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EXPLAINED: The rules and deadlines for filing Italian taxes in 2021

From an upcoming deadline to special tax breaks, here's what you need to know about filing taxes in Italy.

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Know the taxes you need to pay in Italy and when. Photo by Ibrahim Boran on Unsplash

Who has to file tax returns in 2021?

Residents and non-residents in Italy alike have to file a tax return, but the rules are different for each group.

Those who are resident in Italy – which includes people who live in Italy more than 183 days per year, making it their primary residence – are taxed on worldwide income.

This means you have to take into account earnings you make from everywhere. Even if you generate an income from another country, you pay taxes to Italy and this is true regardless of your citizenship.

Non-residents on the other hand, such as those who have a second home in Italy, only pay taxes on income made in Italy. Find out more about the taxes second-home owners need to pay here.

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Not everyone has to file taxes, however. This includes people who receive employment income from a single employer, those who make an income taxed at source such as money gained from dividends, people who earn an income of 8,000 euros or less from employment and people who receive a retirement income of 7,500 euros or less.

When are the deadlines for filing this year?

The final deadline for filing your taxes is approaching – they are due November 30th.

The Italian tax year is the same as the calendar year, running from January 1st to December 31st. For the 2021 tax season, the tax return regards income and expenses incurred during 2020.

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You must file your tax form online via the dedicated website of Italy’s tax office (Agenzie delle Entrate). If you’d prefer a professional to take care of it, your accountant can do this for you.

You’ll need some form of electronic ID credentials such as your SPID or CIE.

Which Italian tax form should I use?

There are two different tax forms – one is known as the 730 and the other is the ‘Redditi‘ (revenue).

Everyone can file taxes using the latter within the upcoming final 30th November deadline.

However, the more simplified 730 form can only be used by those employed by a company (and therefore not self-employed) – it’s generally processed faster but has an earlier deadline of 30th September.

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The Redditi tax form is broken down into sections, based on the type of income earned, including a section for foreign assets, which would incur a type of tax called ‘wealth tax’.

If you have any assets or income that can’t be included in the shorter 730 form, you must complete the Redditi to adhere to Italy’s income reporting requirements.

What taxes can I expect to pay?

There are three main taxes you need to pay on income in Italy. Everyone is subject to personal income tax called ‘Irpef’, which starts at 23 percent of earnings for the lowest income bracket and rises cumulatively to 43 percent as a wage increases.

You pay tax on each income bracket you pass through. So if you earn over 15,000 euros for example, you pay 23 percent on income earned up to this threshold (making it 3,450 euros).

Anything over that you start to pay 27 percent tax and so on according to your salary.

Photo: Kelly SikkemaUnsplash

There are also regional taxes which vary from under 1 percent to over 3 percent and you’ll also need to pay municipal income tax rates, which varies according to where your fiscal residence is.

You’ll also need to take social security contributions into account, which is around 9 percent for employees of a company as employers pay the major share (around 30 percent).

The rate is much higher for self-employed workers, coming to around 25 – 29 percent of gross income.

One exception is for those who are eligible for Italy’s flat tax rate or ‘regime forfettario’ for new freelancers, which can slash income tax to between five and 15 percent. Find out more about this here.

What happens if I miss the deadline?

The best approach is to never miss Italy’s tax deadlines, as there are fines and sanctions in place for those who do.

You could be fined anywhere between 250 euros to over 1000 euros for not filing taxes on time. If your tax return lands you in a tax liability, you could be issued with a further fine ranging from 120 percent to 240 percent of each tax liability.

READ ALSO: Working remotely from Italy: What are the rules for foreigners?

If you have foreign assets and were late with your tax return, you will face a fine of between 3 and 15 percent of the asset value. Double that if your asset is held in a black-listed country or jurisdiction, such as the Cayman islands, Oman or the Seychelles.

Tax breaks for new residents to Italy

There are hefty tax discounts available for some people who move to Italy and make it their primary residence, which is worth bearing in mind ahead of filling out your tax form.

Essentially, there’s a discount on taxes for new residents for a period of up to five years.

To be eligible, you need to be either employed or self-employed in Italy and not have had residence in Italy in the previous two years.

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You can take advantage of a 70 percent tax exemption on your income, meaning that if you make 100,000 euros per year, only 30,000 euros is taxable.

There are even greater tax breaks on offer if you move to the south of Italy, with the exemption increased to 90 percent. Where living costs are lower and only 10 percent of your earnings are taxable, that’s an alluring prospect to new professionals.

The scheme is extended for a further five years if you have a dependent child or you buy any residential property in Italy.

To find out whether you may be eligible, speak to an accountant or your local agenzie delle entrate (tax office).

People sit at a table during a job interview

There are different steps for the employed and self-employed when it comes to taxes in Italy. Photo: Nick Morrison on Unsplash

When do self-employed workers pay their taxes?

Self-employed workers are subject to the same income tax brackets as the employed, but they can pay their taxes slightly differently.

Compared to those employed by a company who pay income tax at source, the self-employed can pay their taxes in June or spread them out over six months in instalments.

