ITALY Law and Practice Contributed by: Paolo Ludovici and Andrea Mirabella, Gatti, Pavesi, Bianchi, Ludovici
1. Tax 1.1 Tax Regimes Tax System
Income Brackets and Tax Rates Personal income tax applies to incomes determined on a worldwide basis at proportional and progressive rates up to 43% as outlined below: • 23% up to EUR28,000; • 35% from EUR28,001 to EUR50,000; and • 43% from EUR50,001. Local (regional and municipal) surcharges generally apply up to roughly 2%. Substitutive Taxation Financial income and alike – such as dividends and interests – is generally subject to a final withholding tax/substitutive tax of 26%. Capital gains from the disposal of both qualified and non-qualified shareholdings are subject to a 26% sub - stitutive tax. Qualified shareholdings are defined as those representing more than 20% of the voting rights exercisable in the ordinary shareholders’ meeting (2%, in the case of a listed company) or more than 25% of the company’s equity (5%, in the case of a listed company). For capital gains realised from the sale for considera - tion of undevelopable land and buildings, the seller may request the application of a 26% substitute tax. Capital gains realised upon sale of properties held for more than five years are not subject to tax (see 1.4 Taxation of Real Estate Owned by Non-Residents ). Interest on Italian government bonds, postal savings bonds issued by the Cassa Depositi e Prestiti and sim- ilar securities issued by international bodies, as well as interest on bonds issued by “white list” countries, is subject to a 12.5% substitutive tax. Whenever a double taxation treaty is in force, the withholding tax rate on dividends and interest may be reduced. Wealth Taxes Different property taxes apply depending on the situs of the assets and investments and their nature.
Italian taxation applies to both resident and non- resident persons. Italian resident persons are subject to tax according to the worldwide taxation principle. Non-residents are taxed on Italian-source income. Tax Residence of Individuals For the purposes of Italian personal income tax, Arti - cle 2, paragraph 2 of Presidential Decree No 917/1986 (Italian Consolidated Income Tax Act, TUIR) sets out that residents of Italy are those individuals who, whether nationals or not, for the greater part of the calendar year (ie, 183 days or more, or 184+ in leap years), including fractions of days: • have their residence in Italy according to the Italian Civil Code – the Italian Civil Code defines resi - dence as the place where “the person has his/her habitual abode”, and the individual’s residence is identified as where he/she is physically present with the intention of residing there with a degree of habituality and stability; • have their domicile in Italy – for tax purposes, domicile is defined as the place where an individu - al’s personal and family relationships are primarily developed; • are physically present in Italy; or • are registered with the Italian Register of the resi - dent population (“ Anagrafe ”) – enrolment with the Anagrafe is regarded as a rebuttable presumption. Categories of Taxable Income Personal income tax is applied in aggregate on the following categories of income:
• income from lands; • income from capital; • employment income; • self-employment income; • business income; and • other income (including capital gains).
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