Taxation in Europe

3 febbraio 2021
Taxation in Italy:
an overview
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File: FI0141_EN.docx
INDICE
INTRODUCTION .................................................................................................. 3
IRPEF AND TAXATION ON LABOUR ............................................................. 5
 Personal Income Tax — IRPEF ..................................................................... 5
 Reducing the tax wedge ................................................................................. 6
 The system of deductions and deductions (tax expense or tax expense) ....... 7
 Flat tax .......................................................................................................... 15
 1. Flat-rate scheme ....................................................................................... 15
 2. Corporate income tax - IRES ................................................................... 16
 3. Flat-rate income tax on letting out a house or flat .................................... 16
 4. Taxation of financial gains ....................................................................... 17
 5. The optional regime for new residents ..................................................... 17
 6. Flat tax for pensioners .............................................................................. 18
 Tax reform in economic planning documents .............................................. 18
 The proposed amendments to the IRPEF: the measures under
consideration by Parliament ......................................................................... 21
 Other proposals to amend the IRPEF ........................................................... 21
PROPERTY TAXATION .................................................................................... 25
 Property taxation: general lines .................................................................... 25
 Property taxation in the context of local finance .......................................... 25
 The IMU and the single fee .......................................................................... 26
 Renovation of buildings and superbonuses .................................................. 27
 The waste tax ................................................................................................ 29
 Revaluation of land ...................................................................................... 30
 Indirect taxes on transfers............................................................................. 30
 Emergency measures to combat the spread of COVID-19 .......................... 31
 Issues for consideration: the reform of the cadastre ..................................... 32
IRES AND CORPORATE TAXATION ............................................................ 34
 Direct taxation on the enterprises: IRES ...................................................... 34
 Permanent establishment and taxable amount.............................................. 34
 Rates ............................................................................................................. 36
 The so-called web tax ................................................................................... 37
 Non-profit sector .......................................................................................... 39
 Superdepreciation, overdepreciation and tax credits .................................... 40
 Innovative start-ups and SMEs..................................................................... 41
 Taxation of the financial sector .................................................................... 43
 IRAP ............................................................................................................. 43
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EXCISE DUTIES AND VAT............................................................................... 46
 Excise duties ................................................................................................. 46
 Value added tax — VAT .............................................................................. 47
 VAT evasion................................................................................................. 48
 The proposed changes to VAT ..................................................................... 49
 Electronic invoicing and electronic transmission ......................................... 49
 Proposals to amend e-invoicing ................................................................... 50
 Simplification of tax compliance ................................................................. 50
 Tax simplification proposals ........................................................................ 52
TAX COLLECTION AND COMPLIANCE ...................................................... 53
 Tax collection results.................................................................................... 53
 Amounts to be collected (so-called warehouse) ........................................... 54
 Measures to promote compliance ................................................................. 54
 Tax amnesties ............................................................................................... 55
 Tax collection by local authorities ............................................................... 56
 Measures taken to address the emergency ................................................... 57
 Proposals for a reform on tax collection and compliance ............................ 57
 The measures under consideration by Parliament ........................................ 58
PERSONAL INCOME TAX IN MAIN EUROPEAN COUNTRIES .............. 59
 France ........................................................................................................... 59
 Germany ....................................................................................................... 62
 United Kingdom ........................................................................................... 63
 Spain ............................................................................................................. 65
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INTRODUCTION
INTRODUCTION
The purpose of this work is to provide a brief overview of Italian taxation
and, in particular, of those taxes under attention of legislators in recent years,
both because of their political and economic importance (for example, the
debate on taxation of labour and productive activities), and their effects on
public finances (e.g. measures on tax compliance).
This dossier collects short summaries on legislation of single taxes or tax
measures; the latest legislative interventions, for each of them; significant
matters and proposals coming from parliamentary work, public and private
institutions.
In the current emergency context, and considering the resources available

through the European Recovery Fund, tax reform is one of the components of
the National Recovery and Resilience Plan (January 2021). As announced in
the guidelines (September 2020), the Government intends to review taxation, in
particular personal income tax, to reduce tax wedge on labour and to shift the
tax burden to other items and, in general, “from people to things”, also in
response to numerous recommendations from the European institutions.
The involvement of Parliament in the implementation of the tax reform -
which is going to take place as an enabling law (delegation law) - is ensured
through the definition of guiding principles and delegation criteria and,
subsequently, by delivering parliamentary advice on implementing decrees.
It should also be reminded that the Chamber’s VI Standing Committee on
Finance and the Senate’s 6th Committee on Finance and Treasury have started,
on November 11th 2020, a comprehensive fact-finding survey on tax reform, in
order to gather views coming from different stakeholders, and to explore the
main outstanding issues.
Budget Law for 2021 (Law No 178 of 2020, par. 2 to 7) established a fund
with a budget of EUR 8,000 million for 2022 and EUR 7,000 million from 2023
onwards, to finance the reform of the tax system, to be implemented by means
of appropriate legislative measures. Resources resulting from the improvement
of voluntary tax compliance are allocated to the fund. A share of the fund of not
less than EUR 5,000 million and not more than EUR 6,000 million as of 2022
shall be allocated to the so-called universal allowance and to interventions for
households and families.
It should be noted that a recent reform action was carried out at the beginning
of the legislature, with the 2019 Budget Law, by extending the flat-rate scheme
for professionals and self-employed workers, based on a single substitute tax at
15% rate (as introduced by the 2015 Stability Law), to taxpayers with revenues
up to EUR 65,000.
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INTRODUCTION
The same law allowed persons engaged in business activities, arts or

professions with revenues between EUR 65,001 and EUR 100,000 to apply a
flat tax (instead of regular income tax, regional and municipal income and IRAP
- regional tax on productive activities) at 20% rate. This latter provision was
repealed by 2020 Budget Law.
It should also be recalled that a previous attempt at tax reform was carried
out during the 17th parliamentary term, by Law No 23 of 11 March 2014, which
empowered the Government to establish a fairer, more transparent and growth-
oriented tax system.
Measures have been taken concerning, inter alia: tax simplifications and tax returns;
taxation of manufactured tobacco; composition, powers and functioning of cadastral
committees; electronic invoicing and electronic transmission of VAT transactions;
rules on legal certainty in the relationship between the tax authorities and the taxpayer;
measures for business growth and internationalisation; revision of rules governing tax
disputes; review of the rules governing the organisation of tax agencies; revision of
the sanctioning system; measures for the simplification of tax collection rules;
estimation and monitoring of tax evasion, monitoring and reorganisation of tax erosion
provisions.
The deadline for implementing the delegation expired on 27 June 2015. The
following areas of delegation have not been implemented or only partially
implemented: rules concerning land register; tax collection by local authorities
and corporate income taxation; rationalisation of VAT and other indirect taxes,
revision of rules on public gaming and reform of the horse-racing sector; energy
and environmental taxation.
It should be pointed out that a number of extraordinary fiscal measures have

been adopted to deal with the Coronavirus emergency, many of which are of a
temporary nature, aimed at preventing and curbing its expansion and its effects
on the economic system.
These emergency measures have been issued since March 2020 to support
families, workers and businesses: Decree-Law No 9 of 2020, whose measures
were then incorporated into the subsequent broader legislative action contained
in Decree-Law no 18 of 2020, Cura Italia, Decree-Law no 23 of 2020, Liquidity,
Decree-Law no 34 of 2020, Rilancio, Decree-Law no 104 of 2020, Agosto, and,
most recently, Decree-Law no 137 of 2020 Ristori, which incorporated three
further Decree-Laws (no 149, no 154 and no 157 of 2020). 2021 Budget Law
also contains fiscal measures to face emergency.
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IRPEF AND TAXATION ON LABOUR

