Italy

Italian tax law allows certain expenses to be deducted from gross income, while tax credits may be used as an offset against the tax liability.

Employment expenses

With reference to employment income, Italy has adopted a system of tax credits rather than employment expense deductions (see ‘Employment tax credits’ in the Other tax credits and incentives section for more information).

Provided that the conditions required by law are met, the main deductions from employment taxable income are:

• mandatory social security contributions paid by the employee, which are fully deductible, and
• contributions paid to specific complementary pension funds, which are deductible up to EUR 5,300.

Personal deductions

Provided that the conditions required by law are met, the main deductions from gross taxable income include:

• mandatory social security contributions paid by the employee, which are fully deductible
• social security contributions paid for domestic workers, which are deductible up to EUR 1,549.37
• medical expenses for disabled individuals, which are fully deductible
• contributions paid to specific complementary pension funds, which are deductible up to EUR 5,300
• voluntary social security contributions paid to the mandatory pension scheme, which are fully deductible, and
• alimony payments to a separated or divorced spouse, pursuant to a court judgement.

Only the portion of alimony relating to the separated or divorced spouse is deductible. Amounts attributable to child maintenance are not deductible.

Charitable contributions

Contributions to certain religious entities may be deductible from taxable income at up to EUR 1,032.91 per taxpayer.

Payments must be made through traceable means, such as credit or debit card or bank transfer.

Personal exemptions

Unlike other countries that permit personal exemptions and allowances in determining taxable income, Italy has adopted a system of tax credits (see the Other tax credits and incentives section for more information).

Business deductions

For self-employment income, ordinary rules apply to determine taxable income as the difference between fees collected and deductible expenses, subject to the relevant limitations.

Losses

For personal income tax purposes, offsetting losses against income is allowed for capital gains/losses on income items of the same nature, subject to the applicable rules.