READ ALSO: ‘Smart working’? Here’s what you need to know about going self-employed in Italy

They must meet the November 30th deadline for filing taxes, but it’s always recommended to do it earlier to avoid potential penalties.

What about income earned from outside Italy?

Depending on where the income from abroad is earned from, you’ll need to check any double taxation treaties in place between Italy and the country you’re generating income from.

Regardless of where income is generated, however, you can deduct any extra tax paid abroad from the limits set in Italy.

If the tax paid is higher in the other country, you don’t have to pay anything in Italy. If it’s the contrary, you’ll have to pay the difference in accordance with Italy’s tax rates.

Even if it turns out you don’t have to pay any extra taxes to Italy, you still have to file a tax return and disclose your foreign income.

If you have any foreign assets, such as residential and commercial properties, bank accounts, shares owned in private or public companies, vehicles such as a boat, investments, insurance, pensions and cryptocurrency, you need to declare these.

Only residents in Italy must disclose foreign-held assets, however. Again, any taxes paid abroad can be used as credit to offset taxes in Italy in accordance with double taxation agreements.

Are there any tax deductible items I can claim for?

There are plenty of items and schemes that can be deducted in your tax return. This can include health expenses, kindergarten fees, holiday tax credit and a whole raft of Italy’s building bonuses.

The 110 percent IRPEF deduction, better known as the ‘superbonus‘, can be filed for work carried out to upgrade a property’s energy efficiency rating or to reduce seismic risk.

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This is a good way to offset income taxes while benefitting from government-funded renovation work. In addition, Italy’s latest Budget Law 2022 plans to extend the scheme into 2023 for certain categories of property.

In the 730 form for 2021, there’s also a 90 percent deduction for the facade bonus (set to drop to 60 percent in 2022) and a 30 percent personal income tax deduction to finance measures to contain and manage the Covid-19 epidemic emergency.

Please note that The Local cannot advise on personal tax questions. For further guidance, contact your accountant (commercialista) or your local tax office (agenzie delle entrate).

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COST OF LIVING

How does the cost of childcare in Italy compare to other countries?

Parents in Italy spend a monthly average of €303 for public nursery care and €324 for public kindergarten. How does that compare to other countries?

How does the cost of childcare in Italy compare to other countries?

Childcare costs in Italy can differ greatly depending on where you live, as the monthly cost of public nurseries (for children between three months and three years of age) and kindergartens (for children between three and five) are left to the discretion of local authorities.

READ ALSO: How much parental leave do you get in Italy?

According to the latest available data, a one-child Italian family spends an average of 303 euros a month for a full-time place (around ten hours a day, five days a week) at a public day nursery, or asilo nido, and an average of 324 euros a month for a place in a public kindergarten (scuola materna or scuola dell’infanzia). 

Fees are generally higher in northern regions, with the highest monthly nursery fees of all recorded at 515 euros in Lecco, Lombardy. Conversely, childcare is usually more affordable in the south – full-time nursery care in Catanzaro, Calabria costs 100 euros a month on average. 

For a breakdown of average public nursery fees by Italian region, see this website.

READ ALSO: Italy ranked among worst in Europe for tax burden on families

Unsurprisingly, fees for private daycare facilities are generally significantly higher than those for public ones. 

According to an investigation from Altroconsumo, a part-time place (five hours a day) at a private nursery costs 480 euros a month on average, whereas a full-time place (ten hours a day) can cost as much as 620 euros a month.

Once again, the available data show a big gap between the north and south of the country, with private daycare facilities in southern regions being significantly more affordable than their northern counterparts – Palermo, Sicily is the least expensive city when it comes to private nursery fees, charging an average of 2.09 euros per hour of care.

Financial support for low-income households is available in the form of a bonus asilo (‘nursery bonus’), which can be claimed by families of children in public daycare facilities or in contracted private ones.

The claimable amount depends on families’ economic situation, which in Italy is calculated as ISEE (Equivalent Financial Position Indicator). The following subsidies are in place:

  • Families with ISEE under 25,000 euros are entitled to an annual budget of 3,000 euros.
  • Families with ISEE between 25,001 euros and 40,000 euros are entitled to 2,500 euros. 
  • Families with ISEE over 40,001 euro are entitled to 1,500 euros.

The bonus asilo for the current school year must be requested by midnight on December 31st, 2022 through the INPS website.

Shortage of childcare places

While this bonus does provide vital help with childcare costs, many families are not actually able to use it due to an endemic dearth of places available at public or private daycare facilities across the country.

According to data from the Italian Public Budget Observatory (Osservatorio sui Conti Pubblici Italiani), in the school year 2019-2020 there were only 361,318 nursery places available in Italy overall (public and private nurseries were considered together in this instance).

READ ALSO: How much does it cost to raise a child in Italy?

That meant that only 26.6 percent of children eligible to receive nursery care (aged between three months and three years) could actually find a place in a daycare facility. 

