Income Tax Returns

Filing and payment

The tax year in Italy is the same as the calendar year. If you’re a resident, you must file an income tax return ( dichiarazione dei redditi) unless any of the following applies:

You have no income;
Your income is exempt from tax, e.g. a war, old age or invalidity pension;
You’ve already paid tax at source on income, e.g. dividends, bank interest, mortgage interest;
You’re an employee and are taxed on a PAYE basis and have no other income.

Non-residents with income arising in Italy must also file a tax return. The tax system is based on self-assessment and the tax office won’t send you a tax return or chase you to complete one. Tax returns are available free from your local council ( municipio) or can be purchased from a tobacconist or stationer. They can also be downloaded from the Ministry of Finance’s website (www.finanze.it ). Declarations can also be made from abroad by registered post. Many people can obtain free income tax assistance at a Centro Assistenza Fiscale (CAF), including pensioners, part-time workers, certain categories of self-employed people, the disabled and those receiving unemployment benefit.

You must file a different tax return according to whether you’re employed or self-employed, as explained below.

Employees

The tax return for most taxpayers is the modello 730, which covers the following categories of people: employees, pensioners, members of co-operatives, anyone with a fixed-term contract ( tempo determinato) which extends through the months of March to June, and members of the clergy and elected government officials who have received compensation payments.

Those with additional income from land and property, dividends earned from corporations and income derived from on-going work also use the 730. Income subject to taxes other than income tax, such as capital income, income from occasional autonomous work, inherited income received on an on-going basis, life insurance and accident policy premiums if policies are redeemed before five years, non-taxable TFR (redundancy payments), and taxes and fees that have been used as deductions (and reimbursed) in the previous year, can also be declared on form 730.

A married couple may file a joint tax return (both must sign) but are taxed separately, although payment is joint. The disadvantage of filing a joint return is that although the assessment may be raised against only one of a couple, there’s a common responsibility for payment. A couple can use form 730 if their income is earned solely from land and/or property and the total amount is less than €2,840.51. Otherwise, they must use the Unico form.

Self-Employed

If you’re self-employed (e.g. an artisan, merchant or artist) or a professional with a VAT number, you must file a Unico form. This is a multifunctional, colour-coded (light blue, orange, green and dark blue) form that replaced form 740 in 1998. The various coloured sections denote the type of tax. The basic Unico form has four pages, but there are 14 other pages comprising a total of 44 sections. No additional documentation such as expense receipts or medical expenses need be attached.

Filing

Modello 730 returns for the previous year must be filed between the 1st May and the 30th June. If you’ve completed your own form, you may hand it in at a bank or post office and no longer need to file it at the local comune or send it to a service centre (intendenza di finanza), which are listed in telephone books. However, forms completed by professionals using computer systems must be handed in or sent to a service centre.

Unico forms should be presented between 1st June and 31st July at a bank, post office or Centro Assistenza Fiscale (CAF) office (a kind of citizens’ advice bureau for tax matters, listed in telephone books and on the CAF website, www.caaf-cia.it ); it shouldn’t be taken or sent to a service centre office. Late filing within 30 days of the due date is subject to a penalty of 15 per cent of the tax due; after 30 days penalties range from 120 to 245 per cent of the tax due! You should keep copies of tax returns and receipts for six years.

Payment

Advance tax payments must be made equal to 98 per cent of the tax paid for the previous year or the amount due for the current year (whichever is less). Forty per cent of the advance tax payments (called an acconto) must be made by 31st May and the remaining 60 per cent by 30th November. If you’ve earned less than your advance payment, you can claim a refund, although tax rebates can take years to be paid. Income tax can be paid in two six-monthly instalments, or in seven instalments (provided you don’t pay VAT), in which case annual interest of 6 per cent is payable. Payment is due on the last day of each instalment period or (for those who pay VAT) on the 15th of the month. A portion of the total interest due (where applicable) must accompany each instalment. If you choose to pay in instalments, it must be noted on your income tax return.

Payments up to 20 days overdue attract a surcharge of 0.5 per cent; between 20 and 60 days, the surcharge is 3.75 per cent; if you’re over 60 days late, you must pay a further surtax of 30 per cent plus 5 per cent annual interest.

Using a Commercialista

Because of the complexity of the Italian tax system, it’s wise to use a commercialista (a combination of accountant and lawyer) to prepare your tax return, particularly if you’re self-employed (obligatory unless you have a doctorate in Italian bureaucracy!). A commercialista’s fees are relatively low, although you should obtain a quotation, and he can also advise you on what you can and cannot claim regarding allowances and expenses.