Personal Income Tax — IRPEF
Personal income tax (IRPEF) is regulated by the Consolidated Income Tax
Act (Presidential Decree No 917 of 22 December 1986). It applies to income
falling within certain categories defined by law (property income, capital
income, compensation of employees, self-employment, business income,
miscellaneous income) and is a progressive tax as it is levied on income at rates
that depend on income brackets. There are currently five income brackets with
the following rates:
- up to EUR 15,000.23 %;
- from EUR 15,000.01 to EUR 28,000.27 %
- from EUR 28,000.01 to EUR 55,000.38 %
- from EUR 55,000.01 to EUR 75,000.41 %
- more than EUR 75,000.43 %.
The progressive nature of the tax is also ensured by the existence of a

complex system of deductions, tax reductions and tax credits, stratified over
time.
It is also necessary to add the regional and municipal surcharges to the
IRPEF, which apply to the total income determined for the purposes of the
IRPEF and must be paid if, for the reference year, the IRPEF is due.
There is provision for a no tax area resulting from the application of the
different deductions for employees, pensions or self-employment, which are
decreasing as income increases.
The no tax area varies according to the different categories of taxpayers: it amounts
to around EUR 8,145 for employees, to around EUR 8,130 for pensioners, to EUR
4.800 for self-employed workers. Taking into account also the allowances for
dependent family members, the no tax area for a single-income family with two
parents and two children is about EUR 16,340. The reduction of the IRPEF to zero
brings the corresponding regional and municipal add-ons to zero.
In recent years, the legislator has intervened on the regulation of the IRPEF
- particularly as a result of requests from the European institutions - mainly
to reduce the tax wedge (taxation and contributions on labour) and boost
consumption. At the same time, the IRPEF interventions have pursued
additional objectives, such as reorganising facilities, encouraging traceable
payments and revitalising specific economic sectors. To that end, the
legislature focused on the system of deductions, tax reductions and tax
credits mentioned above, leaving unchanged both the structure and the
general conditions for the tax.
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Reducing the tax wedge

Most recent measures include the 2020 budget law, which set up a fund to
reduce the tax burden on employees, with a budget of EUR 3 billion for 2020
and EUR 5 billion from 2021; by Decree-Law No 3 of 2020, the measures to
reduce the tax wedge were implemented in practice.
Since 1 July 2020, a sum has been granted as a supplement to labour and
similar income, subject to specific conditions (gross tax exceeding the amount
of the deduction due per employee). In essence, the monthly payroll bonus
measure for these categories of taxpayers has been increased from EUR 80 to
EUR 100 (introduced by Decree-Law No 66 of 2014, which was repealed at the
same time); the income limit for full entitlement to the relief has also been
increased (from EUR 24,600 to EUR 28,000). A temporary additional income
support measure has been introduced in the form of a deduction from gross tax
for holders of total income of between EUR 28,000 and EUR 40,000 (six
months from 1 July to 31 December 2020).
Budget Law for 2021 made the deduction permanent, specifying that,
from January 1st, 2021, the aid is granted for amounts twice as high as those
provided for in the second half of 2020 alone, namely:
 EUR 960, increased by product between EUR 240 and the amount
corresponding to the ratio between EUR 35,000, less total income, and EUR
7,000, if the total income exceeds EUR 28,000 but does not exceed EUR
35,000;
 EUR 960 if the total income exceeds EUR 35,000 but does not exceed EUR
40,000; the deduction shall be due in respect of the part corresponding to the
ratio between the amount of EUR 40,000, less total income, and the amount
of EUR 5,000.
It should be noted that the Parliamentary Budget Office affirmed that the planned
intervention, and specifically the extension of the monetary transfer, which is the permanent
element of the measure, makes a comprehensive and structural reform of the Irpef even
more complex. Taken in isolation, it exacerbates the unequal tax treatment of persons with
different sources of income and family characteristics and exacerbates the irregularity of
marginal rates, even though for 2020 this is counterbalanced by the introduction of the
additional deduction. These considerations are also shared by the representatives of trade
unions and the National Association of Accountants, who stress the need for similar measures
to be taken on the self-employed, whose tax rates (worker’s social security contributions,
IRPEF and related additional contributions) currently appear to be significantly higher.
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SourceNational Chamber of Accountants
From a different point of view, several measures have taken place over the
last few years to attract human resources to Italy, providing for benefits to
individuals who transfer their tax residence. Please note here the Legislative
Decree No 147 of 2015, which introduces substantial IRPEF reductions for
workers who, having not been resident in Italy in the previous five tax periods,
transfer their tax residence to the territory of the State. 2021 Budget Law,
paragraph 50, allows persons who transferred residence to Italy before 2020 to
benefit from the extension of the mentioned tax scheme.
The system of deductions and deductions (tax expense or tax expense)

The issue of tax expenditure has been at the heart of the debate for several
years. The information needs associated with it were met thanks to the
procedure for monitoring tax expenditure redesigned by Legislative Decree No
160 of 2015, which provides for two instruments with distinct
characteristics.
On the one hand, the annual report on tax expenditure, entrusted to a
Commission on tax liabilities and annexed to the statement of revenue of the
Budget Law, lists any form of exemption, exclusion, reduction of the tax base
or tax or preferential scheme resulting from existing legislation, with a separate
indication of those introduced in the previous year and during the first six
months of the current year.
On the other hand, the programme report, annexed to the DEF update note,
sets out measures to reduce, eliminate or reform tax expenditures in whole or in
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part that are unjustified or outdated in the light of changing social or economic
needs or which overlap with spending programmes with the same objectives, to
be implemented through the fiscal policy.
With reference to the definition of tax expenditure, the Commission recalls that,
in paragraph 2 of the previous report, the possible options and the theoretical and
methodological reasons that led the Commission to unanimously choose the legal
benchmark approach were discussed. In operational terms, it is established whether
a provision of a preferential nature is a structural feature of the tax, or whether it
constitutes a deviation from the rule, in the latter case the provision is regarded as tax
expenditure. In this respect, the Commission highlights some of the main implications
of this methodological choice for the three major taxes considered.
In the field of the IRPEF, they were not classified as tax expenses: Deductions for
income production expenses (compensation of employees, pensions and similar
income) or for dependent family members, in line with the practices of some other
countries; substitute taxes on property income; the separate taxation system for the
income situations referred to in Article 17 of the TUIR. In the field of IRES, neither
the provisions on the ACE nor the provisions on participation exemption, which
clearly represents a structural and systemic choice, were considered to be tax
expenditure. In the field of VAT, reduced rates were not considered to be tax
expenditure, even if they were due to a structural choice. In the field of social security,
it was decided not to treat as tax expenditure the deduction of compulsory
contributions, due to their structural nature.
In this connection, we would point out that, according to the data available
on the MEF-Finance Department’s website under the Statistical Analysis —
Statements 2019 — Tax Year 2018 section, the total income declared is
approximately EUR 880 billion, with an average value of EUR 21,660 (+ 4.8 %
compared to 2017).
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Source: MEF Statistics on tax returns — Analysis of Irpef data 2018 tax year
The most declared types of income, both in terms of frequency and amount,
are those relating to employees (52.6 % of total income) and pensions (29.3 %
of total income).
In this context, the total deductions amount to around EUR 70 billion and
are mainly composed of:
 deductions for compensation of employees and pensions (61.6 %)
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 household loads (17.7 %)

 deductible charges at 19 % (8.8 %)
 expenditure on building recovery (9.7 %) and expenditure on energy savings
(2.4 %).
In more detail, household care deductions in 2018 amount to around EUR

