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TAXES

EXPLAINED: The rules and deadlines for filing Italian taxes in 2022

As the first deadline approaches for some, here's a reminder of the key dates and what you need to know about filing your Italian taxes this year.

Know the taxes you need to pay in Italy and when in 2022
Austria has been sending out climate bonus payments to millions of people (including some deceased). Image: moerschy / Pixabay

Who has to file a tax return in Italy in 2022?

Whether you are a resident or non-resident in Italy, you’ll need to file taxes in Italy.

That is unless you either receive employment income from a single employer in Italy, make an income taxed at source (such as money gained from dividends), earn an income of €8,000 or less from employment, or receive a retirement income of €7,500 or less. In these cases, you are not required to fill out a tax return.

For everyone who does need to file taxes, the rules differ slightly depending on your circumstances.

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.

READ ALSO: What’s the difference between Italian residency and citizenship?

This is true regardless of where the income is generated from and you must take your earnings from everywhere into account. Therefore, if your primary residence is in Italy and you make money from the US, Canada or the UK for instance, you must pay taxes on that income to Italy.

Your citizenship doesn’t change this requirement.

Non-residents on the other hand, such as those who have a second home in Italy, only pay taxes on income made in Italy.

If you are a second-home owner in Italy however there are taxes you need to pay on the property. See here for details.

When are the deadlines for filing this year?

The final deadline for filing taxes is November 30th 2022, but there are other instalments to be aware of, depending on your personal circumstances.

Some tax deadlines were extended under reforms made under Italy’s Fiscal Decree for 2022, with a view to aiding economic recovery following the impacts of the pandemic.

Originally, the deadline for paying tax bills from September 1st to December 31st 2021 was November 30th 2021. An extension was initially retrospectively granted for 60 days, but has now been further extended to up to 180 days.

People sit at a table during a job interview

The new tax deadlines you need to know for 2022. Photo: Nick Morrison on Unsplash

Looking ahead, the Italian tax year is the same as the calendar year, running from January 1st to December 31st. For the 2022 tax season, the tax return regards income and expenses incurred during 2021.

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

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

For a calendar of all the tax deadlines by month, see Italy’s tax office schedule here.

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 PF‘ (revenue) and which one you use depends on the type of income.

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

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.

READ ALSO:

Employees and retirees who have income from work, a pension and other sources may submit form 730. Spouses may submit form 730 jointly, according to Italy’s tax office guidelines.

Anyone else and taxpayers who are not resident in Italy for tax purposes during the tax year and/or during the year of filing of the tax return must submit the Redditi PF form.

This tax form is split into sections, based on the type of income earned, including a part to declare foreign assets, which would incur a type of tax called ‘wealth tax’.

Do your research when looking for work

Remember to check you’re using the correct forms and submit by the relevant deadline. Photo: Van Tay Media on Unsplash

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.

For more advice on these forms, Italy’s Inland Revenue has published instructions in English here.

What taxes can I expect to pay?

You’ll need to pay three main types of taxes on income in Italy. 

Everyone is subject to personal income tax (Irpef), which starts at 23 percent of earnings for the lowest income bracket and rises cumulatively to 43 percent as a wage increases.

Italy recently approved a drop to its income tax bands from five to four and reduced tax rates for those on lower incomes.

Now, you’ll pay 23 percent tax on earnings up to €15,000 (as before), while for salaries of between €15,000 and €28,000, the tax will be reduced from 27 percent to 25 percent.

For salaries between €28,000 and €50,000, the applicable tax rate will be 35 percent.

The 41 percent tax band for earnings between €55,000 and €75,000 will be abolished altogether, with all income over €50,000 now set to be taxed at the top rate of 43 percent.

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

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.

Social security contributions (INPS) will also make up a sizeable part of your tax bill.

For this year, employees with incomes up to €35,000 per year (or up to €2,692 gross per month) will get a 0.8 percent discount for the pay periods from January 1st to December 31st 2022.

Self-employed workers face higher social security contributions than employees (who pay around 9 percent and the rest is paid by the employer), at around 25 – 29 percent of gross income.

