security burden 2026	11.575	3.463 + 8.112

Whether the actual costs amounted to €3,000 or €15,000 is irrelevant for tax purposes.

VAT and Social Security

Entrepreneurs under the flat tax regime issue invoices without VAT and are not entitled to deduct input VAT. Periodic VAT settlements do not apply. The invoice must include a corresponding reference to the application of the “regime forfettario”.

Social security contributions to INPS are generally due in the ordinary manner.

For commercial activities (craftsmen, traders), there is the possibility of a 35% reduction of INPS contributions upon request.

Who Benefits from the Flat Tax Regime?

The regime is particularly attractive for:

Freelancers and entrepreneurs with low operating costs
Activities with low use of goods
Part-time self-employed persons with limited employment income
Start-ups with manageable investment needs

Disadvantages and Limits

No deduction of actual costs
No input VAT deduction
No use of certain tax deductions
Limited growth potential due to the turnover threshold

The flat tax regime is therefore less suitable in cases of:

High fixed costs
Significant use of goods
Strongly growing activities
Planned larger investments

Minimum Regime (Regime dei minimi)

An obsolete model, however, is the minimum regime (Regime dei minimi). This is also a preferential tax system for small entrepreneurs with prior-year revenues up to €30,000, under which the substitute tax amounts to only 5%. This tax system was abolished in 2015, but may continue to be applied by those taxpayers who had already entered this tax system before and who meet the relevant requirements.

Conclusion

The Italian flat tax regime offers a simple and often tax-efficient solution for smaller entrepreneurial and freelance activities. However, the combination of turnover threshold, lump-sum profit determination and exclusion criteria makes a careful assessment of the individual situation necessary.

Question 37

Foreign companies – When an Italian company is managed from Germany

Accepted Answer

In Germany, the term 'Auslandsbekleidung' (foreign management, ital. esterovestizione) is used when a limited liability company (Srl) is formally based in Italy but is actually managed from abroad (in this case, Germany). This issue often concerns German corporate groups that manage a subsidiary/branch in Italy and whose managing director (amministratore) resides in Germany.

Definition and delimitation

In Italian tax law, however, the term esterovestizione actually refers to the opposite case: a company formally established abroad for the purpose of evading Italian taxes, whose effective management is exercised from Italy. This article deals with the 'reverse' situation, in particular the case of an Italian company managed from Germany (also known in Italian as esterovestizione inversa).

Pursuant to Article 73, paragraph 3, of the Consolidated Income Tax Law (TUIR), a company is considered resident in Italy if it meets at least one of the following criteria:

its registered office (sede legale) is located in Italy,
the place of effective management is located in Italy,
the place where the company's ordinary management is mainly carried out.

Only one of these characteristics is sufficient to determine tax liability in Italy.

When is there a risk?

The risk of so-called 'esterovestizione' (foreign incorporation) only exists if the Italian company does not carry out any real activity in Italy, but exists only on paper.

This would be the case, for example, if:

there are no employees or business premises in Italy,
all decisions and accounting records are made exclusively in Germany,
the company has no customers of its own and does not generate any turnover in Italy.

In such cases, the German tax office could argue that the effective management ("head office") is located in Germany. This would result in dual residence, which would have to be resolved on the basis of the double taxation agreement between Germany and Italy.

When is there no risk?

In practice, this situation does not pose any problems for German entrepreneurs if the Italian company is operational, i.e. it has its own employees, premises, customer relationships or orders in progress and turnover in Italy. In this case, the business clearly remains taxable in Italy, even if the managing director lives in Germany and makes strategic decisions from there.

Example: An Italian limited liability company (Srl) employs five people in Milan, provides services to customers in Italy and is wholly owned by a German limited liability company. The managing director resides in Germany and manages the business from the Italian headquarters.
In this case, there is no tax or foreign relocation risk.
The company is legally resident in Italy and is subject to corporation tax (IRES) and regional tax on productive activities (IRAP).

Recommendation

German entrepreneurs therefore do not need to worry if they manage an Italian company from Germany. It is essential that the company has actual economic substance in Italy, for example through:

local employees or service providers and/or
an office or permanent establishment and/or
the preparation of annual financial statements and tax returns in Italy.

These points clearly demonstrate that the company is not a shell company, but a genuine Italian business.

Conclusion

So-called 'esterovestizione' does not pose a threat to German entrepreneurs who carry out operational activities in Italy.
As long as there are, for example, staff or operational activities in Italy, the company is clearly considered resident in Italy for tax purposes, even if the managing director lives in Germany. Only fictitious or shell companies that exist only on paper and are not operational could be subject to dispute. Nevertheless, taxation in Germany should be clarified between accountants in Germany and Italy.
Further information is available in our glossary entries on corporation tax (IRES) and limited liability companies (Srl) in Italy or permanent establishments in Italy.

Question 38

Frequently Asked Questions of: Probationary Period

Accepted Answer

The probationary period is a mandatory component of an employment contract. Below is an overview of the key aspects:

FAQ – Probation Period Question: What is the probationary period and what is its purpose?
Answer: The probationary period is a clause in the employment contract and serves the mutual interests of both contracting parties:

For the employer: It allows the employer to determine whether the employee’s skills and working methods are suitable for the work to be performed.
For the employee: It allows the employee to assess whether the working conditions, the work itself, and the working environment meet their expectations.

Question: When is a probationary period invalid?
Answer: For a probationary period agreement to be valid, certain formal and substantive requirements must be met:

The written form is mandatory: the probationary period must be agreed upon in writing. If there is no written agreement regarding the probationary period, the respective clause is invalid and the employer cannot invoke the probationary period.

The probationary period must relate to the activity for which the employee was hired. If the employee is assigned substantially different duties during the probationary period, this may affect the validity of the probationary period agreement.

Question: Where is the duration of the probationary period determined?
Answer: The duration of the probationary period is regulated by law and specified in the individual national collective labour agreements, whereby the duration usually depends on the employee’s classification/category.

As a general rule:

Maximum duration: Pursuant to the Transparency Decree, the probationary period may not exceed six months. National collective labour agreements may provide for a shorter duration.
Specific rules for fixed-term contracts (new from 2025): For fixed-term employment contracts, the duration of the probationary period is determined proportionally to the duration of the contract.
- It amounts to one day of actual work for every 15 calendar days from the start of the employment relationship.
- Minimum and maximum limits apply:
  - For contracts of up to six months: at least 2 days and no more than 12 days (calculation: 180 calendar days / 15 calendar days).
  - For contracts of more than six months but less than twelve months: no more than 24 days (calculation: 365 calendar days / 15 calendar days).
- National collective labour agreements may provide for more favourable provisions for employees.

Question: When is the probationary period extended?
Answer: The probationary period is extended by the corresponding duration in the event of absences due to sickness, occupational accidents, maternity/paternity leave, or suspension of work by the employer (e.g. wage supplementation schemes). This ensures that the employee is effectively given the opportunity to complete the probationary period. However, foreseeable absences such as public holidays or weekly rest days do not interrupt the probationary period.

Question: How can the employment relationship be terminated during the probationary period?
Answer: A characteristic feature of the probationary period is the simplified termination of employment. Both the employer and the employee may terminate the employment relationship at any time during or at the end of the probationary period without stating any reason and without observing a notice period. There is also no entitlement to compensation.

Question 39

Income statements

Accepted Answer

Income statements are one of the key management tools in corporate accounting. Expenses and income are systematically presented in the income statement, providing transparency on the factors that have a significant impact on the annual results. Together with balance sheet accounts, income statement accounts form the basis for meaningful annual financial statements and tax profit determination (see glossary entries for balance sheet account, balance sheet in Italy, IRES – corporate income tax).

What is an income statement account?

An income statement account is an accounting account in which all transactions affecting income for a specific period (usually the fiscal year) are recorded. It therefore does not show what a company owns or owes (that is the task of the balance sheet accounts), but rather what income it has generated and what expenses it has incurred to do so.

Examples of income statement accounts

Income statement accounts can be divided into income accounts and expense accounts.

Income accounts (examples):

Revenue from the sale of goods or services
Rental income, commissions, license and interest income
Other operating income (e.g., subsidies)

Expense accounts (examples):

Cost of goods sold, cost of materials
Wages and salaries, social security contributions, TFR provisions
Rent, leasing, energy, insurance
Depreciation (see glossary entry for depreciation – ammortamento)
Interest expense, bank charges
Taxes and duties to be recorded as expenses

The sum of all expense and income accounts results in the operating result. This, in turn, forms the basis for the tax assessment (e.g., IRES, IRAP, IRPEF for sole proprietors).

Significance for entrepreneurs and HR managers

A sound understanding of income statements is an important skill for entrepreneurs, managing directors, and HR managers, as it enables more precise control and evaluation of operational processes.

For entrepreneurs and managing directors
- it serves as a basis for assessing the profitability of individual business areas, products, or projects,
- provides clarity on cost structures and supports the identification of optimization and efficiency potential,
- and provides valuable insights into the factors that significantly drive operating results.
For HR managers
- it places personnel costs in the overall financial context of the company,
- it highlights the budgetary impact of new hires, salary adjustments, and variable compensation models,
- it strengthens the ability to carry out strategic personnel planning based on reliable business indicators.
For private individuals and freelancers
- it facilitates the structured recording of income and expenses,
- improves understanding of one's own tax situation (see glossary entries Tax return in Italy, Self-employment).

A solid understanding of income statements is therefore an essential component of professional corporate management and decision-relevant control instruments.

Question 40

Income types

Accepted Answer

Italian tax law distinguishes between different types of income, each of which is subject to its own tax rules. This system is regulated by the Testo Unico delle Imposte sui Redditi (TUIR) and forms the basis for the taxation of natural persons as well as businesses.

The classification into types of income is not merely formal in nature, but has concrete tax implications:

different methods of calculation (e.g. flat-rate taxation and profit determination)
different tax rates or special provisions
various deduction options

Taxation is generally based on the so-called worldwide income principle: individuals resident in Italy must pay tax on all domestic and foreign income.

Income categories

There are a total of six types of income that form the basis of the entire system of taxes:

Income from land and property (Redditi fondiari)
Income from capital assets (Redditi di capitale)
Income from employment (Redditi di lavoro dipendente)
Income from self-employment (Redditi di lavoro autonomo)
Business income (Redditi d’impresa)
Other income (Redditi diversi)

Together, these categories form the total income (reddito complessivo), which forms the basis for taxation.

Income from land and property (Redditi fondiari)

This income is divided into two main categories:

Income from land (Redditi dominicali)
Income from buildings (Redditi dei fabbricati)

Both are generally based on the cadastral income (rendita catastale) and not necessarily on the actual income received.

Income from land (redditi dominicali)

This relates to land used for agricultural purposes, with taxation based on the cadastral income, regardless of whether actual revenue is generated or not. The income is attributed to the owner.

Income from buildings (redditi dei fabbricati)

a) Rented properties
For rented properties, a comparison is made between the actual rental income (reduced by a standard deduction, usually 5%) and the cadastral income (increased by the statutory surcharge of 5%). The higher of the two values is generally used as the tax assessment basis. In practice, this is usually the actual rental income.