12 billion (around EUR 8 billion in income brackets ranging from EUR 12 to
EUR 35,000) and EUR 42.5 billion in deductions for compensation of
employees (more than 30 billion in income brackets ranging from EUR 12 to
EUR 26,000).
In addition, the comparison with the previous year shows increases for the
following deductions:
 Deductible charges at 19 % (+ 5.0 %);
 Building recovery costs (+ 11.9 %);
 Expenditure on energy savings (+ 9.2 %);
 Expenditure on furniture for renovated buildings (+ 21.3 %).
Of particular interest is an analysis of the data on deductible charges at

19 % (about EUR 31.4 billion), which shows an increase of 4.7 % compared
to 2017. Analysis of the components, compared with the previous year, shows
the increase in health expenditure (+ 4.8 %), expenditure on non-tertiary
education (+ 11.2 %) and expenditure on education (+ 5.0 %); for expenditure
on non-university education, it is recalled that in 2018 the deductible amount
was increased from EUR 717 to EUR 786. The ‘other deductible charges’
doubled compared to 2017, the trend being influenced by the presence of local
public transport costs in 2018.
Pending the reorganisation of the deduction system, the latter category of
deductions (Article 15 TUIR) was reduced for taxpayers with an income of
more than EUR 120,000, with the exception of interest costs on loans and loans
for the purchase of the main residence and healthcare costs. The use of the
deduction is conditional on the use of traceable payment systems.
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It is particularly important in this context to regulate the facilities for

building renovation and energy renovation, as extended by the 2020 budget
law and reinforced by the decree-laws issued to deal with the COVID-19
outbreak (Superbonus 110 %), for which reference is made to the section on
property taxation.
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According to the latest Annual Report on Tax Expenditure (annexed to the

2020 Budget Law), for 2021, tax expenditure (Table 7) - amounting to more
than EUR 119.2 million grants provided - totalled EUR 68 billion (an increase
of around EUR 5,6 billion compared to the 2020 forecast in the 2019 report).
In 2021, most of the tax expenditures have an impact on the IRPEF

amounting at EUR 39.3 billion, or 57.8 % (compared with EUR 43 billion in
2020, or 68.9 %), on tax credits amounting at EUR 6.5 billion, or 9.6%, and
on registration, stamp and mortgage and cadastral taxes amounting at EUR
6.2 billion, or 9.2 %.
According to an analysis of the data from the IRPEF declarations, in 2018

deductions amounted to more than EUR 35.7 billion (+0.6 % compared to
2017) and are divided between:
 Deduction per main residence (approx. EUR 9.0 billion)
 Deductible expenses (EUR 26.7 billion), the main item of which, both in
terms of frequency and amount, relates to social security contributions
(73 %).
These are mainly burdens relating to individual entrepreneurs and self-employed
persons: those taxpayers must include in their return their income before those
contributions, which are then deducted before the calculation of the taxable amount
for the IRPEF. In this case, the legislation differs from employees who report income
in return already after deduction of contributions.
In comparison with 2017, deductible expenses show an increase of 0.5 %,

mainly due to supplementary pension schemes (+6.5 %), medical expenses for
persons with disabilities (+5.5 %) and contributions for domestic and family
services (+1.6 %); on the other hand, social security contributions have been
reduced (-0.9 %).
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In 2018, the deductible charges also include liberal payments to non-profit

organisations, voluntary organisations and associations for social advancement,
for which, under the new Third Sector Code, there is a choice between deduction
and tax credit. The deduction is provided for up to 10 % of the total declared
income and has been used by more than 333.000 persons for an amount of EUR
135.2 million.
On the other hand, those who have opted to deduct 30 % (in the case of
payments to non-profit organisations and social promotion associations), up to
a maximum of EUR 30,000, are over 201.500 tax payers, for an amount of EUR
72.6 million, while those who have opted to deduct 35 % (in the case of
payments to voluntary organisations) are over 24.600, amounting to EUR 9,2
million.
It should be noted here that 2021 Budget Law contains numerous rules on
tax credits, which have led to the introduction of new advantages (inter alia, in
favour of professional cooks affected by the pandemic emergency, investors
who have suffered losses linked to long-term savings plans (RIPs), allowances
for training in managerial skills, advantages for purchasers of water purification
systems) and extends, adjusts or amends other tax credits already in force. These
measures are in addition to the set of bonuses - not strictly fiscal - that have
been introduced on a one-off basis for the needs linked to the pandemic, both
by emergency decrees (holiday bonus, mobility bonus, etc.) and by the 2021
Budget Law itself, thereby enriching and making the tax exemption system
more complex.
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Flat tax
Flat tax is a non-progressive tax system based on a fixed rate, net of any
tax deductions or reductions.
The first theorisation of this tax system is generally attributed to the economist
Milton Friedman who reported on its functioning in 1956 at a conference at the
Claremont College on the Distribution of Income. Subsequently, in 1962, this model
was set out in detail in the ‘Capitalism and Liberty’ book. In the text, the economist
stated that the better structure of personal income tax would be a flat tax applied to
any income in excess of a tax-free amount, defining income in very broad terms and
allowing only the deduction of strictly defined expenses incurred in order to earn the
income itself. The scholar identified for the US an optimal single rate of 23.5 % on
the overall tax base.
In Italy there are some types of flat tax:
1. Flat-rate scheme
The rules governing the flat-rate scheme are reserved for natural persons
who have earned income from an undertaking or self-employed person who, in
the previous year, earned income or received annual remuneration of not more
than EUR 65,000 and incurred expenses not exceeding EUR 20,000 gross in
respect of ancillary work, employee work and fees for employees.
The fundamental discipline is contained in the 2015 Stability Law and was
last amended as a result of the 2020 Budget Law. In a nutshell, access to this
scheme entails the following tax rebates:
- preferential determination of taxable income through the application, to the
income earned or the remuneration received, of a legally established
profitability ratio, with the deduction of compulsory social security
contributions, including those paid on behalf of employees of the family
business which are taxable;
- application to taxable income of a single tax of 15 %, replacing those
normally provided for (income tax, regional and municipal additional taxes,
Irap); The substitute tax shall be reduced to 5 % for the first five years of
operation subject to certain legal requirements.
General data on natural persons holding VAT numbers can be found in the Analysis
of 2018 IRPEF data, while for a statistical overview of the data collected in 2019, see
the factsheet of the Observatory on VAT numbers of the Finance Department.
The latest specific official data on professionals registered in orders with VAT
numbers have been compiled by Confassociazioni:
 around 3.9 million VAT numbers of natural persons (free work and self-
employment in the strict sense), of which: around 2.2 million VAT registrations
for professions not organised in associations and associations; around 1,1 million
VAT registrations of professions organised in associations and associations;
around 600 thousand false VAT numbers;
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 around 1.9 million professionals registered in 27 orders and colleges generate

around 6.6 % of GDP.
It should be noted here that the 2019 Budget Law provided for the
introduction of a substitute tax of 20 % (so-called flat tax) to be applied to
natural persons engaged in business activities, arts or professions if they had
earned up to EUR 100,000 in the previous tax period.
The 2020 Budget Law repealed this substitute tax at 20 % and reintroduced,
as a condition for access to the 15 % flat-rate scheme, the limit on the costs of
staff and ancillary work, as well as the exclusion for compensation of employees
in excess of EUR 30,000. It also established a reward system to encourage the
use of e-invoicing.
2. Corporate income tax - IRES