However, if you are eligible for Italy’s flat tax rate or ‘regime forfettario’ for new freelancers, you could pay much lower income tax rates of between five and 15 percent. Find out more about this here.

What happens if I miss the deadline?

The best approach to Italian tax deadlines is obviously not to miss them, as there are fines and sanctions in place for those who do.

You may be required to pay between €250 to over €1000 for not filing taxes on time. If you end up in a tax liability, you could be issued with a further fine ranging from 120 percent to 240 percent of each tax liability.

There are further penalties 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 it if your asset is held in a black-listed country or jurisdiction, such as the Cayman islands, Oman or the Seychelles.

Do your sums to avoid fines. Photo by Towfiqu barbhuiya on Unsplash

Tax breaks for new residents to Italy

If you move to Italy and make it your primary residence, you could be eligible for some considerable tax breaks.

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.

READ ALSO:

The potential savings are substantial as you can take advantage of a 70 percent tax exemption on your income. Therefore, only 30 percent of what you earn is taxable.

And it’s even more attractive if you move to the south of Italy, with the exemption increased to 90 percent. 

When do self-employed workers pay their taxes?

Self-employed workers are subject to the same income tax brackets as the employed, but – aside from having to file their own taxes – they can pay them 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:

June 30th is the first deadline for paying their income tax and November 30th is the second and final one.

If you pay VAT (IVA), you’ll need to pay the VAT balance for the year 2021 by March 16th 2022.

What about income earned from outside Italy?

It’s best 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 the balance shows you don’t have to pay any extra taxes to Italy, you still have to file a tax return and disclose your foreign income.

Are there any tax deductible items I can claim for?

In Italy, you may be able to claim back the cost of many different expenses to offset against your income tax: from medical bills to kindergarten fees and various building and renovation bonuses.

This means you’ll need to keep any receipts related to these expenses somewhere safe until it comes to the time to submit your tax return.

As well as everyday expenses, the Italian government is currently offering dozens of tax incentives in the form of ‘bonuses’, some which can be claimed as a reduction in your tax bill, or as a discount at the time of purchase. See a list of the current tax bonuses available here.

You may not be able to claim back expenses in some circumstances, for example if you’re on the flat tax rate. Speak to a professional to find out more about what you can deduct.

For further information and guidance, contact your accountant (commercialista) or your local Italian tax office (Agenzia delle Entrate).

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For members

MONEY

What you need to know about opening a bank account in Italy

There are a few things to know before choosing the right place to put your cash in Italy. Here’s our guide to finding the best bank for you.

What you need to know about opening a bank account in Italy

Money makes the world go round, they say, and even in notoriously cash-friendly Italy, your life will be a lot easier if you have somewhere to put it.

But with daunting paperwork, confusing opening hours and array of diverse offerings, interacting with Italian banks can be challenging.

Here’s our guide to opening a bank account in Italy to get you started.

Step one: Know what’s out there

I come from Canada, where you can count the number of big banks on one hand. That means Italy’s banking sector can be a little dizzying in comparison. At the time of writing, Italy has more than 20 banks with assets of more than €10 billion. 

Among the biggest names in Italy are Dutch-based ING, Germany-based Deutsche Bank, Italy’s own Unicredit, and the Banca Nazionale di Lavoro (now owned by France’s BNP Paribas).

READ ALSO: Which are the best Italian banks for foreigners?

Alongside these big national banks, there are regional providers like the Banca Popolare di Puglia e Basilicata or the Banco di Sardegna, which confusingly operate branches far from their respective homelands. As a result, it’s not uncommon to find a Pugliese bank next to a Venetian one in Lombardy, or encounter a local bank that has just a handful of branches throughout the country.

Consider the fees applied to transactions and cash withdrawals when choosing your Italian bank account. (Photo by ANDREAS SOLARO / AFP)

Disrupting the banking world in recent years has also been the emergence of a whole new crop of online banks, like N26 and HYPE, which offer very low fees by operating no physical branches.

And lastly, there’s the post office: Poste Italiane, in an unholy alliance of paper-based bureaucracy, also operates a consumer bank notorious for slowing down postal lines everywhere.

