The tax year for individuals in Italy is the calendar year.
In order to declare income, the taxpayer can file Dichiarazione dei Redditi or Modello 730 (Mod. 730, a simplified income tax return) on the basis of specific tax rules.
In Italy, the Mod. 730 is a simplified income tax return. It can be filed only for specific incomes (i.e. incomes subject to ordinary taxation) and the taxpayer must meet the following conditions:
- Individual is an Italian tax resident in the year of filing of the Mod. 730 and in the previous one.
- Individual has a withholding agent in Italy in the period of the filing of the Italian income tax return.
- Individual has no VAT number.
The main advantage of this tax return is that the taxpayer is not obliged to prepare any calculation; the balance resulting from the tax return is directly withheld or refunded to the employee in the pay slip for the month of July. Married couples can file the Modello 730 jointly.
This tax return has to be submitted to the Italian tax authorities by 7 July via electronic filing.
Dichiarazione dei Redditi
In case Mod. 730 is not applicable, the taxpayer has to file the Italian tax return called Dichiarazione dei Redditi. This tax return has to be submitted to the Italian tax authorities by 30 September via electronic filing. Married couples cannot file the Dichiarazione dei Redditi jointly.
WHT and Mod. CU issued by the employer
On employment income, the employer, as tax agent, effects a monthly withholding tax on the basis of the tax rates applicable to the annual employment income.
The employer is obligated to issue within 31 March of the next year an annual employment certification, so called Model CU, certifying the amounts of the taxable income of the employee and the withholding taxes operate during the fiscal year.
In case the foreign individual has an employment relationship with an Italian company, the Italian employer, as withholding agent, is obligated to operate as above.
In case foreign individuals have no employment relationship with an Italian company, they are obliged to declare the income in the Italian tax return (through the so called ‘self-assessment method’).
Voluntary disclosure bis
The Decree n. 193, dated 22 October 2016, (related to the Stability Law 2017) provides for the chance of the so-called 'Voluntary disclosure bis'.
This procedure can be finalised by 31 July 2017 by any individual who needs to regularise one's Italian fiscal position in respect of the investments and financial activities held abroad and not declared for Italian tax purposes.
The voluntary disclosure claim can be integrated by 30 September 2017. By the same deadline, the accompanying report and the supporting documentation has to be sent to the Italian tax authorities.
The voluntary disclosure procedure is regarding the fiscal years from 2010 to 2015 in respect of income violations (while starting from 2009 regarding the violation of RW fiscal monitoring), provided that the following conditions are met:
- The investments and financial activities are held in white-list countries or in black-list countries that signed an agreement pursuant to Article 26 of the OECD Model entered into force by 24 October 2016.
- The above-mentioned activities will be repatriated in Italy or, in lack of a repatriation, a 'waiver' will be issued by the foreign financial intermediary. If the above conditions are satisfied, the voluntary disclosure can be activated by avoiding double penalties and the doubling of the assessable years. Compared with the previous edition of voluntary disclosure, the following countries will be considered as 'black-list countries' with an agreement in force starting from 24 October 2016: Cayman Islands, Hong Kong, Guernsey, Isle of Man, Jersey, Cook Islands, and Gibraltar.
- The main relevant news of the voluntary disclosure bis is relating to the possibility for the individual to opt for the calculation of the taxable income and related taxes, penalties, and interest on a self-assessment basis. By this way, the cost of the procedure will be the same as the previous edition.
- If the voluntary disclosure is regarding foreign investments and financial activities held in 'black-list countries' with no agreement, in such a case, the relevant fiscal periods will be starting from 2006 to 2015 (for income violations) and from 2004 for RW violations.
Furthermore, it is possible to apply for a national voluntary disclosure procedure in respect of assets localised in Italy. There is also an opportunity to regularise cash and other valuables, like precious metals and jewels held in safe-deposit boxes, even in Italy or abroad.
Payment of tax
In principle the income taxes are paid through the individual’s tax return using the so-called self-assessment method as follows:
- Two estimated payments (30 June and 30 November of the current year),
- And one final balance (30 June of the following year).
The amounts due are as follows:
- First estimated payment = (100% of the income tax of the previous year) x 40%.
- Second estimated payment = (100% of the income tax of the previous year) x 60%.
- Balance = Actual income tax - Estimated payments.
Tax audit process
The tax authorities have the power, during the period up to 31 December of the fourth year following the year in which the tax return has been filed, to audit the taxpayer's return. The taxpayer has the option to appeal within 30/60 days from the notification date of the notice of assessment.
In case of an omitted tax return, the tax authorities can assess during the period up to 31 December of the fifth year following the year when the tax return should have been filed.
If the taxpayer has appealed, then a judgment will be issued by the tax commissioners. It is possible to appeal against this judgment again by means of a petition filed within 60 days from the date of the notification of the tax commissioners' notice of judgment. The case is reviewed by the tax commissioners. It is possible to appeal against this second judgment only on a point of law.
The tax authority in Italy is the Ministero dell’Economia e delle Finanze.
Topics of focus for tax authorities
At the moment, the main areas of focus for the Italian tax authority are:
- Assessment of the foreign tax credits.
- Assessment of the tax residence for Italian citizens who moved their tax residence abroad (see the Residence section for more information).
- Voluntary disclosure bis (see Tax returns above for more information).