Corporate income tax (IRES) is also comparable to a flat tax, since it is
determined by applying a single rate, the amount of which, which varies over
the years, is currently set at 24% (paragraph 61 of Law No 208 of 28 December
2015 - Stability Law 2016). For a more detailed analysis of this tax see the
relevant paragraph.
3. Flat-rate income tax on letting out a house or flat

It should also be considered that, in order to encourage the emergence of the
tax base, the so-called flat-rate income tax on letting out a house or flat has
been gradually extended, It makes it possible to opt for a substitute tax at a flat
rate instead of the ordinary IRPEF rules (with different bands and rates).
The preferential scheme allows rental income (within the meaning of
Legislative Decree No 23 of 14 March 2011) to be taxed at 21 %, or at a lower
rate, subject to certain legal conditions. Taxpayers who have the right of
ownership or the right in rem to enjoyment (for example, usufruct), who rent
the property outside the business, the arts and professions, may opt for a flat-
rate income tax. The option can be exercised for real estate units belonging to
cadastral categories A1 to A11 (excluding A10, private offices or firms) located
for residential use and for related appliances.
Decree-Law No 50 of 2017 made it possible to opt for a 21 % flat-rate income
tax payment also for income from so-called short lettings, i.e. rental contracts
for residential property, provided that they are entered into by natural persons
outside the business, either directly or in the presence of intermediaries and also
online. The measure introduced specific information requirements for
intermediaries; if those persons also intervene at the stage of payment of the
rent, they are required to apply a withholding tax of 21% at the time of the credit,
by way of advance payment or tax, depending on whether or not the flat-rate
income tax option has been made. Budget Law for 2021 limited the 21% flat-
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rate income on short leases to the lending of no more than four apartments per
tax period, otherwise assuming a business operation for tax purposes.
Subsequently, the 2019 Budget Law allowed the use of flat-rate income tax
for the lease of commercial premises concluded only in 2019, provided that
these properties are classified in the cadastral category C/1 and have certain area
limits (up to 600 m²).
The 2020 Budget Law reduced the rate of the tax rate on rents for
residential property in municipalities with a high population density from
15 % to 10 % under the scheme. Decree-Law No 162 of 2019 extended this
reduction to municipalities for which a state of emergency was decided
following the occurrence of disasters, including municipalities affected by the
earthquakes of central Italy.
4. Taxation of financial gains

Financial gains are also subject to IRPEF, which, under the TUIR rules, fall
within the two categories of capital income (that is to say, derived from capital
investment: dividends, interest and similar income) and miscellaneous income
(capital gains and losses arising from transactions in shares, corporate equity
securities and other products).
As a general rule, the tax rate on this income is 26 % (this measure was last
laid down by Decree-Law No 66 of 2014). Depending on the type of income to
be taxed, withholding tax or substitute tax is applied.
Different treatment is given to revenues from so-called black list countries
(with which there is no adequate exchange of tax information), which may be
taxed at the ordinary IRPEF rate, or at flat rates in the cases provided for by law
(if the lack of transparency is overcome by certain factual circumstances, for
example if revenues derive from companies traded on regulated markets and are
paid by financial intermediaries resident in Italy), or charged to shareholders by
a tax transparency system.
By way of derogation from the abovementioned 26%, a preferential rate is
applied for specific revenues. We would point out here that the proceeds from
government bonds and equivalent securities and project bonds are taxed at
12.5%; the amount of the levy is 11.5 % for pension funds and supplementary
pension schemes.
5. The optional regime for new residents

The 2017 Budget Law No 232 of 2016 (paragraph 152) introduced a special
scheme reserved for individuals transferring tax residence to Italy. Such persons
may benefit from a flat-rate substitute tax of EUR 100 thousand for each
tax period for which they are charged on income generated abroad.
It should be noted that it is not strictly a flat tax with a fixed rate, since it is a
flat-rate substitute tax, but is generally included as a flat tax.
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This flat-rate scheme may also be extended to one or more eligible family
members, by means of a specific indication in the tax return relating to the tax
period in which the family member transfers his/her tax residence to Italy or the
subsequent tax period. In this case, the substitute tax shall be EUR 25
thousand for each of the family members to whom the effects of the same
option are extended.
6. Flat tax for pensioners

Established by the 2019 Budget Law and corrected by the Growth Decree,
the flat tax for pensioners is a single tax of 7% which the Treasury applies to
all income of pensioners who decide to transfer their residence from abroad to
a region of southern Italy.
Flat taxing was a feature already present when the personal income tax was
created, as far as proportional taxation of capital income was concerned. Over
the past two decades, in addition to the schemes described above, it has also
affected employee performance bonuses and other fees. The increasing
extension of substitute taxation systems may lead to an uneven tax burden of
different sources of income, negatively affecting the redistributive capacity of
the tax, also considering the non-application of additional municipal and
regional income taxes to such incomes. According to Bankitalia, overall
“flatting” reduces Irpef’s tax base by around one-tenth, amount that is largely
due to financial income, business income and self-employment, especially after
the proportional levy has been extended to those having revenues up to EUR
65,000.
Tax reform in economic planning documents

The National Recovery and Resilience Plan (January 2021) identifies the
reform of the tax system as one of the components needed to implement the
measures of the NRRP. In response to the suggestions made by the European
Council, it is therefore intended to review taxation in order to reduce the tax
wedge on labour and shift the tax burden to other items and generally “from
people to things”.
According to the plan, the reform of the Irpef aims to reduce the effective
rates on income from employment and self-employment, in particular for
low- and middle-income taxpayers in order to increase the employment rate, to
reduce undeclared work and to boost the employment of women and young
people. Such an intervention has been already launched with 2021 Budget Law.
It should be noted, in this connection, that a significant proportion of the
additional resources of React EU (EUR 4 billion) helps to finance tax benefits
for employment in the Southern regions and other employment measures (de-
contributions for new recruiting of young people and women).
18
The Government also intends to combat tax evasion and encourage tax
compliance, to review the environmental tax system so that it contributes to the
goals of Agenda 2030, and to introduce the universal single allowance — with
the first module — in 2021, with a view to making the Italian tax system more
in line with the objectives set out in the Country Specific Recommendations.
Finally, the process of digitising tax certifications — electronic invoices and
electronic receipts — is developing, accompanied by gamification initiatives
and measures aimed at providing services to taxpayers, which, on the one hand,
facilitate voluntary compliance and, on the other hand, the ability of the tax
administration to monitor.
In the context of Mission 1, Digitalisation of the public administration is

