Thursday, 6 April 2017

Italian Income Tax(es) and INPS

This is an update of the post from 2014 which was also an update from 2006 and 2007

If you are self employed and living in Italy, you must pay tax on your worldwide income in Italy because you are in the Population Registry as having lived there for at least 183 consecutive days over a 12-month period, or your life is centred there.
Living in Italy for less than 183 consecutive days over a 12-month period means you pay tax only on the income you earned in Italy.

Since 2014 personal tax allowance has increased to a maximum of €7.500. So how much of my income will I keep?

Annual Income 2015 (2016 tax return) Rate
€7.501 to €15.000 23%
€15.001 - €28 000 27%
€28.001 - €55 000 38%
€55.001 - €75 000 41%
over €75,001 43%

There is also a regional tax of up to 3.33% and a municipal tax of 0.1% - 0.9% (addizionali IRPEF). Each region and municipality is free to set its own rate within the range set out in national law. This appears to have decreased since 2014.

Take into account:
  • tax allowances (a deduction of between €3.000 and €7.500 to avoid taxing those on low incomes), as well as allowances for dependant family members (dependant wife and/or children).
  • any deductions you are entitled to for certain types of expenditure.
On top of all these taxes you must also consider the obligatory pension contributions (INPS) which stands at 29% of your net income (same as 2014). 4% of this should be paid direct by your clients. Therefore one has to add this to any invoice to a client. Note - this is then totaled BEFORE the VAT is calculated, therefore they also make VAT on your pension contributions. A self-employed (libero professionista) person pays the highest % of INPS but are NOT entitled to sick and unemployment benefits. You have to call every client to make sure they pay this amount on your behalf and ask for written proof, if they don't it is you that is fined, not them. Apparently 30% of a self-employed person's work time is used up creating paperwork or chasing it, or explaining it to someone else to do it and do the chasing for you.

VAT - Partita Iva - is 22% but is due to be raised to 24% in 2017

So assuming:
you invoice €28.000
and you qualify for €7.500 tax allowance
further allowable tax deductions and expenditure of €3.000
your income tax (IRPEF) bill would be €8.475
your regional/municipal taxes (IRAP) would be €857
and your INPS contributions would be €7.250

That would leave you just €8.417 for all you hard work that year (roughly 33% of your profit)

OR
you invoice €43.000
and you qualify for €7.500 tax allowance
further allowable tax deductions and expenditure of €5.000
your income tax (IRPEF) bill would be €11.590
your regional/municipal taxes (IRAP) would be €1269
and your INPS contributions would be €11.020

That would leave you just €14.121 for all you hard work that year (roughly 37% of your profit)

The calculations above do not include VAT. You must register for Iva (VAT) no matter what your turnover is. You should consider this if your clients are not VAT (Iva) registered.

Now compare all that with the taxes you would pay in UK, if may help you decide where to live.

You invoice £28,000
and you qualify for £11,000 tax allowance
further allowable tax deductions and expenditure of £3,000
your income tax bill would be £3,400
your NAT INS Class 2 contributions would be £145.60
and your NAT INS Class 4 contributions would be (9% on profits) £1,525

That would leave you £19,929 for all you hard work that year (roughly 79% of your profits)

OR
You invoice £43,000
and you qualify for £11,000 tax allowance
further allowable tax deductions and expenditure of £5,000
your income tax bill would be £5,400
your NAT INS Class 2 contributions would be £145.60
and your NAT INS Class 4 contributions would be (9% on profits) £2,695

That would leave you £29,759 for all you hard work that year (roughly 78% of your profits)

You do not have to register for VAT.

These are obviously rough calculations and do not consider living expenses (council tax in UK or property ownership tax in Italy) but it helps illustrate what a huge difference the two tax systems have on your income balance. In this case about 10,000 (I am ignoring any exchange rate).

Sunday, 13 July 2014

In 2006 I posted the article "Christmas is Cancelled" which was a stab at trying to explain the tax stranglehold for a self-employed person living and working in Italy, I updated it in 2007 with Happy New Tax Year.

