Bologna Inside - Second Edition

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5 > WORK

PAYING TAXES

If your main home is Italy, or if you spend more than 183 days in any tax year in Italy, you are classified as a tax resident. Most legal residents are also tax residents. Under Italian law, it is your responsibility to file a dichiarazione dei redditi (declaration of income) each year when you have any taxable income. The Italian fiscal year runs from January 1 to December 31. Taxes must be filed by June 30 for the period ending December 31 of the previous year.

Below is a partial list of taxes you will encounter as a tax resident in Italy:

Imposta sul Valore Aggiunto (IVA): IVA is the Italian acronym for value added tax, or VAT.The rate of IVA varies, but the standard is 20%. Different than an across the board sales tax, you pay IVA on services, but not on consumer goods or food. IVA is paid at the time services are rendered.

Imposta sul Reddito delle Persone Fisiche (IRPEF): personal income tax on your worldwide income from all sources, ranging from about 12-60% of your gross income. IRPEF is applied to income from business activities, income generated from land and buildings located in Italy, income from Italian securities, capital invested in Italy and earned income from self-employment. If you are working under any kind of contract, IRPEF will be automatically withheld from your paycheck.

Imposta Comunale sugli Immobili (ICI): ICI is paid by owners of residential property. It is calculated based on the valore catastale (see Chapter 10: Long Term) and is paid annually in two installments, 90% by June 30 and the remaining 10% in the first 20 days of December. The notification to pay ICI arrives by mail to your residence.Tassa Rifuti (garbage tax): garbage tax is calculated based on the number of inhabitants in your home and is paid to your local comune. The notification to pay your garbage tax arrives by mail to your residence.

Bolli, Imposte and Canoni: various smaller taxes include a bollo auto (car tax), bollo moto (scooter tax), imposta di registro (registration tax), and canone Rai (tv tax), not to mention the ubiquitous imposta/marca da bollo (stamp tax). These various bolli, imposte and canoni can sometimes catch you by surprise. If you think you have completed a transaction without paying a tax on it, you probably just don’t know about it yet.

Given the complexity of the Italian tax system, most people get help from a professional accountant when filing. See this chapter under ‘Working on your own.’ If you don’t have an accountant, you can go to one of the many agencies around the city specializing in tax assistance, called Centri Autorizzati Assistenze Fiscali or CAAF. Some CAAF are organized by trade unions and only charge a percentage fee for the service. Check with the URP for a list of approved agencies. One of the most popular is Teorema, organized by the CGIL trade union.

Teorema Bologna

72 locations in the city and province
Tel. 051.4199333
www.teorema.bo.it

PERSONAL INCOME DEDUCTIONS

Various personal tax deductions are available, but the rules are complex. Deductions include certain medical and funeral expenses, certain mortgage allowances in your primary residence and some university tuition fees. During the tax year, save your receipts from the pharmacy, physician and veterinarian as well as any charitable donations. Consult with your accountant to see which of these expenses may then be deducted.

TAX OBLIGATIONS IN MORE THAN ONE COUNTRY

Just because you are now an Italian taxpayer, doesn’t mean that you no longer have tax obligations in your home country. Since you may be a tax resident in more than one country, many nations have signed reciprocal double taxation treaties in order to limit the possibility of being required to pay the same tax twice. Details regarding double taxation treaties depend on your country of origin. For example, Italy has a double taxation treaty with both the UK and the US. Consult with your embassy and your accountant.

INFORMATION FOR US CITIZENS

US citizens must file a US tax return every year reporting gross income in US dollars regardless of where they live. If you earn less than $80,000 US dollars and pay Italian taxes on these earnings, you do not also have to pay US taxes on this foreign income, but

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you still must declare it. This is known as the 80K exemption. Tax returns are due on April 15 but an automatic extension is granted until June 15 to those filing from abroad. A “failure to notify” penalty can be applied to foreign residents who fail to report foreign tax status to the IRS. Publications that explain the guidelines for US citizens living abroad may be found at www.irs.gov.