therefore intended to ensure that public authorities are fully digitised from the
point of view of revenue, together with the implementation of a national plan to
accompany the transition to a cashless community through mechanisms to
encourage the use of electronic means of payment for both consumers and
merchants, linking it to the digital infrastructure for tax certification, electronic
invoices and electronic charges (EUR 5.56 billion, of which 4,77 billion has
already been allocated to the Italian cashless project and to ongoing initiatives
by central authorities).
Specific action is to be taken to reduce the tax disputes pending before the
Corte di Cassazione (Supreme Court). As documented in the latest report on
the opening of the judicial year, the Tax Chamber of the Corte di Cassazione
alone had 52.540 cases pending in 2019. In order to address this problem, it is
envisaged that, on an exceptional basis, honorary auxiliary magistrates may be
assigned temporarily and on a contingent basis to the Tax chambers of the
Court, and for two cycles, in order to eliminate the endemic backlog that has
long overburdened these chambers and negatively affected the disposal
performance of the entire Court.
With regard to innovation and digitalisation of businesses (Transition 4.0,
EUR 18,8 billion), tax incentives included in the Plan - whose procedures for
granting are simplified and sped up - are reserved to companies investing in
capital, tangible and intangible assets necessary for a real digital transformation
of production processes, as well as for research and development related to these
investments.
With regard to energy efficiency and renovation of buildings, it is
envisaged that a programme is put in place to improve and secure the public
building stock, with particular reference to schools, public residential buildings,
municipalities and courts, as well as a temporary incentive for energy and anti-
seismic upgrading of private buildings, through a tax deduction of 110 % of the
costs incurred for the measures (EUR 29.55 billion).
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The update to the DEF 2020 (economic and financial planning document)
refers to policies to combat tax fraud and tax evasion and, in general, to
improve compliance, in order to reduce the so-called tax gap— that is to say,
the gap between taxes and contributions actually paid and the taxes and
contributions that taxpayers would have had to pay under a system of perfect
compliance with the tax and contribution obligations laid down in the legislation
in force. This gap, as explained in more detail in the relevant paragraph, relates
mainly to VAT, but also to the IRPEF on self-employment, business and social
security contributions:
Source: Report on the results achieved in the area of measures to combat tax evasion and contributions — Nadef 2020
The update of the DEF announced that a fund would be set up to cover the
revenue actually generated by the improvement of compliance, also linked to
the encouragement of the use of electronic means of payment, to be used to
finance tax reform measures and reduce public debt; as mentioned above. This
fund was established by 2021 Budget Law.
The plan shows that in 2020 tax revenue exceeded the forecast, thanks to
measures to tackle the tax gap introduced in recent years (including electronic
invoicing and electronic transmission of charges, combined with the
digitalisation of payments). The increased revenue from better tax compliance
is therefore set aside in the tax reform fund, which is bound to finance the
various forms of the tax reform.
Funding for the budget for 2021-2023 should also have come from the
revision of some environmentally harmful subsidies (including tax reliefs
and exemptions) in order to stimulate the ecological transition by means of
gradual, multiannual, proportionate and shared measures with stakeholders.
However, this revision was not carried out in the Budget Law.
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The proposed amendments to the IRPEF: the measures under

consideration by Parliament
The Chamber of Deputies has approved a draft law (A.C. 687) to reorder and
strengthen measures to support dependent children through the Single
Allowance and the Single Due for Services.
The Chamber is also discussing a Family Act (A.C. 2561) for the support
and enhancement of the family and the reorganisation of measures, including
fiscal measures, to support the upbringing of dependent children.
The following legislative proposals are also being examined by the
Chamber’s VI Finance Committee:
 A.C. 1061 Crosetto and A.C. 1501 Gusmeroli on the introduction of a
substitute corporate income tax to be applied to incremental income; the
tax, which applies to all income and to persons already subject to the IRPEF
and the IRES, would be taxed at a flat rate of 15 per cent, to be calculated
solely on the additional part of income generated in relation to the previous
year.
 A.C. 2075 Cabras and A.C. 2593Gusmeroli on the establishment of fiscal
credit certificates and the use of tax credits for payments between private
individuals, with the aim of ensuring liquidity for the economic system by
introducing new complementary payment measures between private
individuals. In particular, A.C. 2075 provides for the establishment of
transferable and negotiable fiscal credit certificates through which the
taxpayer to whom they are allocated may offset payments to the government,
while the A.C. 2593 allows, in order to make payments between individuals,
the use and transfer of tax credits arising from the application of the
provisions in force and represented by form F24.
Other proposals to amend the IRPEF

In its report on the Italian economy and economic policy scenarios,
Confindustria Research Centre presented a study setting out proposals for a
comprehensive tax reform, meant to simplify tax rules and lowering the tax
burden, especially on paid labour. The simplification of the system requires
first and foremost a revision of the tax expenditures, which however needs to
be carefully assessed, as their elimination/reduction would lead to an increase
in the overall tax levy. Given that the current tight public budgetary constraints
limit the magnitude of the reduction in the tax burden that can be achieved, but
given the urgent need for measures to maximise the country’s growth prospects,
a viable option appears to be targeted actions that stimulate the development
and efficiency of the system in complementary areas:
 A merger of the IRPEF rates into the first bands, thereby strengthening
average incomes, especially those from employees, which are currently
21
penalised by a number of substitute schemes for other forms of income.

Simulations carried out by CSC with the EUROMOD model show that
replacing the nominal marginal rate currently in force on the second IRPEF
band with the rate in the first band would result in tax savings of 56 % of
IRPEF taxpayers and a cost to the State of around EUR 8 billion. This seems
more reasonable than the alternatives discussed, such as: (I) the merger of the
second and third IRPEF bands, which would increase the cost of an additional
EUR 4 billion and lead to savings for less than a quarter of taxpayers; (II) the
introduction of a fixed rate of 15 % up to EUR 55 thousand, which would
cost EUR 80 billion;
 Targeted intervention on compensation of employees to increase net income
also for workers with low incomes not paying taxes, with the introduction of
a real negative tax, including transfers to those who are unable to work as
employees;
 Strengthening the current tax incentives on performance bonuses to
further stimulate the uptake of variable wage schemes and the achievement
of productivity gains.
The Study Centre also carried out a detailed study on a possible reform of
personal income tax based on the introduction of a flat tax. The proposal
states that the extreme articulation and complexity of the current rules governing
the IRPEF has so profoundly altered the original rationale of the tax that the
introduction of a flat tax, as a result of its simplicity, would resolve a large part
of the current inconsistencies. However, there are challenges for the
implementation of such a reform. The results of the analysis according to
Confindustria show that the shift to a quasi-flat tax is very unlikely to be self-
financed by the proceeds of higher induced growth;
 This tax reform needs to be well defined and announced from the outset, but
necessarily implemented gradually;
 In order to finance the loss of revenue, resources need to be recovered from
a serious spending review and a reduction in tax evasion.
The Director of the Revenue Agency at the hearing held at the VI Finance
Committee of the Chamber of Deputies presented a possible reform of the
procedure for determining and paying the IRPEF by economic operators.
The Director pointed out that the cash taxation system could provide for the
possibility of paying taxes on a monthly basis on the basis of what is actually
collected, net of what is spent on carrying out business, thus favouring
investment in capital goods, the costs of which could be deducted from income,
thereby also encouraging growth in the country. The features of the new cash
taxation system could be as follows:
A. total and immediate deductibility of capital investment instead of current
depreciation, the main accounting item still subject to the accrual criterion,
22
and the application of the cash criterion also to all other items still subject
to accrual criteria (some gains and losses; property income; some contingent
assets and liabilities; maintenance costs; establishment costs and other
multiannual expenditure; provisions for retirement and social security funds);
B. the introduction of a system for the periodic monthly or quarterly payment of
income tax linked to cash flow, making possible automatic set-off;
C. the debiting of sums due to the taxpayer’s current account by means of a
payment in self-liquidation by the same taxpayer at the monthly or quarterly
intervals laid down or by direct debit, of course, subject to his authorisation
and without any obligation to use a dedicated current account;
D. crediting the repayments or offsetting them against taxes due in the first
period thereafter;
E. the consequent abolition of the payments on account in June and
November and the withholding tax for professionals; this system would
make the payment of direct taxes more continuous throughout the year and
reflect the situation of the taxpayer and the needs of the tax authorities.
The Court of Auditors, at the hearing in the context of the fact-finding