Alternative: Cedolare secca
For residential property, the so-called ‘Cedolare secca’ may be chosen as an alternative, which provides for a flat-rate tax of 21% and may be reduced to 10% in certain cases.

b) Unrented properties
Unrented properties may be taxable, particularly in the case of second homes or vacant properties.

c) Commercial properties
The following special provisions apply to commercially used properties:

the Cedolare secca does not apply
Taxation in accordance with the general rules
For businesses: allocation to business assets with corresponding profit calculation

Income from capital assets (Redditi di capitale)

This includes income from the use of capital, such as:

Dividends from equity participations
Interest on bank deposits or loans
Income from security papers

In many cases, this income is not taxed via personal income tax IRPEF but via withholding tax (imposte sostitutive), usually at 26%, and is therefore not included in total income.

Income from employment (Redditi di lavoro dipendente)

Income from employment is one of the most important types of income under Italian tax law. It includes all remuneration received within the framework of an employment relationship. This includes, for example:

Wages and salaries
Bonus payments
Non-cash benefits (fringe benefits, e.g. company car)
Pensions

Taxable income is calculated as gross remuneration minus social security contributions (INPS). Taxation is based on the progressive personal income tax IRPEF and is normally withheld and paid directly by the employer.

Income from self-employment (Redditi di lavoro autonomo)

This category applies to freelancers and self-employed service providers whose work is primarily based on their personal expertise and who do not have a formal business structure. Typical examples include:

doctors, solicitors
consultants, IT service providers
Freelancers and sole traders not engaged in commercial trade

Taxation is based on profit (income minus expenses) and is subject to the progressive personal income tax IRPEF (unless the flat-rate system is applied).

Business income (Redditi d’impresa)

This includes income from business activities, in particular:

sole trader
Partnerships
Corporations

Taxation:
Profit is determined in accordance with commercial and tax law.

Sole traders: The profit is attributed directly to the trader and is subject to progressive personal income tax IRPEF (unless the flat-rate system is applied).
Partnerships: Profits are attributed to the partners in proportion to their equity participation in accordance with the principle of transparency and are taxed by them under the progressive personal income tax regime IRPEF.
Corporations, on the other hand, are separate taxable entities whose profits are subject to Corporate Income Tax IRES at company level.

Note:
Partnerships (not their partners) and corporations are also subject to the regional production tax IRAP.

Miscellaneous income (Redditi diversi)

This category serves as a ‘catch-all’ category and includes all income that cannot be clearly assigned to any of the other categories but is nevertheless taxable. Some examples are:

Private property sales (within 5 years of acquisition)
Capital gains from shareholdings and financial instruments
Speculative gains (e.g. crypto-assets)
Occasional activities

Taxation:
To determine the profit, income is calculated by deducting directly attributable costs.
The taxation itself then depends heavily on the individual case:

Progressive personal income tax IRPEF, e.g. for occasional activities and property sales.
Substitute tax (imposta sostitutiva), usually 26%: common for financial gains

Question 41

Indirect taxes (ital.: imposte indirette)

Accepted Answer

Indirect taxes are taxes that are not directly linked to a person’s income or assets, but to individual economic transactions related to the circulation of goods and services as well as to certain legal acts and transfers of assets. Taxation does not concern income, but its use.

Indirect taxes are of central importance in day-to-day business operations, in particular in invoicing, contract drafting, as well as in real estate and cross-border transactions. They affect both pricing and the tax structuring of business transactions.

They therefore form an essential part of the Italian tax system. They cover a wide range of economic transactions and are relevant both for companies and for private individuals in numerous everyday situations.

Distinction from direct taxes

In contrast to direct taxes (imposte dirette) such as IRPEF or IRES, which are directly linked to income or assets, indirect taxes refer to individual transactions.

Typical characteristics are:

Link to specific economic transactions
Taxation of consumption and exchange
Possibility of economic passing-on to the final consumer

Structure of indirect taxes in Italy

Indirect taxes cover in particular:

Supplies of goods and services
Legal acts and documents
Transfers of assets
Certain consumption-related transactions

Main indirect taxes

Value Added Tax (IVA – Imposta sul valore aggiunto): general consumption tax on supplies of goods and services
Registration tax (imposta di registro): tax on the registration of certain contracts and legal acts
Stamp duty (imposta di bollo): tax on certain documents and official papers
Stamp Duty Land Tax (Imposte ipotecarie e catastali): taxes related to real estate transfers and registrations
Inheritance and estate tax (imposta sulle successioni e donazioni): tax on gratuitous transfers of assets
Excise duties (accise): taxes on certain goods such as energy products, alcohol, or tobacco

Question 42

Inheritance declaration

Accepted Answer

The inheritance declaration is a mandatory tax declaration that must be submitted after the death of a taxpayer in Italy. The aim is to report the transfer of assets and rights to the heirs, legatees and beneficiaries and to pay the inheritance taxes due.

The declaration must be submitted within 12 months of the date of opening of the succession (data di apertura della successione), which usually coincides with the date of death of the deceased.

The declaration can be submitted to the Revenue Agency (Agenzia delle Entrate) in various ways:

directly by the taxpayer via the telematic services
via an authorised intermediary (e.g. tax advisor or CAF)
at the competent tax office (ufficio competente dell'Agenzia delle Entrate)

The online service "Dichiarazione di successione web" or special PC software is available for submission. If the notification is submitted electronically, you will receive a confirmation of transmission, which serves as proof of submission.

Who is required to submit an inheritance declaration?

The following persons are required to submit an inheritance declaration:

the heirs (eredi)
the legatees (legatari)
the beneficiaries (i chiamati all'eredità)
the legal representatives of the heirs or legatees
persons who have been placed in possession of the property in the event of the absence or presumed death of the testator
the administrators of the estate (amministratori dell'eredità)
curators of dormant estates (curatori delle eredità giacenti)
executors (esecutori testamentari) and trustees

Note: If several persons are required to report, it is sufficient to submit a single declaration.

Exceptions to the reporting obligation

There is no obligation to submit an inheritance declaration if all of the following conditions are met at the same time:

The inheritance goes to the spouse and/or direct relatives.
The inheritance does not exceed a value of € 100,000.
The inheritance does not include real estate or rights in rem to real estate.

Please note: Anyone who has submitted an inheritance declaration and declared real estate therein is exempt from the separate reporting obligation for municipal property tax (GIS) or municipal property tax (IMU). In such cases, the Revenue Agency will forward a copy of the inheritance declaration to the relevant municipality.

Tax obligations prior to submission

If real estate is inherited, the taxes and duties associated with the inheritance must be calculated and paid before submitting the inheritance declaration. These are:

Mortgage tax (imposta ipotecaria).
The cadastral tax (imposta catastale).
Stamp duty (imposta di bollo).
Fees for mortgage and cadastral services.

Calculation and payment of inheritance tax (imposta di successione)

The method for calculating and paying the actual inheritance tax depends on the date on which the inheritance was opened:

Inheritance cases from 1 January 2025 (reform)

For inheritance cases opened on or after 1 January 2025, the inheritance tax must be calculated by the taxpayer themselves. The self-calculated inheritance tax can be paid at the same time as the inheritance declaration is submitted or no later than 90 days after the deadline for submitting the inheritance declaration.

Inheritance cases before 1 January 2025

For inheritance cases opened before this date, the tax will continue to be calculated by the competent territorial offices of the Revenue Agency. In this case, payment must be made within 60 days of delivery of the assessment notice (avviso di liquidazione) using form F24.

Inheritance tax rates and allowances (aliquote e franchigie)

The tax rates and allowances depend on the degree of kinship to the deceased. The taxes are applied to the total net transfer value:

Beneficiary	Tax rate	Allowance per beneficiary
Spouse and direct relatives	4 %	€ 1,000,000
Siblings	6 %	€ 100,000
Other relatives up to the 4th degree and Collateral relatives up to the 3rd degree	6 %	-
All others	8 %	-

An allowance of € 1,500,000 is provided for beneficiaries with severe disabilities.

Payment of tax in instalments

If the inheritance tax amounts to more than € 1,000, payment by instalments can be requested. In this case, a down payment of at least 20 % must be made.

The remaining payment can be staggered as follows:

Amounts up to € 20,000: Maximum of 8 equal quarterly instalments.
Amounts over € 20,000: Maximum of 12 equal quarterly instalments.

Question 43

INPS contribution reductions for traders and craftspeople

Accepted Answer

Entrepreneurs carrying out a craft activity (artigiano) or a commercial activity (commerciante) in Italy are generally required to pay social security contributions to the National Social Security Institute INPS.

In certain cases, legislation provides for various possibilities to reduce contributions, which may be applied for if the relevant requirements are met:

35 per cent reduction when using the flat tax regime
50 per cent reduction for pensioners who have reached the age of 65
50 per cent reduction for those registering for the first time in 2025 with the insurance scheme for traders or craftspeople

The individual concessions differ in terms of the amount of the reduction, the duration of application and the applicable requirements.

It is not possible to benefit from several reductions simultaneously, as these concessions cannot be combined. Therefore, if the requirements for more than one contribution reduction are met, it is necessary to assess, before submitting the application, which benefit is more advantageous in the specific case.

35 per cent reduction for users of the flat tax regime (regime forfettario)

Taxpayers carrying out a business activity and applying the flat tax regime may apply for a 35 per cent reduction of their INPS contributions. The reduction applies to both the minimum contributions and the income-related contributions above the minimum assessment base.

To benefit from the reduction, an electronic application must be submitted via the INPS portal. For persons already registered with the relevant insurance scheme, the application must be submitted by 28 February of the year from which they intend to benefit from the contribution reduction. In the case of a new registration, the application may be submitted after the commencement of business activities and completion of the registration process with the relevant INPS scheme.

50 per cent reduction for pensioners who have reached the age of 65

Individuals registered with the INPS insurance scheme for craftspeople or traders may apply for a 50 per cent reduction in contributions if they have reached the age 65 and receive a pension.

The application for the reduction must also be submitted electronically via the INPS portal.

50 per cent reduction for first-time registrations in 2025

The 2025 Budget Act introduced an additional temporary contribution relief measure for individuals who commenced a business activity and registered for the first time in 2025 with one of the INPS insurance schemes for craftspeople or traders.

The reduction amounts to 50 per cent and applies to both the minimum contributions and the income-related contributions above the minimum assessment base.

Unlike the other two concessions, the duration of this reduction is limited to 36 months from the start of business activities or from the first registration.

The reduction may apply to individual business owners, family businesses, shareholders of companies and assisting family members.

Impact of contribution reductions on pension entitlements

The reduction of contributions may also affect the individual’s pension entitlements.

Where the application of a contribution reduction results in lower contributions being paid and the statutory minimum contribution level is therefore not reached, a reduced number of insurance months may be credited for pension purposes. In such cases, the number of credited months is reduced proportionally to the contributions actually paid.

The financial benefit arising from reduced contributions should therefore always be assessed taking into consideration the potential impact on the individual’s pension position.

Question 44

Interest Limitation Rule in Italy

Accepted Answer

In Italy, corporations are subject to a special restriction on the tax deductibility of interest on borrowed capital. This rule, known as the interest limitation rule, is intended to counteract excessive debt financing and is based on Art. 96 of the Italian Income Tax Code (TUIR).

The current regulation has been in force since 2019 and transposes the European ATAD Directive (Directive (EU) 2016/1164 on combating tax avoidance practices) into national law through Decree Law No. 142/2018.

