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 23 July (30 Sept. from next year, as foreseen by the Italian Budget Law 2020) 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 November 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’).
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 fifth 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 seventh 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).