exercise prior to the examination of the National Reform Programme for 2020,
stressed that the problems with the functioning of the IRPEF, in the light of a
process of overall redesign of the system, would suggest that a possible revision
of the existing VAT rates should not be excluded from the options, as well as
some scenarios for reducing the number of rates (currently four), which could
give rise to some administrative advantages. On this specific point, the NRP
does not spell out any revision direction. However, this does not reduce the need
to make a clear choice as to the role that the two main taxes of the tax system
(IRPEF and VAT) have to play. In favour of shifting the levy from the IRPEF
to VAT, it should be noted that, in the European comparison in Italy, the weight
of the IRPEF in relation to GDP is among the highest and that of VAT is among
the lowest; moreover, a revision of VAT could take place - by adjusting the rates
accordingly - in the absence of unintended redistributive effects.
During a number of hearings held in the Senate, representatives of trade unions
noted that the tax reform should include an increase in the specific deductions
for compensation of employees and pensions, a reform of the IRPEF bands, the
redefinition of the IRPEF rates and the tax bases, in full compliance with the
principle of progressivity laid down in the Constitution, and, at the same time,
this reform must provide for the adjustment of VAT, also with a view to
ensuring greater liquidity, supporting the growth of domestic demand, which is
essential for the revival of Italy’s economy. In addition, the increase in
deductions would have the positive effect of widening the no-tax area.
It is also proposed to defer contractual increases and to improve policies to
combat tax evasion.
23
Also during the discussion on prioritising the use of the Recovery Fund, trade
union representatives stressed the urgent need for a comprehensive tax reform
that should increase progressivity and fairness, combat tax and tax evasion and
provide for a review of incentives and subsidies, especially those that are
environmentally harmful. It also calls for an increase in social security relief for
the recruitment of young people and a reduction in the tax burden on income
from retirement and work.
More generally, the following are also mentioned:

A. The proposals for extending deductions/deductions from the IRPEF set
out in the so-called Colao Plan (in particular for electronic payments and
support for innovative start-ups);
B. The 50 proposals from Confindustria and the National Council of Chartered
Accountants for a simpler tax burden (in particular for amending the rules on
the relationship between payment of the IRPEF and the activity of tax
substitutes);
C. The proposal, on an experimental basis and for a three-year period, for the
full exemption of the salary increases resulting from comparatively more
representative collective bargaining, submitted at the hearing of 18
February in the Senate by Rete imprese Italia.
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PROPERTY TAXATION
PROPERTY TAXATION
Property taxation: general lines
In Italy, the direct component of the levy on real property - taxes on
income and assets - affects the actual and imputed income and the asset value
derived from the cadastral income, whereas the indirect taxation component
is based on an economic transaction.
The level of taxation is different depending on the nature of the property
(land, buildings for residential, industrial or commercial use) and taxable
persons (on the one hand, businesses and professionals; on the other hand,
persons who are not engaged in business activities or self-employment). In
addition, in the Italian tax system, there is an important distinction between
main residence, intended to meet housing needs and other real estate units
owned for production, investment or kept available.
Since 2001, the main residence does not contribute to income formation for the
purposes of the IRPEF and enjoys significant tax advantages, including the
deductibility of part of the interest expense on mortgage loans contracted for the
purchase, construction or renovation of the property. The tax treatment of the main
residence has been the subject of numerous legislative measures in recent years. The
2020 Budget Law, in unifying IMU and TASI, maintained the tax exemption for the
so-called first home of the taxpayer.
Taxation of investment in real estate is mixed: a proportional tax of 21 per
cent (so-called flat rate, reduced to 10 % in some cases) can be applied to the
rental of residential property; income from renting property for commercial use
is subject to personal income tax (for contracts concluded in 2019 it is possible
to opt for the flat scheme); income from unrented immovable property is
excluded from income tax, with the exception of income from immovable
property not rented in the same municipality of main residence, which is subject
to personal income tax for a half of the income determined in the land register.
Property taxation in the context of local finance

Many reasons have led to the view that property taxes are the most suitable
sources of financing for local authorities. First of all, that consideration stems
from the principle of benefit (who pays the tax may link the amount of the levy
with the services provided by the local government), as well as from the limited
risk of tax competition and the certainty of revenue. Moreover, the proximity of
the tax base to the municipal government level entails specific advantages in
terms of tax assessment and thus tax compliance.
On the other hand, the municipal revenue system presents a complex picture
due to the overlapping of numerous legislative measures, including those of an
urgent nature, which have amended the rules on local property taxes on several
occasions. The legal framework is therefore characterised by transitional
features, which were further confirmed by the provisions adopted in 2020.
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PROPERTY TAXATION
Over the last year, local property taxation has undergone a comprehensive
overhaul. During the 2020 measure (tax decree 2019 and 2020 budget law), the
positive rules governing this form of levy, as well as other municipal taxes and
fees, were amended; the involvement of municipalities in tax assessment and
collection has been encouraged and, in addition, the system for collecting local
government revenue has been reformed (see the relevant paragraph).
The COVID-19 outbreak has also affected, inter alia, the structure of
municipal revenues. In an effort to safeguard the liquidity of the sectors most
affected by the crisis, in particular the tourist and hospitality sector, the
legislator has introduced local tax exemption measures that are valid while the
emergency continues; at the same time, resources have been allocated to
municipalities for the loss of revenue.
The IMU and the single fee