Affected entities

The interest limitation rule applies to all companies subject to IRES, in particular:

joint stock companies (SpA), limited liability companies (Srl), cooperatives and consortium companies based in Italy
public and private institutions and trusts that mainly carry out commercial activities
non-resident companies and entities, including trusts, which carry out their activities in Italy through a permanent establishment

Article 96 of the Italian Income Tax Act does not apply to financial intermediaries, IRPEF subjects (partnerships, sole traders) and non-commercial entities.

Functionality and calculation

The interest limitation rule determines the extent to which interest expense is tax deductible. The calculation is carried out in two stages:

Offsetting against active interest: Passive interest (for the current period and carried forward) is subject to deductibility without limit up to the amount of active interest (current and carried forward).

Deductibility of net interest expense: The excess portion of interest expense (after offsetting against interest income) is only deductible up to 30% of the "fiscal ROL" (Risultato Operativo Lordo).

The „Fiscal ROL” (EBITDA-like measure)

In simple terms, ROL corresponds to earnings before interest, taxes, depreciation and amortisation (EBITDA), but is calculated according to tax criteria rather than commercial law criteria.

Since 2019, it has been mandatory to use the "fiscal ROL" for the calculation, which replaces the former "accounting ROL" (ROL contabile). It is calculated as:

Value of production – Production costs (items A – B of the income statement)
+ Depreciation of tangible and intangible assets
+ Leasing instalments for business assets

Tax deduction restrictions must be observed (e.g. telephone expenses are only 80% deductible, car expenses only 20%).

Carry-forward of surpluses

Surplus	Tax treatment	Time limit
Passive interest	Non-deductible passive interest can be carried forward indefinitely and is deductible in subsequent years if there is sufficient active interest or fiscal ROL.	Unlimited
Active interest	Surplus active interest can be carried forward to the next tax period without any time limit and offset against passive interest there.	Unlimited
30% ROL surplus	If 30% of ROL exceeds the passive interest, the surplus ROL can be used for the following five tax periods (FIFO principle).	5 years

Special rule for „old loans“

For loans contracted before 17 June 2016, the unused accounting ROL accumulated up to 31 December 2018 may still be used. This amount can be carried forward without time limitation, but only to offset interest related to those specific pre-2016 loans.

Conclusion

The Italian interest limitation rule (Art. 96 TUIR) is of great importance for the tax planning and financing of companies. Careful calculation of the fiscal ROL and forward-looking design of the financing structure are crucial in order to avoid interest deduction restrictions or make optimum use of them.

Question 45

Internship (ital.: tirocinio)

Accepted Answer

An internship (tirocinio) is primarily intended for orientation and training. It is important to note that an internship is not a standard employment relationship. It is designed to provide practical insights and facilitate entry into the workforce. The actual work performance takes a back seat. This is precisely why a clear distinction is particularly important in practice.

What types of internships are there?

In Italy, a distinction is made between curricular (within the context of school or university and thus as part of formal education) and extracurricular internship (for career orientation or career entry).

The curricular internship is part of an ongoing educational or training program. It is therefore conducted within the framework of a school, university, or recognized training program and is intended to supplement theoretical learning with practical experience. Responsibility for this lies primarily with the respective schools, universities, or training providers.

In contrast, extracurricular internships take place outside of a formal educational program. They are intended to promote career orientation or facilitate entry into—or a return to—the labor market. This type of internship is not uniformly regulated at the national level but is implemented by the regions and autonomous provinces. At the national level, however, there are common minimum standards.

These internships are generally intended for high school and college students, and, under certain conditions, also for individuals who have recently completed their education.

In South Tyrol, training and orientation internships are typically limited to school breaks, particularly the summer months and the Christmas holidays.

What is the minimum age for an internship?

In general, in Italy, access to work is generally only permitted from the age of 16, provided that compulsory schooling has been completed.

This is distinct from special regulations at the regional or provincial level. In South Tyrol, for example, a minimum age of 15 applies to training and orientation internships / summer internships.

How must an internship be reported?

An internship undertaken as part of school, university, or vocational training is part of an educational pathway. Such internships are organized and reported by schools, universities, or training institutions. Consequently, the company is not required to file any reports, including insurance with the National Institute for Insurance against Accidents at Work (INAIL).

The situation is different for internships aimed at career exploration or entering the job market. Such extracurricular internships are generally subject to mandatory reporting by the host company.

Depending on the region or autonomous province, prior approval or authorization from the relevant authority may also be required. In South Tyrol, for example, training and orientation internships are handled through the ProPraktika portal; there, the internship project is submitted and reviewed by the Public Employment Service. Only after approval and signature by all parties involved does the internship become fully legally valid. In addition, the company must insure the intern against workplace accidents with INAIL and have liability insurance covering third parties.

How long can an internship last, and does it have to be paid?

The duration and compensation for an internship depend on the type of internship and which regulations apply.

Training and Orientation Internships

At the national level, the guidelines for extracurricular internships generally stipulate a minimum duration of 2 months and a maximum duration of 12 months. In addition, a minimum gross stipend of at least 300 euros per month is required.

However, these requirements do not apply uniformly throughout Italy. The regions and autonomous provinces may establish more detailed regulations and, in some cases, adopt provisions that differ from them.

For example, South Tyrol has its own regulations regarding training and orientation internships. There, the recommended allowance is at least 650 euros gross per month, with a maximum of 900 euros gross per month. The minimum duration is 2 weeks. The maximum duration is 3 months for students in certain school types and 6 months for university students or certain graduates; the total duration may not exceed 10 months.

School internship

These placements are planned and supervised by the school; they require an agreement with the host company, and students are supported by an in-school tutor as well as a contact person at the company. The duration is usually two weeks, but can also be adjusted on an individual basis.

How many interns can a company take on at the same time?

Here, too, regulations vary from place to place. Depending on the region or province, maximum limits may apply. In South Tyrol, the number of interns that can be accepted at any one time depends on the number of employees. The following applies there:

0 to 5 employees: 1 intern
For 6 to 19 employees: 2 interns
for 20 or more employees: no more than 10% of the workforce.

Do occupational safety regulations apply to interns?

Yes, interns are generally to be treated the same as employees when it comes to occupational safety. Even though an internship does not constitute a regular employment relationship, regulations regarding health and safety in the workplace must be observed. Special care must also be taken with regard to underage interns.

Topic	Orientation Internship	School internship
Purpose	Career orientation, entry into or re-entry into the labor market	Learning as part of school or vocational training
Who can complete an internship	Generally intended for high school students, college students, and recent graduates	Part of a school curriculum, typically for students as part of their education
Minimum age	Available from age 16, provided compulsory education has been completed. In South Tyrol, a special rule applies to training and orientation internships: minimum age 15.	No uniform age requirement; the specific educational path is decisive
Compensation	Nationally, at least €300 gross per month. In South Tyrol: Compensation of €650 to €900 gross per month is recommended.	Typically, no standard internship pay shown on the pay stub
Duration	At least 2 months, up to 12 months. In South Tyrol: at least 2 weeks, usually up to 3 months for high school students and up to 6 months for university students or graduates; total of up to 10 months.	No standard internship duration, but usually 2 weeks
Reporting requirement	Generally subject to registration. In South Tyrol, prior approval from the employment office is required.	Not subject to reporting requirements
Insurance	INAIL accident insurance is required. Additional requirement: Existing liability insurance	Insurance with the accident insurance agency is normally arranged through the school itself
Number of interns	1 intern for 0–5 employees 2 interns for 6–20 employees 10% for more than 20 employees; regional regulations may apply.

Frequantly asked questions (FAQ)

1. Is an internship in Italy considered a normal employment relationship?
No. An internship is generally intended for orientation and training and is not regular employment relationship. It is intended to provide practical insights and must not be to permanently replace a regular employee.

2. What is the minimum age for an internship in Italy?
In general, individuals must be at least 16 years old to work in Italy, provided they have completed their compulsory education. However, special regional or local regulations may apply to certain types of internships. In South Tyrol, for example, vocational and exploratory internships, for example, a minimum age of 15 applies.

3. Does an internship need to be registered?
That depends on the type of internship. School internships are generally not required to be registered. Training and orientation internships outside of a current educational program, on the other hand, are subject to mandatory registration.

4. Does an internship have to be paid?
Compensation is provided for extracurricular internships. In South Tyrol, a gross monthly compensation of between 650 and 900 euros is currently recommended for training and orientation internships. School internships, on the other hand, are not normally paid.

5. How long can an internship last?
This also depends on the type of internship and the applicable regional regulations.

Nationally, extracurricular internships generally last between 2 and 12 months. In South Tyrol, training and orientation internships may have shorter durations, such as a minimum of 2 weeks, and—depending on the group of people—varying maximum durations.

School internships typically last about two weeks, but in practice they are often organized individually by the school.

6. Do occupational safety regulations apply to interns?
Yes. Even though an internship is not a standard employment relationship, interns generally treated the same as employees when it comes to occupational safety.

Question 46

Intrastat

Accepted Answer

The Intrastat declaration is used to report intra-Community supplies and acquisitions of goods and certain services to the Italian Customs and Monopolies Agency (Agenzia delle Dogane e dei Monopoli). The declaration serves to collect statistics on the movement of goods and services within the EU and applies to companies that conduct cross-border business transactions with other EU member states.

In order to carry out intra-Community supplies and acquisitions of goods and certain services without applying Italian VAT, registration in the MIAS register (Value-Added Tax Information Exchange System, or VIES) is required.

Transactions Subject to Reporting

In Italy, the Intrastat declaration applies in particular to the following transactions:

intra-Community supplies of goods from Italy to another EU member state;
intra-Community acquisitions of goods from another EU member state into Italy;
certain services between businesses within the EU.

The declarations are structured as follows:

Declaration	Business Transaction	Form
Intra-Community sales of goods	Supply of goods to taxable persons established in other EU Member States	INTRA-1 bis
Provision of services	Certain services provided to businesses in other EU Member States	INTRA-1 quater
Intra-Community acquisitions of goods	Purchases of goods from other EU Member states	INTRA-2 bis
Acquisition of services	Certain services received from businesses in other EU Member States	INTRA-2 quater
Corrections	Correction of Previously Submitted Declarations	INTRA-1 ter, INTRA-1 quinquies, INTRA-2 ter bzw. INTRA-2 quinquies

Thresholds and Filing Deadlines in Italy

The obligation to file an Intrastat declaration, as well as the frequency of filing, depends on the type of transaction and the applicable thresholds.

Sales

The following thresholds apply to intra-Community supplies of goods and services:

If intra-Community supplies of goods or services exceed EUR 50,000 per quarter, the Intrastat declaration must be filed monthly.
If these limits are not exceeded, the declaration may be submitted quarterly.

Purchases

The following thresholds apply to intra-Community acquisitions:

A monthly report for purchases of goods (INTRA-2 bis) is required if intra-Community purchases of goods exceed 2 million euros per quarter.
For intra-Community services (INTRA-2 quater), a monthly reporting requirement applies if the corresponding turnover exceeds 100,000 euros per quarter.

Intrastat reports must generally be submitted electronically by the 25th day of the following month.

Late, incomplete, or incorrect submission of a required Intrastat declaration may result in administrative penalties.

