In addition to IRPEF (personal income tax), taxpayers may also be liable for regional and municipal IRPEF surcharges.
The tax applies only to individuals; companies and organisations are not liable for it.
These are surcharges on IRPEF and are allocated respectively to the region and the local authority in which the taxpayer has their tax residence.
The surcharges apply to individuals who receive income subject to IRPEF, such as:
- income from employment
- pension income
- income from self-employment
- business income
- property income and other personal income.
Purpose of the surcharges
The main purpose of the IRPEF surcharges is to ensure the financial autonomy of local authorities so that they can fund expenditure in the public interest at local level (e.g. for regions: health services, education, culture, the environment – for local authorities: road maintenance, waste management, street lighting, cultural activities, libraries, museums, sports facilities, recreational initiatives, etc.).
Region (Province) and Relevant Municipality
The surcharges are payable to the Region (the Province of Trento or Bolzano) and to the municipality where the taxpayer has their tax residence as at 1 January of the year. In the event of a change of residence during the year, the change takes effect for tax purposes in relation to the surcharges only after 60 days.
Regional IRPEF surcharge (provincial for Bolzano and Trento)
The regional IRPEF surcharge is a tax set by the Region to which the taxpayer belongs. Those resident in the provinces of Bolzano and Trento pay a provincial surcharge instead.
The basic rate is set by national law, but individual regions (the provinces of Trento or Bolzano) may apply variations within the limits established by the legislation.
The minimum rate is generally 1.23%, whilst the maximum rate is set at 3.33%.
Reduced rates, exemptions or deductions may apply to lower incomes (e.g. in the province of Bolzano). Some regions have introduced a flat rate, whilst others have a progressive rate with tax brackets that increase as income rises.
The tax is calculated by applying the relevant rate to the IRPEF taxable income, i.e. the total income on which IRPEF is calculated after any applicable deductions have been made.
The calculation is therefore generally carried out automatically during:
- payroll processing
- the submission of tax returns using Form 730 or the Redditi Persone Fisiche form
Municipal IRPEF Surcharge
The municipal IRPEF surcharge, on the other hand, is a tax payable to the municipality in which the taxpayer has their tax residence.
Each local authority may set its own rate within the limits laid down by law.
The local authority may also choose not to levy any surcharge at all.
Some local authorities may, however, set an exemption threshold – that is, an income level below which the surcharge is not payable – or adopt a progressive system whereby the rate increases as income rises.
The municipal surcharge is also calculated on the IRPEF taxable income.
How are the surcharges paid?
For employees and pensioners, payment is normally made via the withholding agent, i.e. the employer or the pension scheme.
The amount is deducted directly from their pay or pension.
For other taxpayers, such as sole traders or the self-employed, payment is normally made using the F24 form, based on the figures shown in the tax return.
Advance payments and final settlement of surcharges
For the regional surcharge (provincial surcharge for Trento and Bolzano), no advance payments are required. The amount due is normally paid in full in the year following the reference year.
The surcharge calculated on income from employment is deducted in the year following the reference year, usually from January until no later than November (maximum 11 instalments).
Municipal surcharge
As with the regional (provincial for Trento and Bolzano) surcharge calculated on income from employment, it is deducted in the year following the reference year, usually from January until no later than November (maximum 11 instalments).
In the case of the municipal surcharge, an advance payment is generally required, equal to 30 per cent of the amount due for the previous year.
The advance payment is paid in the following year together with other payments arising from the tax return, or deducted from the pay packet for income from employment from March until November (9 instalments).
The final balance is then determined on the basis of the surcharge actually due for the reference year, taking into account any advance payments already made.