The 2020 Budget Law (Article 1, paragraphs 738 to 783 of Law No 160 of
2019) reformed the structure of real property taxation, merging the two previous
forms of levy - IMU and TASI - and bringing the relevant legislation together
into a single text, relating to the municipal tax on property (IMU).
These rules have essentially incorporated the proposals already put forward by the
Parliament and which have come to the attention of the competent standing
committees; This is the A.C. 1429, which was subsequently combined with A.C. 1904
and A.C. 1918.
With regard to the positive tax regime, the basic rate is 0.86 %, essentially
the sum of the former IMU and TASI, and may be operated by municipalities
under certain conditions. Electronic payment arrangements are introduced.
The 2020 Budget Law:

 granted a full deduction of the IMU on capital buildings since 2022, adjusting the
deductions for the years 2020 and 2021 (60 % respectively).
 eliminated the possibility of having two main dwellings, one in the municipality of
residence of each spouse;
 stated that the right of residence granted to the custodial parent is regarded as a right
in rem for the purposes of the IMU alone;
 clarified the tax effects of changes in cadastral income (changes in cadastral income
during the year, as a result of building work on the building, take effect from the
date of completion of the works or, if earlier, from the date of use);
 specified the value of building areas (this is the market value on 1 January or from
the adoption of urban planning instruments in the event of a change during the year);
 it allowed the municipalities to entrust, until the expiry of the contract, the
management of IMU to the entities entrusted, on 31 December 2019, with the
management of the old IMU or TASI.
The same 2020 Budget Law introduced, since 2021, the so-called single licence
fee, licence fee or advertising display fee, bringing together in one form of levy
revenue relating to the occupation of public areas and the distribution of
26
PROPERTY TAXATION
advertisements, and the single concession fee for employment in the markets, which,
since 2021, replaces TOSAP, COSAP and, in the case of temporary occupation only,
the TARI.
With reference to the IMU, in addition to the transitional measures linked to

the COVID-19 outbreak, 2021 Budget Law reduced IMU to a half, for a single
real estate unit, provided that it is not leased or given free of charge, held in Italy
and owned by persons not resident in the territory of the State, who are
entitled to a pension acquired under an international agreement with Italy. For
such buildings, the TARI or the equivalent rate is applied at the rate of two
thirds (paragraphs 48 to 49).
Similar to the IMU in its structure and key features, the IVIE, established by
Decree-Law No 201 of 2011, is imposed on properties located abroad.
Renovation of buildings and superbonuses

Tax exemptions for buildings have a key role to play in the policy debate on
property taxation, with particular reference to the IRPEF deductions for
renovation and energy renovation of buildings.
These measures have been extended from year to year, with specific
adjustments to the measure and the limitations of these benefits.
2021 Budget Law extends to 2021 deductions for expenditure on energy
efficiency, building renovation, purchase of furniture and large household
appliances, as well as recovery / restoration of the external facades of buildings.
The provision also increases from EUR 10,000 to EUR 16,000 the total amount
on which the planned deduction for the purchase of furniture and household
appliances is to be calculated. The measure lays down that the deduction
provided for such measures is also granted for replacing the existing emergency
power plant by emergency “last generation” gas generators, and extends by one
year (to the end of 2021) the tax advantage relating to the refurbishment of
uncovered areas of private residential property (the advantage consists of the
deduction from gross tax of 36 % of the expenditure incurred, up to the limit of
EUR 5,000 per year and, therefore, up to the maximum deductible amount).
In addition to these measures, Decree-Law No 34 of 2020 (known as the
Rilancio Decree) regulated the so-called superbonus, which consists of the
possibility of deducting 110 % of expenditure relating to specific energy
efficiency measures and anti-seismic measures in buildings.
2021 Budget Law also extends the application of the abovementioned
deduction until 30th of June 2022 (compared to the previous deadline of 31
December 2021), to be distributed among beneficiaries in five equal annual
instalments, and four equal annual instalments for expenditures incurred in
2022. It is therefore provided that the provisions on the option to sell or discount
instead of tax deductions (Article 121 of Decree-Law No 34 of 19 May 2020)
27
PROPERTY TAXATION
also apply to persons who, in 2022, bear the costs of operations covered by the
superbonus rules.
Therefore, until 31 December 2021, the following deductions are provided
for:
 tax deduction (from IRPEF and IRES) of 110 % for energy efficiency
measures, earthquake-bonuses, photovoltaic and recharging systems for
electric vehicles with the characteristics regulated by Decree-Law No 34 of
2020 (from 1 July 2020 until 30 June 2022);
 tax deduction (from the IRPEF and the IRES) of 65 % for documented
expenditure relating to energy renovation of buildings (ecobonus);
 tax deduction for expenditure incurred from 1 January 2020 to 31 December
2020 for the purchase and installation of micro-cogenerators to replace
existing plants;
 tax deduction of 50 % for expenditure incurred on the purchase and
installation of winter air conditioning installations with plants equipped
with heat generators using biomass fuels;
 tax deduction of 50 %, up to a maximum of EUR 96,000, for building
renovation works;
 tax deduction of 50 per cent for the purchase of high energy class furniture
and household appliances;
 tax deduction of 36% of expenditure incurred, up to a limit of EUR 5,000
per year for measures to renovate uncovered areas of private residential
property;
 tax deduction of 90% of the documented expenditure incurred in 2020
relating to measures, including only cleaning or external painting, aimed at
recovering or restoring the façade of buildings located in specific areas
(facade bonus);
 tax deduction of expenditure on anti-seismic measures on buildings located
in highly hazardous seismic areas and in zone 3, to varying degrees (up to
85%) on account of the building - single dwelling or common parts of the
building - and the type of measures, with particular reference to the reduction
of seismic risk (so-called earthquake bonus, where the measures are not
driven by the superbonus rules).
Further details of the tax advantages for building renovation and energy efficiency
measures can be found in the Revenue Agency’s Guide, as well as the factsheets on
the webpage “Tax deductions for building renovation and energy efficiency” of the
Chamber of Deputies Documentation Portal and the study carried out by the Chamber
of Deputies’ Research Service in collaboration with CRESME (Centre for Economic
and Social Market Research for Buildings and Territories) The energy recovery and
upgrading of the building heritage: An estimate of the impact of the incentive
measures.
The Tax Register Commission has recently carried out an in-depth investigation
into property taxation, for which see the outcome document.
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PROPERTY TAXATION
The waste tax

The waste tax (TARI) is the levy intended to finance - by covering all costs
- the service of collecting and disposing of waste and is payable by any person
owning any premises or open areas capable of producing waste. As a transitional
measure, the surface area of the building units eligible for TARI is the floor area
of the premises and areas capable of producing municipal and similar waste.
Municipalities which have put in place systems for measuring the quantity of
waste delivered to the public service may, instead of the TARI, which is of a
fiscal nature, charge a fee.
TARI was introduced by Law No 147 of 27 December 2013 to replace the previous
municipal tax on waste and services (Tares), which was in force for 2013 alone and
which, in turn, had replaced all previous levies on waste management, both of financial
and fiscal nature (TARSU, TIA1, TIA2). The 2020 Budget Law, in reregulating local
property taxation, didn’t change TARI and its discipline.
The tax rate is determined in accordance with Presidential Decree No 158

of 1999 (standard method); as a transitional measure, the municipality may
adjust the rate to the normal average quantity and quality of waste produced per
unit of area, in relation to the uses and types of activities carried out and the cost
of the waste service. The rate for each homogeneous category or sub-category
shall be determined by the municipality by multiplying the cost of the service
per unit of taxable area determined for the following year by one or more
coefficients of quantitative and qualitative productivity of waste.
By the deadline for the approval of the budget estimate, the municipal council
must approve the rates in accordance with the financial plan of the municipal
waste management service drawn up by the entity providing the service.
Decree-Law No 124 of 2019 extended until different regulations laid down by the
Regulatory Authority for energy, networks and the environment (ARERA) this method
of measuring the tax rate on the basis of the medium-ordinary criterion (instead of the
actual quantity of waste generated).The measure provided for access to preferential
rate conditions for the provision of an integrated municipal and similar waste
management service for household users in poor economic and social conditions.
It should be noted that the 2018 Budget Law (Law No 205 of 2017, paragraph
527) entrusted ARERA with the task of regulating the waste sector, with regard
to improving the service to users, homogeneity between the areas of the country,
assessing cost-quality ratios and adapting infrastructure.
The new tariff method for the integrated waste management service was
therefore defined by Decision 443/2019/R/ref of 31 October 2019. In particular,
Article 2 defines the following tariff components of the integrated municipal
waste management service:
a) operating costs, consisting of the sum of operational costs for the
management of the activities of sweeping and washing, collection and
transport of mixed municipal waste, treatment and disposal, collection and
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PROPERTY TAXATION
transport of sorted fractions, treatment and recovery, and incentives to