Companies with regular business relationships within the EU should therefore regularly review whether new business transactions or changes in transaction volumes require an adjustment to their reporting obligations.

Question 47

IRPEF (income tax in Italy) - tax brackets & rates in Italy

Accepted Answer

IRPEF (Imposta sul reddito delle persone fisiche) – Personal Income Tax in Italy

The IRPEF is the Italian tax on personal income. The IRPEF is a progressive tax. Calculation of labor costs, gross and net salary: gross-net-cost calculator for Italy

It applies to individuals who are resident in Italy and/or who earn income in Italy (possibly subject to the 183-day rule). Individuals residing in Italy must declare all income to IRPEF, while non-residents are taxed only on income earned in Italy. IRPEF is calculated on income from real estate, employment (dependent and independent), business activities, capital/investment income, and other income sources. IRPEF is often (mistakenly) equated with payroll withholding tax, even though withholding is only one component. The law provides a number of deductions and tax credits that reduce the taxable base or the net tax, as explained below.

IRPEF is usually withheld via payroll for employees and then summarized in the income tax return ("redditi", Form 730, or RED for pensioners). The tax balance with the "redditi" return is normally paid in June of the following year, along with the first instalment. The second instalment is due on November 30. Payments are made using Form F24. If the tax return generates an IRPEF credit, it can be offset against other taxes via F24. When using Form 730 (for employees), credit or debit is normally adjusted in payroll between July and September.

For the calculation of labor costs, gross salary, and the corresponding net salary, you can use our gross-net-cost calculator for Italy.

IRPEF Tax Rates and Income Brackets 2026

As part of the 2026 tax reform, a relief has been made for taxpayers in the middle-income segment. The second IRPEF rate (income between €28,000 and €50,000) was reduced from the 35% to 33%.

Thus, for the 2026 tax year and subsequent years, the following income brackets and IRPEF rates are to apply as of 01.01.2026:

23% up to €28,000
33% from €28,001 to €50,000
43% over €50,000

The following table also shows the effective average tax rates when the respective income bracket is fully utilized.

The maximum relief applies to the portion of income falling within the favorable corridor between €28,000 and €50,000 — i.e., a maximum of €22,000. With the 2-percentage-point reduction (from 35% to 33%), a theoretical annual tax saving of €440 results.

For 2026, the IRPEF tax rates in Italy are therefore as follows: 23% up to €28,000, 33% from €28,001 to €50,000, and 43% above €50,001.

IRPEF Rates and Income Brackets from 2025

The reduction to 3 brackets initially planned only for 2024 was confirmed as a structural measure in the 2025 Budget Law (Law No. 207 of December 30, 2024, published on December 31, 2024).

Therefore, for the 2025 tax year and beyond, the following brackets and progressive rates apply:

As of January 1, 2025, the following IRPEF rates apply in Italy:
– 23 % up to €28,000
– 35 % from €28,001 to €50,000
– 43 % above €50,000
The table below also shows the effective average tax rates when each bracket is fully reached.

Progressive Income Tax Calculation (Example)
Bracket	Rate (%)	Income (€)	Tax (€)	Effective Rate (%)
Up to €28,000	23 %	28,000	6,440	23.0 %
Up to €50,000 (incl. first bracket)	35 %	50,000	6,440 + 7,700 = 14,140	28.28 %
Above €50,000	43 %	> 50,000	6,440 + 7,700 + 43 % × (Income – 50,000)	variable

The adjustment provides slight relief for middle incomes, while incomes up to €12,000 are effectively tax-exempt. For incomes over €50,000, the rate remains unchanged.

Additionally, for employment income up to €40,000, deductions have been slightly increased. The structural increase from €1,880 to €1,955 applies to incomes up to €15,000.

The “Trattamento Integrativo” for incomes up to €15,000, originally limited to 2024, has also been made structural and applies in 2025.

Historical IRPEF Rates in Italy

Until 2022, rates were: up to €15,000: 23%; €15,001–28,000: 27%; €28,001–55,000: 38%; €55,001–75,000: 41%; over €75,000: 43%.

From January 1, 2022, rates were reduced from five to four brackets as follows:

up to €15,000: 23%
€15,001–28,000: 25%
€28,001–50,000: 35%
over €50,000: 43%

Therefore, for 2023 the rates were: up to €15,000: 23%; €15,001–28,000: 25%; €28,001–50,000: 35%; over €50,001: 43%.

IRPEF Rates and Brackets for 2024

With Decree-Law No. 216 of December 30, 2023, progressive rates were restructured from 2024 by reducing brackets from four to three.

From January 1, 2024, the following IRPEF rates apply:

Summary table of 2024 brackets and rates:

Income	IRPEF Rate 2024
< €28,000	23%
€28,001–50,000	35%
> €50,001	43%

The 2024 reform provided benefits ranging from €20 to €260 for incomes between €15,000 and €28,000. For incomes above €28,000, a steady €260 benefit was granted, while higher earners with eligible 19% deductions also benefited by €260 (excluding medical expenses).

New 2025 Measures to Reduce Labour Cost (Cuneo Fiscale)

To compensate for the non-confirmation of the partial social security contribution waiver in 2025, two measures have been introduced for employees. These apply only to employment income.

“Somma integrativa” – Labour cost support

This measure applies to employees with total taxable employment income (RLD) not exceeding €20,000. Exempt income for “impatriati” is included, but not the primary home’s value.

The amount is calculated as a percentage of taxable employment income:

Annual RLD	% somma integrativa
RLD < €8,500	7.1%
€8,500 < RLD < €15,000	5.3%
€15,000 < RLD < €20,000	4.8%

This amount is automatically granted in each payroll period, affecting only net pay, and generates a tax credit for the employer via F24. If unjustified, it is checked at the year-end; if over €60, repayment is spread over 10 installments.

“Ulteriore detrazione d’imposta” – Additional tax deduction

This applies to employees with total income (RC) over €20,000 and up to €40,000.

The deduction is €1,000 annually, reducing from €32,000 until it phases out at €40,000:

Annual RC	Annual Deduction
€20,000 < RC < €32,000	€1,000
€32,000 < RC < €40,000	€1,000 × (40,000 – RC)/8,000
RC > €40,000	0

It is applied through payroll. If tax withheld is insufficient, no credit arises. Year-end checks apply; overages above €60 are recovered in 10 installments.

Adjustment of Deductions for High-Income Taxpayers (2025)

For taxpayers with total income above €75,000, from 2025 limits apply to deductions for qualifying expenses. The maximum deductible amount is based on an income-based base multiplied by a coefficient tied to dependent children.

Income brackets & base amounts:

€75,001–100,000: base €14,000
above €100,000: base €8,000

Child-dependent coefficient:

0 children: 0.50
1 child: 0.70
2 children: 0.85
3+ or child with disability: 1.00

Example calculations:

Income €80,000, 2 children → 14,000 × 0.85 = 11,900 €
Income €110,000, 1 child → 8,000 × 0.70 = 5,600 €

These limits apply to expenses from 2025. Medical expenses are excluded, as are interest on mortgages/insurance contracts entered into by December 31, 2024, and investments in innovative startups and SMEs. For multi-year expenses (e.g., renovations), annual installments count toward limits, excluding those incurred up to December 31, 2024.

See our news “Tax Incentives 2025” for more: https://www.graber-partner.com/de/gutachten-rundschreiben/1314-steuerverguenstigungen-1314.html

Changes to Dependent Family Member Deductions (2025)

Deductions for dependents also change from 2025.

Child deductions

Age limits have been defined. The child deduction (up to €950/year) is granted only for children aged between 21 and under 30. Income threshold for dependent status (not exceeding €2,840.51/year, or €4,000 up to age 24) remains. The age limit doesn’t apply for children with disabilities—they remain eligible beyond age 30. Calculation formula unchanged.

Child deductions for under-18s are no longer claimed via payroll but through the unified family allowance (assegno unico) paid by INPS, based on the ISEE means test.

Other dependent family members

The scope of other dependents has been narrowed. From 2025, deductions are allowed only for ascendants (parents, grandparents, great-grandparents) living with the taxpayer. Until 2024, deductions (up to €750) were also allowed for others under Civil Code art. 433 living with, or maintained by, the taxpayer. Income-based scale remains.

Other Key Tax Updates for 2025

Fringe Benefit Valuation for Company Cars

From 2025, fringe benefit valuation rules for mixed-use company cars change. For vehicles registered and assigned from January 1, 2025, taxable value is 50% based on a notional annual mileage of 15,000 km using ACI rates, net of employee contributions.

The rate is 10% for electric vehicles and 20% for plug-in hybrids. For vehicles registered between July 1, 2020, and December 31, 2024, previous percentage rules (25%, 30%, 50%, 60% depending on CO₂) continue. Pre‑July 2020 vehicles use the earlier 30%.

Fuel Type	% Tax Base
Electric	10 %
Plug-in Hybrid	20 %
Combustion	50 %

Cashless Travel Reimbursements Only

From the 2025 tax year, detailed reimbursements for meals, lodging, travel, and non-scheduled public transport (taxi, hired cars) are tax-free/deductible only if paid via traceable methods (bank transfer, card, or cheque). Cash reimbursements will be taxable and contributory. Exceptions apply for public line-transport commuters, where cash reimbursement remains exempt.

Productivity Bonus Tax Relief

For bonuses paid in 2025, 2026, and 2027, the substitute tax rate of 5% is confirmed (replacing the original 10%). Eligible are variable bonuses tied to productivity, profitability, quality, efficiency, innovation, and profit-sharing under collective or company agreements. The annual maximum remains €3,000 and previous-year employment income cap is €80,000.

Increased Fringe Benefit Exemption (2025–2027)

Departing from the standard €258.23 exemption, for 2025–2027 the exemption increases to €1,000. This applies to fringe in kind, domestic utilities, rent of primary residence, and mortgage interest. It increases to €2,000 for employees with declared dependent children (if CPF provided to employer).

Special Tourism Sector Relief (through September 30, 2025)

From January 1 to September 30, 2025, a special non-taxable supplement equal to 15% of gross pay for night work and holiday overtime is confirmed for hospitality, tourism, and spa sectors. This measure, previously in place, is granted upon employee request and self-certification of under €40,000 employment income in 2024. The employer offsets the credit via F24.

Taxation of Tips in Tourism Sector

Changes to tipping taxation in hotels and catering: while the 5% substitute tax remains, from 2025 the taxable cap rises from 25% to 30% of annual employment income. The prior-year income cap for eligibility increases from €50,000 to €75,000. Customer tips are treated as employment income and, unless explicitly waived, are taxed at 5% up to 30% of income. They are exempt from INPS/INAIL, excluded from TFR calculation, and count for deductions and benefits eligibility.

Adjustment of Regional and Municipal Surcharges

IRPEF is also subject to regional and municipal surcharges. Key rules:

Tax residence: The residence as of January 1 determines regional/municipal surcharge. Moves during the year take effect the following year.

Municipality change: Under art. 58 DPR 600/1973, a municipality change takes effect 60 days after request.

Regional surcharge: Regions may levy an additional IRPEF surcharge; collected in 11 instalments via payroll after settlement, with full deduction in final payroll if employment ends mid-year.

