In 2006 the tax rate for an individual is between 23%-43%. In addition to this direct taxation (IRPEF), there is also local tax (IRAP) which self employed individuals are taxed at between 3.25% - 5.25%.
The tax year in Italy ends on December 31st. Advance payments of tax are made on the following basis.:
A Self-Employed Individual is obliged to pay 100% of the tax forecast for a year, or an amount that is the equivalent of 98% of the tax paid in the previous year, whichever is the lower, the pre-payment is made in two installments - 40% by June 20th and 60% by November 30th, thereby squashing any festive spending. The date for filing an annual return is July 31 (post my birthday).
Fines are imposed for arrears in filing an annual return at the rate of 120% - 240% of the tax, depending on the length of time that the return is in arrears.... plus interest. It is more than likely to be the higher rate since they will not send you the notification or indeed the fine until at least 4 years later, earning themselves another hefty wedge in interest on outstanding payments.
DEDUCTION AT SOURCE
For a self-employed person the rate of payment is 20%, this is paid (in theory) by the client directly to the taxman. If they don't pay this then the fine plus interest comes to you, not the client. So you have to call and check with every client to make sure they do this. Apparentely 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 the chasing for you.
TAX EXEMPT INCOME
Ha ha ha ha
EXTREMELY RARE BENEFITS
At least, in this autonomous region, new businesses can benefit by receiving up to 30% of any capital investment. Applications can be made through an accountant as long as the total amount of expenditure exceeds 10,000 Euro. The applicant is then informed that he needs to wait a number of years to see if there is any money left over to fulfill their promises and for any funds to be given to you. Meanwhile the applicant pays hefty fees to the accountant (he won't wait that long) for organising it for you, it is best if one sits down before reading his invoice. It has to be said that IF any of the money does indeed get refunded, it will probably cover the accountant bills... and is probably liable to further taxation as an income.
INPS - (National Insurance contributions)
Self-employed have to pay 18% (27% in 2008) of their earnings to INPS as pension contributions. 4% can be "clawed-back" from their customers by adding it to the subtotal of the invoice (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.
LA COMMERCIALISTA (The accountant)
It is not possible to NOT have one of these. They know it... they have an organised monopoly, and the latest trade mans' list of highest earners in this region are indeed solicitors, accountants and pharmacists. It's easy to see how these are connected... the first two know everything they need to know to avoid taxes and raise their fees and the third is where everyone else goes after paying their tax bills and accountants fees.
TOTALING UP AN HONEST PERSON'S ANNUAL EARNINGS
If one was to earn 30,000 Euro less expend. of say 12.000:
Income tax = 6,000
IRAP = 1,200
INPS = 5,400
Advanced payment for following year (tax and INPS) = 11,100
Balance = -5,700
So for a honest person to live, pay the rent and bills, put food on the table, etc., they would have to make another 15-20,000 undeclared... become a criminal so he can pay the criminals.... or of course don't work for yourself and get a job for life with the government. Either way you are no longer honest.
Romano Prodi's government won elections in April by promising to improve Italy's finances... so they've increased taxes even more as a way to reduce the country's deficit whilst not doing anything about state spending. The extra revenue will go towards paying for more police, possibly to track down more tax dodgers. Italy currently has the highest debt levels in the European Union, and is third in the world behind Japan and the US. It's politicians and EU politicians are the highest paid in Europe. It's taxes are just about the highest in Europe... here's where they spend it ...
They voted unanimously to give themselves a raise of 1,350 Euro a month. This was disguised in a way that it would not be recorded in official reports. This was added to their salary of 19,150 a month to which they add their base salary(?) of 9,980 a month, plus an allowance for their family of 4,000 and reimbursement of rent of upto 2,900 a month, plus something called 'indennita' di carta (whatever that is) of 335 to 6,455 Euro.
Earning so much money must be hard work because after 35 months in parliament they can retire with a pension paid for by the 35+ years of contributions from the rest of the population. Even if they take a pension of 25% of their earnings, whilst in parliament, it amounts to over 7,500 Euro per month, and if they retire at 40 then they will have had over 2.2million Euro by the time someone else of the same age makes retirement at the age of sixtyfive. Pension funds abuse perhaps?
What DO they spend their hard earned cash on? They ate and drank for free to a tune of 1,472,000 Euro (1999), and received 103,000 in reimbursed electoral expenses. They also receive free of charge: mobile phones, cinema tickets, theatre tickets, bus travel, postage stamps, national air flights, autostrada pass, swimming pools and gyms, train pass, clinics, accident insurance, life assurance, car with driver.
So if you were expecting a christmas card this year, please send your requests to:
Romano Prodi and cronies
The Legalised Mafia
Tax Office of the Presumed Guilty until proven Guilty of not paying our wages
Cost of living is low in Italy only if you are a visitor, but once you live here it's one of the highest costs of living in Europe. Maybe this is why the government is introducing a new tax of up to 5 Euros for each tourist to enter certain towns, they expect to earn 30 billion Euros from tourists this year alone... but don't let that put you off coming to see us.
Merry Cancellation and a Happy Tax-free New Year!!