So now in 2014 it's now looking like this for a self-employed person in Italy who doesn't own land or property:

2014 Tax allowance is EUR 4,800

IRPEF Income Tax brackets and rates
from 4801 to 15.000 = 23%
from 15.001 to 28.000 =  3,450 + 27% on the part exceeding 15,000
from 28.00 to 55.000 =  6,960 + 38% on the part exceeding 28,000
from 55.001 to 75.000 =  17,220 + 41% on the part exceeding 55,000
from 75.001 =  25,420 + 43% on the part exceeding 75,000

INPS - (Compulsory National Insurance contributions)

Self-employed have to pay 29% (up from 18% in 2006) of their earnings to INPS as pension contributions. 4% should be paid direct by their clients. Therefore one has to add this to any invoice to a client. Note - this is then totaled BEFORE the VAT is calculated, therefore they also make VAT on your pension contributions). Self-employed pay the highest % of INPS but are NOT entitled to sick and unemployment benefits. You have to call and check with every client to make sure they pay this amount on your behalf and ask for written proof, if they don't it is you that is fined not them. Apparently 30% of a self-employed person's work time is used up creating paperwork or chasing it, or explaining it to someone else to do it and do the chasing for you.

IRAP - regional tax on productive activities
Generally 3.9%


TOTAL
AN HONEST PERSON'S ANNUAL EARNINGS AFTER DEDUCTIBLE EXPENDITURE
OF 8,000 and TAX ALLOWANCE  (actual invoiced totals in brackets)

First year - 15,200 (28,000)
Income tax = 3,504
IRAP = 592
INPS = 4,408
Advanced payment for following year (assuming the same as this year) = 3,504
Get to keep = 3,192

Second year - 17,200 (30,000)
Income tax = 4,644
IRAP = 671
INPS = 4,988
Advanced payment for following year (98% of tax paid last year) = 3,434
Get to keep = 2,646

Third year
- 42,200 (55,000)
Income tax = 4,864+6,960 = 11,824
IRAP = 1,646
INPS = 12,238
Advanced payment for following year (98% of tax paid last year) = 4,551
Get to keep = 11,941

Fourth year - 62,200 (75,000)
Income tax = 17,220+5,248 = 22,468
IRAP = 2,426
INPS = 18,038
Advanced payment for following year (98% of tax paid last year) = 11,588
Get to keep = 7,688
 
So I guess there will still be more pressure on many people to work cash-in-hand in the ever increasing black market.


Personally I have given up 'working for the government' in this way and now work as a house husband bringing up our child on my wife's income. I am now allowed a tax allowance of 7,500 from 'casual' income. I get to keep the same money that I would with 42,000 taxable income if the previous year my tax bill was 9,000.

A no brainer really even though I have no longer make contributions towards my pension ( which will be worthless anyway by the time I can claim it).

Tuesday, 8 July 2014

On your own doorstep

The mind boggles as to why dog owners are happy for their community spaces (except of course immediately on their own doorstep, drive or garden) to be littered with dog crap or little black bags of it.

I can understand that clearing up after your pet can be an unpleasant experience, but that is no excuse for ignoring the fact that YOU are making it an unpleasant experience for everyone else who happens upon the mess you leave behind. Surely when you pass there again with your dog you must see what you did, know what you did, and have to avoid stepping in it yourself. You look around whilst your dog squats down to do it again, either because you're embarrassed, want to be ignorant of the fact that your dog is fouling the pavement, park, gardens, play areas, so that you can plead innocence if approached by someone, or you are merely looking around to see that nobody is coming so that you can walk away before getting out a bag to remove it.

Perhaps you do not step in any, never have to scrape it off the wheel of your child's pushchair or bicycle, you've never had a job which involves using a lawn mower or strimmer in public places. Maybe you don't mind that on hot days there are places that stink of turd so bad it makes you gag or that your child is playing in it whilst you're having a picnic.

You are probably also not aware of the amount of toddlers that contract toxocariasis, a disease that causes serious eye damage. Certainly there is no sure way to prove that YOUR dog shite caused this in anyone, but how can you be sure that it hasn't or won't in the future?

There are NO valid excuses for not clearing up after your dog. So do not try to come up with any. We have heard them all before and none of them are valid. There are many many more reasons why you should be clearing up your dog mess and disposing of it responsibly, not only for health and hygiene, moral and legal reasons.