Municipal surcharge: Municipalities may apply up to 0.8% of taxable income (Rome has special rules). Highlights:

Collected in settlement and 11 instalments next year (Jan–Nov).
From March–November, a 30% advance is withheld in 9 instalments.
No advance for new hires during the year.

Municipalities must announce rates annually by a set deadline; otherwise, previous year’s rates continue.

Contact & Services

Contact us for a free initial consultation or email us with your details and request. Tel. +39 0474 572900 or info@graber-partner.com.

Our Services

Question 48

ISA (indici sintetici affidabilità)

Accepted Answer

The ISA, short for Indici Sintetici di Affidibilità Fiscale, are standardized questionnaires that companies and freelancers are required to submit as a mandatory part of their tax return. The main purpose of the ISA is to verify the credibility of the income declared by the taxpayer.

Structure and Calculation

Currently, there are 172 different questionnaires, with the correct choice depending on the specific business activity carried out. Regardless of the type of questionnaire, data from financial accounting as well as information on employed personnel (e.g., paid working days of employees) must always be provided. In addition, depending on the industry, specific activity-related data is collected (such as number of beds or charged rates for accommodation businesses).

Based on the entered data, the Revenue Agency’s software assigns a score on a scale from 1 to 10, with 10 being the best value. At the same time, the average score of the last two tax periods is calculated.

Impact of the ISA Score

The ISA score is decisive for tax reliefs or controls:

Advantages (score of at least 8 or a two-year average of at least 8.5):
- Reduction of the statute of limitations for tax violations by one year.
- Increase of the thresholds above which certification by a tax advisor is required for the offsetting of tax credits.

Disadvantages (score of 6 or lower):
- The likelihood of a tax audit increases, especially if a low score is recorded over several tax periods.

Neutral (score above 6 and below 8):
- Neither advantages nor disadvantages are foreseen.

Important Exceptions

In certain cases, the ISA questionnaire does not have to be completed. The main exceptions are:

Start-up or termination of the business activity during the tax period.
Revenues exceeding € 5.164.000 in the tax period.
Application of the flat-rate taxation regime during the tax period.

Question 49

Leasing

Accepted Answer

Leasing is a widely used form of financing in Italy that allows companies and private individuals to use assets without having to purchase them immediately. Typical leased assets include vehicles, machinery, production equipment, and real estate.

In a lease, a leasing company makes an asset available for a specific period of time. The lessee pays regular lease payments and, in return, receives the right to use the asset for business purposes.

How does leasing work?

When a lease agreement is signed, the leasing company purchases the asset selected by the customer and makes it available for the customer’s use.

Throughout the entire term of the contract, the leasing company generally remains the owner of the asset. However, the lessee bears the ongoing costs of use and utilizes the asset for business or personal purposes.

At the end of the agreed term, there are various options depending on the terms of the contract:

Returning the leased asset,
Enter into a new lease agreement,
Exercising a purchase option and acquiring the asset at the agreed residual value.

Advantages

Leasing can offer various advantages for companies:

Preservation of liquidity: The investment costs are spread out over the term of the contract.
Predictable financing: The amount of the lease payments is known at the time the contract is signed.
Modernization: Companies can regularly deploy new vehicles, machinery, or technical equipment.
Flexibility: At the end of the contract, a decision can be made regarding continued use based on needs.

Disadvantages

In addition to the advantages, there are also some aspects to consider:

The lessee does not own the asset during the term of the contract.
Total costs may be higher than with a direct purchase due to interest and fees.
The lease agreement results in a long-term financial commitment.
Certain contracts may include requirements regarding use or return.

Leasing or Buying?

Whether leasing or purchasing makes more financial sense depends on the individual situation. While a purchase results in immediate ownership of the asset, leasing allows for the spreading out of investment costs and can preserve the company’s liquidity.

When making a decision, particular consideration should be given to the planned useful life, financing costs, tax implications, and long-term business planning.

Question 50

Limited liability company (ital.: Società a responsabilità limitata)

Accepted Answer

The Società a responsabilità limitata (Srl) is the Italian form of a limited (liability) company and, due to its clear liability limits and flexible organisational structure, is considered the most common type of corporation in Italy, especially for small and medium-sized enterprises (SMEs). It is a legal entity with complete financial autonomy (autonomia patrimoniale perfetta) and is the functional equivalent of the German GmbH.

Key features of the GmbH

Limited liability

The central feature of the GmbH is the limited liability of the shareholders (soci) to the amount of their capital contribution. Only the company's assets are liable for the company's liabilities, which protects the private assets of the shareholders.

Share capital

The minimum share capital for a "normal" GmbH (s.r.l. ordinaria) is €10,000.

However, it is possible to establish a GmbH with a capital of at least €1. In this case, special requirements apply.

Company shares and transfer

The shareholders' shareholdings, equity participations are represented by quotas (quote). The shares are generally freely transferable. However, the articles of association may provide for pre-emptive rights, approval requirements or transfer restrictions.

Establishment and organs

The formation of a limited liability company requires the involvement of an Italian notary (notaio). The company is only established once the deed of incorporation (atto costitutivo) has been entered in the Register of Companies (Registro delle Imprese).

Administrative bodies

Management is the responsibility of the administrator(s) (amministratori), the equivalent of a German managing director. The administration can be organised very flexibly:

Sole administrator (amministratore unico)
Several administrators (with individual or joint power of representation) (collegial administration – conguinta and disgiunta)
Board of directors (consiglio di amministrazione)

Liability of administrators

Administrators are personally and jointly and severally liable to the company, the shareholders and third parties for damages resulting from intentional or negligent breaches of duty.

General assembly

The decision-making process in a limited liability company is flexible.

Regardless of the form chosen, shareholders must decide on the following matters:

Approval of the annual financial statement and distribution of profits.
The appointment and dismissal of administrators (if provided for in the memorandum of association).
Amendments to the articles of association or other far-reaching measures (e.g. capital increase or reduction, conversion, merger or demerger of the company).
Decisions on transactions that result in a significant change in the company's purpose or the rights of shareholders.

Unless otherwise specified in the memorandum of association, the voting rights of the shareholders are calculated in proportion to their shareholding in the share capital.

Control organ and audit

A control organ (collegio sindacale) or an auditor (revisore) is generally not mandatory for a limited liability company. The obligation to appoint one arises from Art. 2477 of the Codice Civile.

The control organ is responsible for monitoring compliance with the law and the articles of association, as well as the principles of proper administration and the suitability of the administrative and accounting systems.

Annual financial statement and filing

The limited liability company is obliged to keep double-entry bookkeeping (contabilità ordinaria) and must keep the books required by law.

The annual financial statements (bilancio d'esercizio) are prepared by the administrators and must generally be submitted to the shareholders' meeting for approval no later than 120 days after the end of the financial year (180 days under certain conditions). The annual financial statements must be filed with the Commercial Register within 30 days of approval.

Tax aspects

The limited liability company is a corporation and as such is taxable. Further details on IRES can be found in our encyclopaedia entry "The corporate income tax IRES".

Taxes (company level):

IRES (Imposta sul Reddito delle Società): Corporation tax, currently 24% on taxable income.
IRAP (Imposta Regionale sulle Attività Produttive): Regional value added tax, varies depending on region and sector (base value approx. 3.9%).

Profit distribution (dividends):

Dividends distributed to shareholders (natural persons) are generally subject to a withholding tax of 26% (final taxation).

Frequently asked questions (FAQ)

1. Who can establish a limited liability company (GmbH) in Italy?
A limited liability company can be established by one or more parties (shareholders) by means of a contract. Shareholders can be both natural persons and legal entities.

2. What is the minimum capital requirement for a limited liability company?
The minimum capital requirement for a standard limited liability company is €10,000.

3. Who is liable for the debts of an Italian limited liability company?
In principle, only the company itself is liable with its assets. The shareholders are only liable up to the amount of their capital contribution.

4. How is taxation carried out?
Taxation is based on the separation principle: taxation at company level (IRES 24%, IRAP approx. 3.9%) and separate taxation on distributions.

5. Does a limited liability company have to appoint a controlling body or an auditor?
The appointment of a controlling body (such as an auditor or supervisory board) is mandatory if certain thresholds are exceeded in two consecutive financial years or if the company is required to prepare a consolidated annual financial statement.

6. Is the filing of annual financial statements mandatory?
Yes. Failure to file may result in sanctions and liability consequences.

Question 51

Municipal property tax (IMU/GIS/IMIS/ILIA)

Accepted Answer

The municipal property tax IMU (imposta municipale propria) applies to properties located in Italy, whether used for private or business purposes. It applies to buildings, agricultural land and building plots.

Due to their special autonomous status, the Autonomous Provinces of Bolzano and Trento apply their own local property tax regulations in place of the national IMU provisions. In the Autonomous Province of Bolzano, the tax is known as GIS (Gemeindeimmobiliensteuer), while in the Autonomous Province of Trento, the IMIS (imposta immobiliare semplice) applies.

The Friuli-Venezia Giulia region has also introduced its own local property tax due to its special autonomous status. Since 2023, the ILIA (autonomous local property tax) has been levied there.

Taxpayers

The tax is payable by the owner of the property, the holder of a usufruct right or any other person holding a right in rem over the property.

Calculation

For buildings, the cadastral income (“rendita catastale”) forms the basis for calculating the tax base. The cadastral income is first increased by 5 per cent and then multiplied by a coefficient depending on the cadastral category:

Cadastral category	Examples	Multiplier
A (excluding A/10) as well as C/2, C/6 and C/7	Flats, villas, cellars, garages, parking spaces	160
B, C/3, C/4 and C/5	Underground storage rooms, workshops	140
A/10 and D/5	Offices, banks and insurance companies	80
D (excluding D/5)	Industrial buildings, hotels, guesthouses	65
C/1	Shops	55

Example:

For an apartment in cadastral category A/2 with a cadastral income of €500, the tax base is calculated as follows: €500 × 1.05 × 160 = €84,000.

For building plots, the tax base corresponds to the market value (valore venale) of the land.

The tax base is then multiplied by the tax rate established by the municipality. Within the limits provided by law, local authorities may determine their own rates and introduce specific reductions, exemptions or tax benefits.

Payment and obligations

The municipal property tax is generally paid annually in two instalments:

16 June: first instalment (acconto);
16 December: second instalment (saldo).

Payment is generally made using the Italian tax payment form F24.

Declaration

Changes that may affect tax liability must generally be reported to the competent municipality by submitting a declaration (dichiarazione IMU or the corresponding local declaration).

The declaration generally has to be submitted by 30 June of the year following that in which the relevant changes occurred. In the autonomous provinces, different deadlines may apply due to specific local regulations. The applicable requirements should therefore be verified with the competent local authority.

However, a declaration is not required in every case, particularly where the municipality already has all relevant information. Specific cases and whether a declaration obligation exists should therefore be clarified with the competent municipality.

Question 52

NISF National Institute for Social Welfare (ital.: INPS Istituto nazionale previdenza sociale)

Accepted Answer

The NISF / INPS (National Institute for Social Welfare) is Italy’s central social security institution for employees. There is no choice between different social security providers in Italy. NISF/INPS is the only statutory social security carrier for employees; private supplementary insurances may be used only as an addition, never as a substitute.

Mandatory insurance

By law, all employees in the private sector – as well as most self-employed workers – must be insured with INPS. The employer registers each employee electronically before the first working day (so-called UniLav notification).