Though Italy formally committed to increasing the capacity of existing nurseries and creating new facilities through its National Recovery and Resilience Plan (PNRR) – the target is to have an additional 264,480 places by December 2025 – many families are still struggling to get their children into daycare and are having to resort to alternative options.

Here’s a look at how the situation compares across Europe:

Denmark

In Denmark, every child is guaranteed a place at a public childcare facility from the age of six months. The government pays 75 percent of the cost of a place or even more if your household income is below a certain threshold

The exact amount parents pay depends on the Kommune. In Copenhagen Municipality, the cost of nursery care (vuggestue up to 2 years and 10 months) is 4,264 kroner a month including lunch (roughly €573). For kindergarten (børnehave from 2 years and 10 months to 6 years) it is 2,738 kroner a month including lunch (roughly €368).

If you have more than one child using childcare, you pay full price for the most expensive daycare and half-price for the others.

Parents in Denmark can also receive child and youth benefits (børne- og ungeydelsen), also known as børnepenge. This is a tax-free payment that you receive for each of your children until they reach the age of 18.

For children aged 0-2 years it is 4,653 kroner per quarter (roughly €156 per month per child). For children aged 3-6 years it is 3,681 kroner per quarter (roughly €123 per month per child).

Norway

The cost of nursery and kindergarten is capped at 3,050 Norwegian kroner, regardless of the hours attended or whether that facility is state-run or private. This means you’ll never pay more than roughly €295 a month per child in childcare costs.

Sweden

Generally, the highest amount parents have to pay for a full-time place in childcare is 1,572 SEK a month, which is around €145. The exact amount is calculated on income. It is half price if you have more than one child in childcare. 

Germany

The costs for daycare centres (Kindertagesstätte, or Kita for short) can differ greatly depending on where you live in Germany, as the fees are set by the local government.

In Schleswig-Holstein in the far north, parents pay on average nine percent of their after-tax income on childcare costs. In Hamburg, 4.4 percent of parent’s income goes on childcare as every child is entitled to five hours of free care a day. In Berlin, daycare is completely free. 

Spain

Costs can vary depending on whether it is a  private or public guardería or centro infantil (as nurseries are called in Spanish).

Public ones are heavily subsidised by the government and cost around €100-260 per month, depending on where you live in Spain and your situation. Private nurseries cost between €150 and €580 per month. There is also a fixed yearly fee called a matrícula or enrolment fee, which is around €100.

There is a 50 percent discount for large families and single parents don’t have to pay anything for childcare.

There’s also a deduction of up to €1,000 (cheque guardería) that is applied to the income tax return and works out at around €100 to €160 per month which is aimed at working mothers and is available up until the child is three years old.

France

In France, crèches tend to be the most affordable option and the cost is based on the family’s income. High earners might pay up to a maximum of €4.20 an hour (€33.60 for an 8-hour day), whereas low-income families might pay €0.26 an hour (€2.08 for an 8-hour day) at a crèche collective, which is for three months to three year olds. At the age of three, compulsory education begins in France.

The cost of a childminder is around €10.88 an hour and up to 50 percent of the costs of a nanny or professional childminder can be reimbursed by the government.

The OECD calculations on the percentage of income spent on childcare – based on two parents both working full time – is 13 percent in France. This is roughly similar to Spain and Italy.

Austria

Public nurseries and kindergartens are heavily subsidised and in some cases free, depending on where you live. For example in Vienna, parents only need to pay €72.33 a month to cover meal costs, with low income families being exempt from that fee.

Vienna also subsidises private kindergartens, paying up to €635.44 a month directly to the institution. 

In other provinces, kindergarten is free for part-time hours. It is mandatory for all children in Austria to attend part-time kindergarten from the age of five. They start school aged six.

Switzerland

The average Swiss family spends a massive 41 percent of their net income on childcare, three times the OECD average of 13 percent.

The average cost of childcare in Switzerland is CHF130 a day (€136). Due to tax breaks and subsidies paid out in the cantons, many parents will pay between 30 and 80 percent of this cost, depending on income. This equates to paying between €41 and €108 a day, roughly €902 to €2,376 a month. 

It’s even more expensive to hire a nannie, which will cost between CHF3,500 (€3,678) and CHF5,000 (€5,255) a month, including mandatory pension contributions.

United Kingdom

According to charity Coram in their Childcare Survey 2022, the average cost of full-time nursery is £1,166 (around €1,304 a month), which is even higher in some parts of London. There are some government subsidies available for low-income families and those receiving benefits and every parent is entitled to 15 or 30 free hours of childcare the term after their child turns three years old.

Conclusion

The cost of childcare varies within each country, depending on family circumstances. However, for guaranteed low childcare costs for every parent, Sweden comes out best, with a maximum of €145 a month.

Average monthly cost of state-run childcare:

Sweden: €145 maximum

Norway: €295 maximum

Austria: €72.33 – roughly €500

Spain: €100 – €260 

Germany: €0 –  €368

Italy: €303 for nursery care; €324 for kindergarten

Denmark: €368 – €573

France: €45,76 – €739.20 

Switzerland: €902 – €2,376 

U.K. €1,304 which reduces the term after the child turns three.

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