Italy Tax Treaty

United States-Italy Tax Treaty

Italy International Tax Compliance Rules

Quick Summary.  Located on Southern Europe and bordering the Mediterranean Sea, Italy is a parliamentary republic with 20 administrative regions and a capital at Rome.

In 2020, Italy introduced a new digital service tax.  In addition, other recent measures include replacement of its hyper and super tax depreciation regimes with a tax credit regime, a corporate equity deduction, and certain step-up provisions for business assets.

Italian corporations are subject to a corporate income tax (imposta sul reddito sulle società) and a regional production tax (mposta regionale sulle attività produttive).  Individuals are subject to income tax (mposta sui redditi delle personne fisiche).

Income Tax Treaty between the United States and Italy

Italy is a member of the European Economic Community (EEC) and North Atlantic Treaty Organization (NATO), the United Nations (UN), World Trade Organization (WTO), and Organisation for Economic Co-operation and Development (OECD).

U.S.-Italy Tax Treaty.

• Convention between the Government of the United States of America and the Government of the Republic of Italy for the Avoidance of Double Taxation with Respect to Taxes on Income and the Prevention of Fraud or Fiscal Evasion, together with a supplementary Protocol and exchange of notes signed at Rome on April 17,1984
• Technical Explanation of the Convention and the Protocol between the United States and the Italian Republic signed on August 25, 1999
• CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE ITALIAN REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND THE PREVENTION OF FRAUD OR FISCAL EVASION
• DEPARTMENT OF THE TREASURY TECHNICAL EXPLANATION OF THE CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE ITALIAN REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND THE PREVENTION OF FRAUD OR FISCAL EVASION

Currency.  Euro (EUR)

Common Legal Entities.  Joint stock company (SpA), limited liability company (SrL) and branches.

Tax Authorities.  Ministry of Finance, Tax Income Agency (Agenzia delle entrate)

Tax Treaties. Italy is signatory to more than 100 tax treaties.  

Corporate Income Tax Rate.  

24% general + regional tax on productive activities (3.9% usually)

Banks and other financial institutions, brokerage companies – 27.5%

Non- operating entities – 34.5%

Individual Tax Rate. 

Up to 15,000 – 23%

15,001 to 28,000 – 27%

28,001 to 55,000 – 38%

55,001 to 75,000 – 41%

Over 75,000 – 43%

Corporate Capital Gains Tax Rate. 

24% usually; plus regional tax; 95% exempt under certain conditions (sale of participations)

Individual Capital Gains Tax Rate. 26%

Residence.  

Individual. Registered in the Office of Records of the Resident Population for 183 days or more; Stays in the territory of the state for 183 days or more; Individual’s center or business or economic interests in Italy for 183 days or more.

Withholding Tax.

            Dividends. 

                        Corporate Resident – 0%; nonresident – 1.2%; 26%

                        Individual Resident – 26%; nonresident – 26%

            Interest. 

                        Corporate Resident – 0%; nonresident – 0%; 12.5%; 26%

                        Individual Resident – 12.5%; 26%; nonresident – 12.5%; 26%

            Royalties. 

                        Corporate Resident – 0%; nonresident – 22.5% (30% rate on 75% gross)

                        Individual Resident – 0%; nonresident – 22.5% (30% rate on 75% gross)

            Commissions. 

                        Corporate Resident – 0%; nonresident – 0%; 30%

                        Individual Resident – 0%; nonresident – 30%

Transfer Pricing. 

Generally follow OECD guidelines.  

CFC Rules.

Profits of nonresident entity are attributed to an Italian resident where resident directly or indirectly controls the nonresident

Hybrid Treatment. 

            In line with EU anti-tax avoidance directive (ATAD) apply as from FY 2022.

Inheritance/estate tax.  4%; 6% or 8% depending on the relationship with the deceased and the beneficiaries. Exemptions up to EUR 1 million may apply for bequests to close relatives.

Tax Treaty Network – International Tax Attorneys

Our international tax expertise allows us to guide clients through tax planning and compliance so that they can focus on what matters most. At Freeman Law, our clients are engaged in an interconnected business environment that spans across the globe.  From supply chains to markets, cross-country taxation impacts every global business.

Do you have questions about Italy’s Tax Treaties? Schedule a consultation with one of Freeman Laws International Tax Experts Today!