Contributions and financing

Social security contributions to INPS are shared between employer and employee. The employee pays roughly 10% of the gross salary, and the employer approximately 30%. The exact rate varies depending on the company’s sector (e.g. craft/industry or commerce) and the classification/position of the employee. Contributions are calculated on the basis of the actual gross wage.

The obligation to pay contributions ceases only above a contribution ceiling (e.g. approx. € 120,000 in 2025) for “first-time insured persons” from 1996 onwards.

Payment of contributions to INPS takes place monthly. The deadline is the 16th of the month following the salary month. Payment is made using the unified F24 payment form to the Revenue Agency. In addition, every month the employer must electronically transmit a detailed breakdown of all employees and paid contributions (the UniEmens declaration) to the institute.

Benefits provided by NISF

The contributions paid are used to finance statutory social benefits, in particular:

Pensions
Unemployment benefits
Sickness benefits
Maternity benefits
Wage supplementation schemes
Family allowances
etc.

If you need further information or have questions about NISF/INPS, you can contact the institute directly:

From Italian landlines: 803 164
From mobile phones in Italy: 06 164 164
From Germany: 0800 182 11 38

Our Services

Question 53

Occasional work: PrestO and Libretto Famiglia

Accepted Answer

Following the abolition of the old vouchers, a new scheme for occasional work was introduced in 2017. Today, a distinction is generally made between the Contratto di prestazione occasionale, or PrestO for short, for companies and freelancers, and the Libretto Famiglia for private individuals.

PrestO can generally only be used by companies and freelancers if certain conditions are met. In particular, there must not, as a rule, be more than ten employees on permanent contracts.

Both schemes operate via the INPS platform and may only be used within clear legal limits.

The general protective regulations also apply to occasional work, particularly regarding working hours, rest periods and health and safety at work.

What is PrestO?

The Contratto di prestazione occasionale is intended for companies, freelancers, associations, foundations, public administrations and certain other organisations. It enables occasional work to be reported and paid through simplified procedures.

Typical use cases include short-term support roles, one-off assignments or very limited support services. Caution is advised as soon as an activity becomes regular, is integrated into the organisation or is subject to instructions.

What is the Libretto Famiglia?

The Libretto Famiglia, on the other hand, is reserved for private individuals who are not acting in the course of a business or freelance activity. It cannot therefore be used by companies.

Only certain activities can be paid for via the Libretto Famiglia, in particular small household chores, gardening, cleaning and maintenance work, domestic care for children, elderly, sick or disabled people, and private tuition. These activities are exhaustively listed in the law.

What are the limits?

Annual limits apply to PrestO and the Libretto Famiglia. The calendar year is the relevant period in each case.

In principle, the following limits apply:

a maximum of €5,000 per year for each occasional worker across all users;
a maximum of €10,000 per year for each individual user across all occasional workers;
a maximum of €2,500 per year between the same user and the same occasional worker.

For certain categories of persons, in particular pensioners, students under the age of 25, unemployed persons and recipients of certain income support benefits, remuneration is taken into account only at 75% for the purpose of calculating the user’s annual limit. The remuneration actually paid to the occasional worker is not reduced.

In certain sectors, such as conferences, trade fairs, events, thermal spas and leisure parks, the annual limit for the user may be increased to €15,000. The above limits refer to the net amount paid to the occasional worker.

Remuneration and reporting

With PrestO, the work must be reported in advance via the INPS platform. The report must be submitted at least 60 minutes before the start of the assignment and must include, among other things, the occasional worker’s details, the place of work, the duration, the type of work and the agreed remuneration.

The hourly wage for PrestO must not be less than €9. Regardless of the actual hours worked, a minimum remuneration corresponding to 4 hours applies for each day of work. This means that one assignment costs the user approximately €50; €36 of this is paid to the worker.

With the Libretto Famiglia, notification is generally provided after the work has been carried out, no later than the third day of the following month. The INPS then pays the remuneration directly to the occasional worker. One hour costs €10, of which the occasional worker receives €8. The remaining amounts cover INPS social security, INAIL accident insurance and administrative costs.

When should caution be exercised?

PrestO and Libretto Famiglia are intended solely for genuine occasional work. PrestO is generally not permitted for individuals with whom the user has already had an employment relationship or coordinated and ongoing collaboration in the last six months.

PrestO also excludes certain users and sectors, particularly in the construction industry.

Question 54

Overtime lump sum

Accepted Answer

An overtime lump sum is commonly referred to in Italy as "straordinario forfettizzato". It is a fixed monthly payment intended to compensate a specific, foreseeable amount of recurring overtime work on a flat-rate basis.

As a general rule, overtime refers to working hours performed beyond normal working time. In Italy, normal working time is generally 40 hours per week; however, the applicable collective bargaining agreement may provide for shorter working hours or specific rules. Even where an overtime lump sum is agreed, statutory and collectively agreed limits on working time must always be observed.

When is an overtime lump sum allowed?

An overtime lump sum may be useful where an employee regularly performs a limited and predictable amount of additional work. It is important that the arrangement is clearly regulated in the employment contract or in a separate addendum.

In particular, the agreement should specify:

the role or activity concerned;
the monthly amount paid;
the indicative number of overtime hours covered by the lump sum;
that statutory rest periods and working time limits continue to apply.

Practical points to consider

A lump-sum payment does not automatically cover any amount of overtime. If the employee works significantly more overtime than the amount covered by the lump sum, an additional payment entitlement may arise. The employer should therefore continue to record the hours actually worked.

Special care is required if the lump sum is paid for a long period regardless of whether overtime is actually performed. In such cases, it may be treated as a stable salary component or as a so-called "superminimo", meaning it may no longer be freely reduced.

Conclusion

An overtime lump sum can be a practical tool, but it must be drafted clearly and monitored over time. The applicable collective bargaining agreement, the actual working hours and a clear contractual arrangement are decisive.

Question 55

Payslip (ital.: busta paga)

Accepted Answer

A payslip (also known as a wage slip or salary statement) is a monthly statement of remuneration. It shows a clear breakdown of gross wages and the deductions (e.g. social security contributions and taxes) that result in net wages. It is based on the information provided by the company on working hours and absences (e.g. hours/attendance list, holidays, sick leave, overtime). The payslip therefore contains all wage components (e.g. basic salary, allowances, overtime, fringe benefits) on the one hand and deductions payable by the employee on the other. In Italy, employers are required to provide employees with a payslip every time they are paid (a legal requirement since 1953).

There is no rigid official template for payslips – the important thing is that the mandatory information is clearly visible. The payslips prepared by our firm typically contain the following information, among other things:

Master data of employer and employee
Details of the employment relationship (e.g. start date, length of service)
Applicable collective agreement (CCNL) and classification, including job description
Working hours/attendance (days, hours, overtime) and absences (e.g. holidays, leave of absence) including balance/remaining hours
Gross remuneration – composition (basic salary and other remuneration components)
Deductions (social security contributions, taxes and any other deductions)
Payment amount (net salary)

Frequently asked questions (FAQ)

1. Are payslips mandatory in Italy?
Yes. Employers must provide a payslip with every wage payment.

2. When must the payslip be handed over?
Generally, at the same time as the remuneration is paid (e.g. for monthly payments).

3. Can the payslip be sent by email?
Yes, this is generally possible – it is important that it is delivered on time and that there is proof that the employee has received it (e.g. suitable delivery/logging).

4. Is an employee portal (login area) sufficient?
A password-protected portal may be permissible if only the respective employee has access and the provision is documented in a traceable manner.

5. What information must be included in any case?
At a minimum: employee data/qualifications, accounting period, all remuneration components and all deductions shown separately.

6. Are employer contributions (e.g. employer's share of NISF) visible on the payslip?
Usually no: the payslip mainly shows the contributions and taxes deducted from the employee's gross salary.

Question 56

Profit distribution and dividends (ital.: distribuzione utili)

Accepted Answer

Dividends are distributions of profits or retained earnings from a corporation (e.g., LLC) to its shareholders. They must be clearly distinguished from salaries or other remuneration paid to directors/managers. Dividends are investment income and not remuneration for work or services rendered.

Normally, profit distributions are made pro rata to shareholdings, unless otherwise specified in the articles of association or shareholders’ agreement.

The profit distribution is determined by a resolution of the shareholders' meeting. The shareholders' meeting decides on the scope and amount of the profits to be distributed (e.g., from annual profits or retained earnings). The prerequisite is that the capital maintenance rules must be complied with; in particular, the distribution must not impair share capital or non-distributable reserves (e.g., legal reserves or reserve funds).

In practice, distributions should be economically justified, properly approved, and correctly recorded. This includes, in particular, the proper minutes of the shareholders’ meeting and clear evidence of the distributable profit/reserve base.

Taxes: Two levels

Level 1 – Company: Profits are generally taxed at the company level (IRES and IRAP). Dividends are therefore a distribution of after-tax profits and are not deductible as expenses for the distributing company, but reduce equity.

Level 2 – Recipient: Taxation depends on the recipient’s status (individual/entrepreneur/corporation) and tax residence (Italy/abroad). Withholding tax and assessment rules apply here.

Dividends to entrepreneurs and companies

Dividends in the business/enterprise sphere benefited from partial relief (e.g., for IRES companies: 95% exemption / 5% taxable).

Dividends to Italian private individuals

For private individuals resident in Italy, taxation is normally carried out typically via a 26% substitute/withholding tax (depending on the case and intermediary).

Foreign dividends may be subject to reporting and declaration requirements.

Dividends abroad: withholding tax, double taxation agreement, and EU rules

If an Italian company pays dividends to recipients not resident in Italy, Italian withholding tax (often 26%) is generally payable, which can be reduced by a double taxation agreement (DTA) (often, for example, to 5% or 15%, depending on the respective DTA and the level of participation).

In certain EU/EEA cases, specific regimes may apply (e.g., exemption under the EU Parent–Subsidiary Directive if conditions are met).

Question 57

Quarterly VAT report (ital.: Communicazione delle liquidazioni periodiche IVA "LIPE")

Accepted Answer

The Quarterly VAT report (Italian: Comunicazione delle liquidazioni periodiche IVA, “LIPE”) is a report that has been required to be submitted regularly under Italian VAT law since 2017.

With the Quarterly VAT report, the taxable person communicates the results of their monthly or quarterly VAT settlements. The report is for informational purposes only.

Affected companies

In principle, all businesses and self-employed professionals with an Italian VAT number are required to submit the Quarterly VAT report. Taxable persons are exempt only if they are not required to submit the annual VAT return and/or are not required to perform periodic VAT settlements, in the cases provided for by law. This may include, in particular:

Taxable persons who exclusively carry out VAT-exempt transactions
Taxable persons who apply one of the flat-rate systems (regime dei minimi or regime forfettario)
Exempt farmers pursuant to Art. 34(6) DPR 633/72
Associations under the flat tax regime, system pursuant to Law 398/91
Non-established taxpayers who apply the OSS scheme exclusively, where applicable

Deadlines

The quarterly VAT report must be submitted every quarter. The deadlines are:

1st quarter: May 31
2nd quarter: September 30
3rd quarter: November 30
4th quarter: February 28

If the annual VAT declaration is submitted by February 28 and the VP overview is completed in full, the Quarterly VAT report for the 4th quarter does not need to be submitted.

