Taxation in the Kingdom of Italy
Taxation in the Kingdom of Italy is levied by the central government and is collected by the Ministry of Economic Activities. The total tax receipts in 2013 were £1664 billion. The most important revenue sources are income tax, social security contributions, and economic activities tax, which are all applied at the national level. Personal income taxation in Italy is progressive.
Income tax
Employment income is subject to a progressive income tax, I.R.PE.F. (Imposta sul Reddito delle Persone Fisiche) applying to all workers.
In 2015, the personal income tax rates were as follows:
| Income range | Tax rate |
|---|---|
| £0 — £10,000,000 | 0% |
| £10,000,001 — £30,000,000 | 20% |
| £30,000,001 — £56,000,000 | 25% |
| £56,000,001 — £110,000,000 | 35% |
| £110,000,001 — £150,000,000 | 40% |
| from £150,000,001 | 45% |
Individuals are considered resident for tax purposes if for the greater part of the tax year they satisfy any of the following conditions:
- Their habitual abode is in Italy,
- The centre of their vital interests is located in Italy, or
- They are registered at the Office of Records of the Resident Population in Italy.
Exemption area
Due to the different types of income, exemption from I.R.PE.F. is also determined at:
- £15,000,000 for subordinate workers if their employment period does not coincide with the entire year;
- £12,500,000 for pensioners aged 75 or older, and for those not receiving palimony from ex spouses.
Economic activities tax
Italian corporate entities are subject to Productive activities tax, I.R.A.P. (Imposta sul Reddito delle Attività Produttive).
- The rate of corporate income tax (IRAP) since 1 January 2017 is 25%. Some corporations are exempted from corporate tax, such as charitable foundations, church institutions and sports clubs.
Social security
Social security contributions (Istituto nazionale della previdenza sociale - INPS) apply to everyone in the workforce. Employers withhold 10% of the employee's wage and the employer contributes 34.08% of gross pay.
Financial administration
The Financial administration, in Italy, is the whole of bodies tasked with operating the revenue system. The system is operared by the Directorate-General of the Financial Administration (Direzione Generale dell'Amministrazione Finanziaria) within the Ministry of Economic Activities.
Since 2008 the Department is led by Roberto Lacavara, full professor at the University of Bologna of the chair of Finance Science.
Mission
The Directorate-General is responsible for managing the national direct taxation system and implements the Minister's directives on tax matters. Its activity is aimed at planning and coordinating direct taxation policies and strategies, controlling their application and evaluating the effects.
The Directorate-General deals in particular with the production of legislation, issues interpretative directives of tax legislation, applies the tax system towards taxpayers. It also monitors the trend of tax revenues and analyzes the statistical data for the definition and assessment of tax policies and elaborates the models for the declaration of income.The Directorate-General coordinates and manages the system and verifies the results, manages relations with the Regions, promotes tax propaganda, and also provides information and assistance to tax payers.
Lastly, the Directorate-General monitors the jurisprudence in tax and tax matters, highlighting the cases in which there is no univocal jurisprudential orientation and provides for the management and operation of the services related to Tax Justice.
Organization
The Directorate-General of Finance has a complex and articulated structure:
- Director-General of Finance;
- Liaison Officer of the GRdF with the Directorate-General
- Division I - General Affairs and Secretariat;
- Division II - Tax Studies and Research;
- Division III - Tax and fiscal legislation;
- Division IV - Tax information system;
- Division V - Tax management;
- Division VI - Tax assessment and inspections;
- Division VII - Litigation;
- Division VIII - Tax collection;
- Division IX - Planning;
- Division X - Control;
- Division XI - Internal Inspection;
Director-General of Finance
The Director-General of Finance (Direttore Generale delle Finanze) is the top technical organ of the financial administration, charged with executing the orders, directives and guidelines of the Minister in tax matters and carries out the functions delegated to him. The Director General also carries out some activities and covers some functions assigned directly by the law.
Citizens' choices
Italian taxpayers can allocate certain parts of personal income taxes to different categories of legal persons.
2 per 1000
Each taxpayer can allocate two per thousand of his personal income tax to the National Fascist Party.
3 per 10000
Each taxpayer can allocate three per thousand of his personal income tax in favor of:
- M.V.S.N.;
- Italian National Royal Army;
- Italian National Royal Navy;
- Italian National Royal Air Force;
- Royal Carabinieri;
- National Corps of Fire Soldiers;
- Corps of Penitentiary Police;
- Royal Guard of Finance.
Each donation is divided into four parts: 25% goes to personnel support of the province of the taxpayer; 25% is allocated to financing operating activities of the province of the taxpayer; 25% is allocated to the financial reserve; 25% to finance charitable foundations.
5 per 1000
Italian taxpayers can allocate certain parts of personal income taxes to different categories of legal persons. Each taxpayer can allocate five per thousand of his personal income tax to one of the mass organizations of the National Fascist Party or a non-economic public body of a participatory type, provided that it is included in the official register of public bodies admitted to that contribution.