Should you be fined? YES
Should people have the right to ask you to clear it up? YES
Do you have the right to verbally abuse anyone that asks you to clear up? NO
Are you flouting the law by not cleaning up after your dog? YES

Name and shame
I for one will be taking photos or video before during and after any such activity, and send it to the appropriate authority. These will also appear online in the hope of naming and shaming you into acting responsibly, although I suspect it won't but that won't stop me from trying.

I would also advocate fines for any dog owner NOT able to prove they are worming their dog(s) regularly or having with them at all times (when out) at least one bag or a poop scoop.

I recently saw two elderly people whose dog left a runny mess on the pavement, it must have been ill, they had nothing with them to clean it up. Had I not been walking past perhaps they'd have hurried along but instead they fumbled around in pockets, pulling out handkerchiefs and realising they weren't adequate enough. Passing by later I saw that it had been partly scraped away and covered with leaves.

For those of you who still think I am barking up the wrong tree here's some researched information provided by Keep Britain Tidy.

Toxocara in dogs (and cats)

Are there different types of toxocariasis?

There are two types of toxocara. Toxocara T.canis is transmitted from dogs and foxes whilst toxocara T.catis, is transmitted by cats. Both come from the roundworm toxocara.

If the fox is also a carrier, surely you can’t blame dogs for toxocariasis

The fox is considered to be a significant host for T. canis in the UK and, therefore, the presence of foxes needs to be taken into account when control of toxocariasis is being considered. However, foxes will not defecate in open spaces, and the debate that states that toxocariasis in humans is as much due to foxes as dogs is misleading. It is believed that the majority of infections arise from parks and play areas where foxes would not defecate.

How many parks are infected with toxocara eggs?

Random soil sampling shows that the majority of the parks in the UK are contaminated with toxocara eggs in various stages of development.

If parks are disinfected would that eradicate toxocara?

Toxocara eggs are resistant to freezing and disinfectants and can survive for two years or more.

Are all dogs infected?

It is reasonable to assume that all puppies are infected with toxocara T. canis and produce larger numbers of eggs than an adult dog. However, the prevalence of toxocara diminishes as the dog grows older.

Is it dangerous for me to clear up after my dog? Won’t I get toxocariasis?

Toxocara eggs are not infectious until they embryonate. This is usually at least 2 – 3 weeks after they have been deposited by a dog. Therefore freshly deposited faeces is not infectious, and you can safely clear up after your dog.

Are there many eggs in dog mess?

A single dog mess can contain approximately 1 million microscopic eggs.

Toxocariasis in humans


What are the symptoms of toxocariasis?

Eye disorders are the most commonly reported complaint associated with toxocariasis. This is by the transportation of larvae via the retinal artery to the eye, potentially causing blindness through the growth of non-malignant tumours or the development of detached retinas. The reporting of eye disorders in relation to toxocariasis may be due to the public and the medical profession being aware of the link. As the links to flu-like symptoms are not so obvious, it is very likely that a huge number of toxocariasis cases go unreported and unrecognised by either the public or by doctors. Other symptoms are vague aches, dizziness and nausea, asthma and epileptic fits.

How many people suffer eye damage from toxocariasis?

In a report by Dr S. Gillespie, (November 1993), he noted approximately 100 cases diagnosed each year, with 50 having serious eye damage. Nearly all were children, who had contracted the disease as toddlers.

Are there any useful treatments or is there a cure?

No.

How do you contract the disease?

Human infection of this disease is a direct consequence of soil or sand contamination with faeces carrying eggs of the parasite. As the parasite can last up to two years, contaminated soil and sand is often the carrier as the faeces degrade. The parasite can only infect humans if swallowed. Once swallowed the infection can last between six and 24 months. Frequently the infection is through hands, but also with the dogs themselves or through inanimate objects such as wheels of toys, soles of shoes, etc. Therefore the prevalence of the toxocariasis is dominant in children between 18 months and five years.

Where are toxocara eggs most likely to be found?

Many infected soil samples are found in the vicinity of children’s play areas, even though dogs are often banned from these areas. Other samples are found on streets. In the UK, about half of the most serious cases of toxocariasis, such as blindness, occur in families who have never owned a dog or a cat.

If I had toxocariasis, how big would the worms be?

The average size of the toxocara worm is between 2cm to 10cm long; although the worms tend to coil when expelled.