If a deadline falls on a weekend, it is postponed to the next working day.

VAT payment

The Quarterly VAT report is not a payment declaration. VAT payments continue to be made separately, usually using the F24 payment form, in accordance with the applicable billing cycles (monthly or quarterly).

Corrections and penalties

Incorrect or missing Quarterly VAT reports can be corrected by means of correction notices.

be corrected by means of correction returns
lead to administrative penalties in the event of late or omitted levies

Question 58

Regional tax on productive activities IRAP

Accepted Answer

IRAP (Regional Tax on Productive Activities) is a tax introduced in 1998 by Legislative Decree 446/1997, which applies to anyone carrying out an independently organised activity to produce goods or services.

From 2022, IRAP is no longer payable by sole traders and self-employed professionals.

Taxpayers

The tax is payable by limited companies, commercial entities, partnerships and public administrations. Third Sector Entities (ETS) are in theory subject to the tax, but many regions and provinces have introduced concessions or even exemptions.

Taxable base

The taxable base, i.e. the amount on which the tax is levied, is calculated differently depending on the taxpayer (company, professional) and the accounting and tax regime applied (e.g. ordinary accounting, simplified accounting).

A table is provided that summarises the various methods of calculating the taxable base.

Financial intermediaries that adopt a financial reporting framework different from that required for most companies determine their IRAP taxable base according to a specific criterion.

Item	Sign	Financial-statement method (Art. 5)	Tax method (Art. 5-bis)	Cash Basis (Art. 8)	Remuneration method
Type of taxpayer		Companies and commercial entities	Partnerships and de facto partnerships	Professionals and professional associations	Non-commercial entities and public bodies
Revenue to be considered (A)	+	Section A of the financial statements	Revenue, compensation and grants	Fees collected during the year	Income is irrelevant The taxable base is the sum of: Employee salaries Income assimilated to employment income Coordinated and continuous collaborations (Co.Co.Co.) Fees for occasional self-employment work
Costs to be considered (B)	-	Section B of the financial statements, excluding B9 (personnel) B10 (write-downs) B12 (provisions for risks) B13 (other provisions)	Costs for goods and services, depreciation/amortisation, rental fees and leasing fees, to the extent relevant for tax purposes Changes in inventories (only for taxpayers using ordinary accounting)	Production costs, depreciation/amortisation, fees paid to third parties during the year	Irrelevant
Other non-deductible costs	-	credit losses implicit interest in leasing IMU fees for co.co.co. directors	credit losses implicit interest in leasing IMU fees for co.co.co. directors	credit losses implicit interest in leasing IMU fees for co.co.co. directors	Irrelevant
Deductible personnel costs	-	The costs of personnel employed under permanent contracts, expenses for apprentices, disabled workers, research and development staff and, only in certain residual cases, part of the cost of fixed-term employees are deductible.	The costs of personnel employed under permanent contracts, expenses for apprentices, disabled workers, research and development staff and, only in certain cases, part of the cost of fixed-term employees are deductible.	The costs of personnel employed under permanent contracts, expenses for apprentices, disabled workers, research and development staff and, only in certain cases, part of the cost of fixed-term employees are deductible.	The costs of personnel employed under permanent contracts, expenses for apprentices, disabled workers, research and development staff and, only in certain cases, part of the cost of fixed-term employees are deductible.
Other deductions	-	flat-rate deductions for smaller taxpayers	flat-rate deductions for smaller taxpayers	flat-rate deductions for smaller taxpayers	irrelevant

Option for the accounting method

Partnerships that maintain ordinary accounts have the option to calculate IRAP using the same method as that provided for limited companies. By choosing this option, certain expenses that would otherwise be non-deductible or partially deductible under the tax method become deductible (e.g. entertainment expenses, car expenses, telephone expenses, miscellaneous operating costs). The presence of capital gains or losses on business assets or property may also be a factor to consider when assessing the merits of this option: under the tax method, such gains are not taxable, whereas they are taxable under the balance sheet method.

Tax Rates

As this is a regional tax, the Regions and the Autonomous Provinces of Trento and Bolzano may amend the rates or provide for exemptions through their own regulations.

In this regard, it is essential to check annually whether any changes or concessions are in place at local level.

The standard national rate is 3.9%.

There are specific rules under which the following apply:

reductions (e.g. for non-commercial entities, new businesses, disadvantaged areas, to encourage or reward stable employment, etc.)
increases for certain activities such as banks and financial intermediaries, insurance companies, concessionaires, energy sector companies, etc.

Deadlines and Return

The IRAP return must be submitted electronically each year.

Payment follows the same deadlines as income taxes (such as IRES or IRPEF).

What happens if my business operates in more than one region?

If the business is carried out in more than one region, the taxable base must be apportioned among the regions concerned. Generally, the apportionment is made in proportion to the amount of wages paid to staff employed in each region.

Question 59

Registration Tax (ital.: Imposta di registro)

Accepted Answer

Registration tax is an important tax in Italy that is levied upon the registration of certain legal acts. Contracts, deeds, minutes and agreements generally acquire full legal validity only through registration with the Italian Revenue Agency, which issues an officially certified proof of date, known as data certa.

The amount of registration tax depends on the type of document. For many civil law acts, such as lease agreements, minutes of shareholders’ meetings, agreements between parties or declarations with external effect, the tax is levied as a fixed amount, currently equal to €200, provided that there are no value-based elements. If, however, an economic value is transferred or determined, the tax is calculated proportionally.

In the case of real estate purchase agreements, the taxable base is generally based on the cadastral value. The applicable tax rates are usually 2% for the purchase of a first home and 9% for other properties, provided that the seller is a private individual. If the seller is a company or a property developer, the purchase may be subject to VAT instead of registration tax. In this case, only fixed amounts of € 200 each are usually due for registration tax, mortgage tax and cadastral tax.

Purchase, donation or exchange agreements concerning movable assets or company shares may also be subject to registration tax. In these cases, the assessment is generally based on the declared value or on the rates established by law.

The tax is paid using the official F23 or F24 forms and is submitted electronically to the Italian Revenue Agency.

Registration tax therefore represents an essential instrument for the legal protection and tax registration of important legal acts in Italy.

Question 60

Revenue agency / Tax Office in Italy (ital.: Agenzia delle Entrate)

Accepted Answer

The revenue agency (Italian: Agenzia delle Entrate, abbreviated to AdE) is the central Italian tax authority (tax office) and is assigned to the Ministry of Economy and Finance (Ministero dell'Economia e delle Finanze). As an administratively independent authority, it is responsible in particular for assessing and collecting state taxes. Depending on the procedure, it also performs tasks such as the registration of certain contracts and deeds.

Organisationally, the revenue agency is divided into regional directorates, which in turn oversee the local tax offices. In the autonomous region of Trentino-South Tyrol, there are separate directorates in Trento and Bolzano.

The revenue agency is particularly relevant for companies, managing directors, HR managers and private individuals because it bundles central processes relating to taxes, notifications, payments, data management and digital services.

What does the revenue agency do?

Its typical responsibilities include:

Setting and administering taxes (e.g. income tax, corporation tax, value added tax)
Receiving and processing electronic notifications and declarations
Administration of registration data (master data, tax positions, notices and communications)
Registration services (e.g. certain contracts and deeds)
Digital tax and invoicing services (e.g. electronic invoice)

Digital access: "Area riservata" and the most important portals

Most of the revenue agency's services are available digitally. Access is usually via the protected online area (Area riservata) – mostly using SPID, CIE or CNS. These are common forms of digital identification in Italy that enable secure and fast access to the online services of the public administration. Depending on the service, traditional access data (e.g. Fisconline/Entratel) may still be required.

Access is generally granted to the taxable person themselves. In business practice, access is often delegated to an authorised intermediary (e.g. Chartered Accountant) via a power of attorney so that checks, submissions and queries can be handled efficiently, on time and centrally.

Important portals (examples):

Fatture e Corrispettivi: Platform for electronic invoices and electronic daily receipts (cash register data/receipts)
Depending on the user profile (private individual, company, intermediary), additional services are available via reserved areas or specialist portals.

Cassetto fiscale: the electronic tax box

A central component of the digital services is the online tax box "Cassetto fiscale". It allows users to view tax documents and information and check their current status with the tax office – without having to visit the authorities.

Common use cases include, for example:

Checking submitted declarations and notifications
Checking payments and allocations (F24/F23)
Viewing refunds, offsets and open items
Reconciling registration and master data
Viewing data from the registry office

Typical notifications and declarations that are transmitted electronically to the revenue agency

In current practice, many transactions are transmitted electronically to the revenue agency via an authorised intermediary. Common examples are:

VAT registration, deregistration and change notifications
- Form AA7: for companies/legal entities
- Form AA9: for natural persons (sole traders/freelancers).
Among other things, main and secondary activities (ATECO), legal domicile, permanent establishments PE, place of storage of documents, etc. are reported.
Annual returns (depending on taxable status)
- Tax return, tax declaration
- Irap declaration
- Annual VAT declaration
- Single certification CU (Certificazione Unica)
- Withholding tax return 770
Ongoing accounting reports
- Quartarly VAT report
- Reporting of foreign incoming and outgoing invoices
Tax payments
- Transmission/processing of tax payments with F24 and F23
Rental agreements
- Registration/deregistration and renewal of rental agreements (e.g. RLI model).

Question 61

Reverse Charge

Accepted Answer

The reverse charge mechanism is a special VAT rule. Where it applies, the seller or service provider must issue an outgoing invoice without showing VAT. The buyer or recipient of the service is then responsible for accounting for VAT on the invoice received.

The reverse charge mechanism is most commonly encountered in intra-Community supplies of goods and services. However, it also applies to subcontractors in the construction sector, (subcontracts) or for various construction services relating to buildings.

The procedure can only be applied if the purchaser or recipient of the service can integrate the VAT. This means that it always applies to business transactions between VAT-registered entities. This special rule therefore does not apply to invoices issued to private individuals.

Invoices are issued without showing VAT. In addition, the relevant reference must be indicated according to the service provided. The most common ones are as follows:

Business transaction	Legal reference
Intra-Community supply of goods	Reverse charge – non-taxable turnover in accordance with Art. 41, G.D. 331/1993
Intra-Community service	Reverse charge – non-taxable transaction pursuant to Art. 7-ter DPR 633/1972
Subcontractors in the construction industry	Reverse charge pursuant to Art. 17, para. 6, letter a, DPR 633/1972
Services provided on buildings	Reverse charge pursuant to Art. 17, para. 6, letter a-ter, DPR 633/1972

Upon receipt of an incoming invoice under the reverse charge mechanism, the invoice recipient is considered the tax debtor and, as already mentioned, must include VAT on the invoice amount.

The reverse charge mechanism is implemented through the double accounting entry of the invoice. By recording the received invoice both in the purchase invoice register and in the sales invoice register, the result is neutral if the VAT is deductible.

Question 62

Reverse charge in the construction industry

Accepted Answer

Anyone building, renovating or buying a flat in Italy will encounter different VAT rates and special rules. Under Italian VAT law, the standard rates are generally 22%, 10%, 5% and 4%. In the construction industry, the 4% and 10% rates are particularly relevant, whilst the 5% rate is of no practical significance. The standard rate of 22% applies whenever no preferential treatment or special rule applies. Depending on the type of building, the work carried out and the principal, client, the reverse charge mechanism may also apply.