Knowing the lay of the land will help you pick out the best offering for your life and location. Consider your choice carefully. When we arrived, we chose N26 for its low fees and easy sign-up. But soon, we needed a bigger bank that could offer services like a fideiussione (renter’s guarantee).

Choosing the right bank is about more than knowing if it has a branch in your area — as you settle, a bank’s mortgage offerings, insurance, or high-interest savings accounts may become more important to you.

Step two: Decide what account you need

Technically, if you’re over the age of 18, you’re eligible to open an account in Italy — but most account types are only available to residents, which includes foreign nationals who are here because of a valid job offer or degree program.

The most common account type is a conto corrente or current account (a checking account for American readers). These accounts are designed with daily transactions in mind, meaning there are often opportunities to save on fees by maintaining a minimum deposit or balance.

Ask an expert: Which are the best UK banks for Brits living in Italy?

To earn higher interest, you can place your savings in a conto di risparmio or savings account, which offer fewer transfers and transactions in exchange for higher interest. There is also the conto di deposito, a more restrictive but even higher-interest savings account designed for parking your money just to earn.

Lastly, there are conti correnti esteri, foreign accounts, which can offer deals on wire transfers or allow you to use your home currency and save on exchange fees. These accounts don’t require you to be an Italian resident, making them a good choice for people staying for an indeterminate time.

Step three: Review costs

There’s a reason some of Italy’s nicest buildings belong to banks — this country’s banking fees are among the highest in Europe.

Though comparisons are hard to come by, in 2009 the European Commission found that fees in Italy could be four or five times the amount for the same accounts in the Netherlands, Ireland, or Germany.

But choose the right offer, and they don’t have to be — one analysis found these fees could vary by as much as 10 times between banks.

On average, a typical current account cost nearly €95 per year in 2022, with high-interest savings accounts costing even more. But that average dropped to just €25 for online-only accounts like those offered by N26.

A branch of Unicredit bank in Milan. (Photo by FILIPPO MONTEFORTE / AFP)

In exchange for these fees, banks offer a range of different services — everything from higher interest to lower transaction fees.

Most banks won’t charge a setup fee, but may charge to issue you with your first debit or credit card. Other services, like cheques, wire transfers, or even ATM withdrawals above a monthly limit are likely to be met with other fees.

Il Sole 24 Ore, one of Italy’s leading financial newspapers, has an online tool that will help you compare bank offers, automatically deducting your expenses from your anticipated interest to show you exactly how much your account is likely to cost.

Make sure to read the fine print — some “fee-free” accounts are promotional offers and expire after a year or so, leaving you paying hefty fees. Others look expensive, but are free if you maintain a low minimum balance or make monthly deposits of just a few hundred euro.

Step four: Visit a branch or sign up online

Now that you know the account type and bank you’re looking for, you can dive into the paperwork.

For a variety of reasons, it’s generally best to wait until you are in Italy to open your account — even in the case of online accounts or conti esteri. Banks will want to mail you your card and know a fixed address in Italy, and you will need an Italian tax code (codice fiscale) to get started in any case.

For online accounts like N26 and HYPE, paperwork is often minimal and requires filing out a few online forms and uploading your ID. 

In physical banks, by contrast, it can be quite extensive, involving a lot of fine print in Italian. If your language skills are poor, consider bringing a friend who can help you review your contracts, or select a bank that you know offers counter service in English.

To open an account, you’ll need the following documents:

  • ID or a passport;
  • Codice fiscale;
  • Residency permit (or, if you’re a non-resident, proof of address like a bill or piece of certified mail); and
  • Proof of your employment income (i.e., a contract or tax return).

Businesses will also need to provide the company’s registration certificate, a certificate of good standing, and statements of the financial status of all shareholders with more than a 20 percent stake in the company.

Take these to your local branch to get the process started. Make sure to check your local bank’s opening hours first — Italian banks are notorious for taking long lunches and closing early in the afternoon.

Closing an account

If you’ve decided it’s time to say goodbye to your bank, it’s unfortunately not quite as simple as visiting a branch.

In most cases, you will need to send a registered letter or raccomandata to your local branch before you show up in person, including signatures from everyone on the account.

And as usual, make sure to read your contract carefully — some banks will even charge a fee to close your account.

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