Purchase of a flat

Here, a distinction must first be made between a “primary residence” and a “main residence”. The primary residence is the first property purchased, whereas the main residence is the one that is actually used predominantly.

First home “Prima casa” tax relief (4% VAT)
When purchasing a primary residence, the “prima casa” tax relief may be claimed under certain conditions. In this case, the VAT rate of 4% applies.

Conditions:

The buyer must not own a property in the same municipality, either alone or jointly with their spouse, nor must they hold any other property suitable for residential purposes over which there are rights in rem such as usufruct, right of residence or right of use.
The buyer must not have previously purchased any other property anywhere in the country whilst claiming the “prima casa” benefit.
The property must be situated in the municipality where the buyer already has their residence or establishes it within 18 months of the purchase. Alternatively, it is sufficient for the buyer to work there. However, the residence does not necessarily have to be in the property itself.

Exception:
The benefit may be claimed again if the property that previously qualified for the benefit is sold within two years.

Inportant:

The primary residence purchased under the “prima casa” scheme does not automatically have to be the same as the main residence where the buyer actually lives.
The benefit does not apply to luxury properties (cadastral categories A/1, A/8 and A/9).

Without the benefit
If the preferential rate cannot be applied, the VAT rate of 10% generally applies.

Construction and renovation work (redevelopment)

For construction and renovation works, both the type of work and the type of building are decisive for VAT purposes. Italian building law distinguishes between four categories:

routine maintenance: e.g. painting, minor repairs, replacement of floor coverings
extraordinary maintenance: e.g. replacement of systems, bathrooms, windows or doors, without fundamentally altering the building
Renovation / conservative restoration: measures for preservation and renewal, including work on load-bearing structures
structural redesign: comprehensive interventions ranging from extensive alterations to demolition and reconstruction.

For residential buildings that are “redevelopment”, the preferential VAT rate of 10% applies to all types of work mentioned, regardless of whether it is a primary residence or main residence.

For commercial properties (e.g. workshops, offices, halls or warehouses), however, the reduced rate of 10% applies only to renovation and structural redesign. For routine and extraordinary maintenance, the standard rate of 22% applies.

Special rule for “significant goods” (beni significativi)
Of particular practical relevance is the provision concerning so called “significant goods”, which include, amongst others:

Lifts and goods lifts
Windows and doors
Boilers
Video intercom systems
Air conditioning systems
Sanitary facilities and bathroom fittings
Security systems

If these are supplied and installed as part of routine or extraordinary maintenance work on residential buildings, the 10% VAT rate does not apply to the entire invoice amount. The concession applies only up to the value of the labour and the other, insignificant components. The portion of the significant goods exceeding this amount is subject to the standard rate of 22%.

Example:

Total invoice: € 10,000
of which major items, such as windows: € 6,000
Other work, including labour: € 4,000

In this case:

10% VAT on the full € 4,000 of the other services,
10% VAT additionally on the € 4,000 for the major item,
22% VAT on the remaining € 2,000 of the major item.

Reverse charge in the construction industry

In the construction industry, the reverse charge is frequently applied. In such cases, the invoice is issued without VAT. A prerequisite is that the principal is a VAT-registered entity. The relevant provisions are governed by Article 17(6) of the Italian VAT Decree (Presidential Decree No. 633/72).

Reverse charge for subcontractors in the construction industry
For services in the construction industry, such as bricklaying, installations and plastering work, provided by a subcontractor, the invoice is issued to the main contractor without VAT in accordance with Article 17(6) a) of DPR 633/72.

Reverse charge for finishing and installation work on construction sites and demolition work
The reverse charge procedure was introduced for various services in the construction and ancillary construction sectors pursuant to Article 17(6) a-ter) of DPR 633/72. It applies not only to subcontractors but also to companies commissioned directly by the client.

The relevant services relating to buildings include, for example:

Electrical installations
Plumbing and heating installations
Installation of lifts
Plastering work
Painting
Flooring and wall cladding
Installation of windows and doors

The key factor is that the service is carried out on a building. In the case of pure supplies of goods with incidental installation, where from a VAT perspective the supply of the goods rather than the service is the primary focus, the reverse charge does not apply.

Which reverse charge takes precedence?
A supply may fall under both the reverse charge mechanism for subcontractors under point (a) and under point (a-ter). In such cases, point (a-ter) generally takes precedence.

Question 63

RLI form (Registrazione locazione immobili)

Accepted Answer

The RLI form (Registrazione locazione immobili) is a key tax form in Italy that is used for the registration and administration of rental and lease agreements for real estate. Since 2014, it has replaced various older forms and summarises numerous obligations relating to real estate rentals and leases.

What is the RLI form?

The RLI form is an official form issued by the Italian Revenue Agency (Agenzia delle Entrate) for:

initial registration of a rental or lease agreement,
notifying changes (e.g. extension, assignment, change of subject),
terminating the contract,
exercising or revoking tax options such as the flat-rate tax "cedolare secca" (flat-rate taxation)

What do you need to bear in mind?

Under Italian law, a rental or lease agreement must generally be registered with the tax office within 30 days of signing.

Important points:

Registration requirement: In principle, almost all rental agreements are subject to registration – with the exception of short-term leases of less than 30 days per year, known as short-term rental agreements.
Legal deadline: The 30-day period begins with the conclusion of the contract or the start of the tenancy if this is before the date of signing.
Legal certainty: Registration gives the contracts a certain date (Italian: data certa).

Who must submit the RLI form?

In principle, the landlord is obliged to carry out or arrange for the registration. However, the obligation applies to both parties, i.e. the landlord and the tenant.

The form can be submitted by:

the landlord themselves,
the tenant with power of attorney,
an authorised representative (e.g. Chartered Accountant, agent),
authorised intermediaries such as estate agents or CAF (tax assistance offices).

How and where does registration take place?

1. In person at the tax office
It is possible to submit the paper form to a local office of the revenue agency (Agenzia delle Entrate).

2. Via a third party
An authorised representative can complete the registration for you (e.g. Chartered Accountant).

3. Online (RLI Web)
The RLI form can be submitted electronically via the official portal of the revenue agency (Agenzia delle Entrate) – using SPID, CIE or CNS (these are digital identity documents commonly used in Italy that enable secure and fast access to the online services of the public administration).

Typical contents of the RLI form

The RLI form covers several areas, including:

General information about the transaction: Type of notification (e.g. initial registration, renewal, termination).
Details of the parties: Identification of landlord and tenant.
Property details: address, cadastral information (cadastral category, parcel, building unit, etc.).
Tax options: choice or revocation of flat-rate taxation (cedolare secca).

Taxes, deadlines and formalities

Registry tax: Depends on the type of rental agreement. For residential property rentals, the registry tax is 2% of the annual rent and is payable annually, usually split between the landlord and tenant.
Stamp tax: €16.00 per 4 pages of the contract.
Flat-rate tax option (cedolare secca): If you opt for flat-rate taxation, both registration tax and stamp tax are waived.

Avoid delays: Late registration may result in interest and penalties. Registration is considered complete once a copied, registered version of the contract has been issued or confirmed electronically.

Conclusion

The RLI form is a key tool for complying with tax obligations for property rental contracts in Italy.

Question 64

Section RW - IVIE - IVAFE

Accepted Answer

Section RW

Section RW appears on the income tax return form and, from 2023, also on Form 730 (referred to as Section W).

Who must complete it?

Section RW must be completed by individuals, unincorporated partnerships, equivalent associations, non-commercial entities and trusts resident in Italy to declare ownership or access to foreign financial investments and assets held abroad.

What must be declared?

The following must be declared if held abroad:

Property, real rights or timeshare interests, including those held under a lease
Precious objects and works of art
Boats, pleasure craft or other movable property registered in foreign public registers
Safe deposit boxes
Equity or capital interests
Foreign bonds or similar securities
Government or equivalent securities issued abroad
Life insurance policies or supplementary pension schemes
Other securities or bearer certificates (including units in UCITS)
Foreign currencies
Deposits and current accounts

This section must be completed even if the investment or asset was no longer held as at 31 December but was held at some point during the year.

Amounts in foreign currency must be stated in euros using an exchange rate specified each year by a specific order from the Director of the Italian Revenue Agency.

Any income generated by the assets or property reported in the RW section – for example, dividends, interest, capital gains or foreign rental income – must then be declared in the relevant income sections.

Penalties

Separate and severe penalties apply for the failure to submit, or the submission of an inaccurate, Section RW. For this reason, you are advised not to underestimate the importance of completing this section and to consult an expert adviser in the event of any doubts or difficulties.

If foreign assets are not declared, a penalty ranging from 3% to 15% of the undeclared amount may be imposed. These percentages are doubled in the case of assets held in tax havens.

In addition to these penalties, there are those relating to omitted IVIE/IVAFE payments or to taxes on undeclared foreign income

IVIE and IVAFE wealth taxes

This section is also used to calculate wealth taxes. These taxes are calculated on the basis of the share of ownership and the period of ownership of the property or financial assets during the relevant year.

Taxable persons are individuals, unincorporated partnerships, non-commercial entities that are resident for tax purposes in Italy and hold property, financial products, current accounts and savings accounts abroad.

IVIE (on foreign property)

The tax is currently payable at a rate of 1.06 % of the property’s value (0.4 % in the case of a luxury property and its appurtenances used as a main residence).

Ministerial Circular 28/2012 clarifies that the reference value on which to apply the tax for properties situated in Europe or in countries belonging to the European Economic Area (EEA) (Norway, Iceland, Liechtenstein) is determined according to the following criteria, applied in descending order of priority:

the cadastral value as determined by the foreign state
average ordinary income multiplied by specific multipliers as provided for by the foreign state
average ordinary income multiplied by the IMU coefficients (optional)
historical cost as stated in the deed of purchase
market value (e.g. price lists, etc.)

The tax is not payable if, excluding tax credits, it amounts to less than 200 euros.

IVAFE (on foreign financial assets)

The tax is payable at a flat rate of 34.20 euros per annum for current accounts and passbooks, and 0.2% for other financial assets and digital assets (e.g. cryptocurrencies).

The basis on which the tax is calculated is generally the market value at the end of the year or on the date the holding ceased. In some cases, such as for shares, bonds and other securities or financial instruments not traded on regulated markets, the nominal value or, failing that, the redemption value must be taken into account. In other cases, such as for cryptocurrencies, in the absence of a market value, the historical purchase cost may be taken into account.

The tax is not payable if the amount is less than €12.00.

Tax credit

Any foreign wealth tax may be deducted from the Italian wealth tax, but only to the extent provided for by a double taxation agreement (see Circular 28/E/2012, Table 1) and up to the limit of the tax due in Italy.

Exchange of information between countries

In recent years, the automatic exchange of information between countries has increased significantly. For this reason, the Italian Revenue Agency now has access to a great deal of data from abroad, particularly via the CRS/DAC/FACTA system, and is able to identify any inconsistencies with the information declared in sections RW, RM and RT.

When discrepancies arise, the Agency sends compliance letters to taxpayers. Such communications do not necessarily constitute a tax assessment, but are primarily intended to invite the taxpayer to voluntarily regularise their position, if tax is indeed due, through voluntary disclosure.

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