improve performance;
b) costs of using capital; calculated as the sum of the depreciation of fixed
assets, the provisions eligible for recognition of the tariff, the return on the
recognised net invested capital and the remuneration of the fixed assets in
progress;
c) adjustment component relating to the costs of 2018 and 2019.
The tariff components shall be determined in accordance with the tariff

method set out in Annex A to the Decision.
A first regulatory period is foreseen from 1 April 2020 to 31 December 2023
(experimental throughout 2020). For municipalities below 5 thousand inhabitants, the
method has been applied since January 2021.
Finally, we would point out that the Bank of Italy has recently analysed (The local
waste levy in Italy: Benefit tax or (hidden) property tax?) the characteristics of TARI
in terms of both efficiency and equity, using a simulation of the Bank of Italy’s
household balance sheet survey data. The Institute notes that TARI does not
adequately discriminate between households on the basis of waste generation and has
specific redistributive effects to the detriment of households with lower incomes; a
reconfiguration of the levy in the form of tariffs would therefore bring benefits not
only in terms of efficiency - for incentives for a more responsible use of public and
environmental resources - but also in terms of fairness, as it would remove the
regression profiles of the current rates.
Revaluation of land
Over time, a number of rules (most recently the 2021 Budget Law, Law No
178 of 2020) have extended the right to reassess for tax purposes the values
of shareholdings held in unlisted companies and land (both agricultural and
building land), on the basis of a expert estimate, making the recalculated value
subject to substitute tax in instalments.
That arrangement, introduced by the 2002 Budget Law, makes it possible to
recalculate those values for the purposes of determining capital gains and losses
subject to income tax.
The 2021 Budget Law, with reference to the value of the rates for determining
the substitute tax referred to above, provided for a single rate of 11% on the
revaluation of shareholdings in unlisted companies and land.
Indirect taxes on transfers

The taxation of property transfers has also been subject to changes in recent
years, both in order to rationalise the measure and the way in which it is applied
and to combat the crisis in the real estate sector through taxation.
The rationalisation objective has been pursued (Article 26 of Decree-Law No
104 of 2013, which amended Article 10 of Legislative Decree No 23 of 2011
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PROPERTY TAXATION
on the so-called municipal federalism) by amending, as from 1 January 2014,

the amount of registration, mortgage and cadastral taxes on real estate transfers:
today, a single rate of 9% applies to all transfers of immovable property with
the exception of a non-luxury main dwelling, which is taxed at a reduced rate
of 2%.The amount of each registration, mortgage and cadastral fee has been
increased from EUR 168 to EUR 200 in all cases where it is fixed.
Emergency measures to combat the spread of COVID-19

The emergency measures adopted in the course of the health emergency
introduced general and widespread measures to suspend taxes and
contributions. Many municipalities spontaneously postponed the deadlines for
the payments of revenue, including property, due to them, which are expressly
authorised by the general tax rules.
However, in addition to these generalised measures and voluntary initiatives
by local and regional authorities, emergency measures have provided for
specific exemptions from local taxes in order to protect the sectors most
affected by the crisis. In particular:
 as a result of the Rilancio and Agosto decree-laws, IMU 2020 is not due on
the buildings of tourism and accommodation companies (beach
establishments, spas, hotels and tourist buildings, buildings used for fair
events or events).The Agosto Decree exempted cinemas, theatres,
discotheques and balloons from the second tranche IMU 2020. Finally, for
buildings intended for cinematographic performances, theatres and concert
and entertainment halls, IMU is not due for the years 2021 and 2022; the
Ristoro Decree (Decree-Law No 137 of 2020) further broadened the scope of
this exemption;
 by the August Decree, companies in the restaurant and beverage sector were
exempted from payment of the tax and rent for the occupation of public
spaces and areas from 1 May to 31 December 2020;
 the Rilancio Decree introduced a tax credit for the monthly rent of
buildings for non-residential use, in favour of certain entities engaged in
business, art or professional activities, who have suffered a reduction in
turnover or payments due to the economic and health emergency caused by
COVID-19; for the tourism and hospitality sector, it is paid regardless of
turnover. The advantage is granted, albeit to a lesser extent, to retailers. The
Ristori Decree extended the measure for October, November and December
2020 to companies whose activities, due to the evolution of the
epidemiological situation, were suspended by the Prime Ministerial Decree
of 24 October 2020.
For companies that started operations in 2019 and some municipalities
affected by catastrophic events (with a state of emergency still in place at the
date of the declaration of the COVID-19 state of emergency), there is no
constraint on the reduction of turnover or fees. The tax credit may be
31
PROPERTY TAXATION
transferred to the lessor instead of payment of the corresponding part of the

rent, with the consent of the lessor.
Issues for consideration: the reform of the cadastre

For a long time, major international organisations (OECD, European
Commission and International Monetary Fund) have drawn up tax policy
recommendations based on a redesign of the composition of the levy, at the
same level of overall revenue, so as to safeguard budgetary balances. The most
growth-friendly tax shift would consist of gradually replacing capital and
labour taxes with indirect taxes on consumption and wealth.
Currently, the most relevant property taxes are IMU, the stamp duty on
financial products and similar taxes on assets held abroad. In 2018, the total
revenue from these taxes amounted to around EUR 23 billion (of which
approximately EUR 18,7 billion was due to IMU and 4,5 to the stamp duty on
financial products).
Transfer of wealth is also subject to levies. These include: inheritance and
gift taxes; registration, mortgage and cadastral taxes in the event of the transfer
of immovable property; financial transaction tax on shares and equity
derivatives.
Since the onset of the international economic crisis in 2007, the European
institutions have highlighted the appreciation of policies aimed at reducing
labour taxation in favour of increasing indirect and capital taxation (including
real estate), believing that this shift can increase employment and investment.
With particular reference to Italy, the EU institutions have long suggested
revising the tax base for real estate taxes in order to align the cadastral value
with market values.
Researchers from the International Monetary Fund (Andrle M. et al, 2018)
also noted that in Italy the tax system is characterised by a high tax wedge, a
relatively narrow tax base and a significant tax backlog. A strategy of
devaluation - shifting from taxation of inputs to taxation on consumption and
ownership - is considered to significantly lower the tax wedge, reduce the tax
gap (both in terms of spontaneous tax compliance and tax policy) and improve
tax collection, rationalise tax expenditures, raise revenues and reintroduce
modern capital taxation. To this end, the International Monetary Fund’s
working paper considers it necessary to introduce a modern form of levy on
immovable property and, in particular, on the ‘first home’, i.e. the principal
residence of the taxpayer, to this end by updating the cadastral values.
The recent Country Specific Recommendations to the Member States (EU
Council, 2019) have highlighted two specific elements: first of all, as we have
seen, the absence of a recurrent property tax on the first home; on the other hand,
the lack of updating of the cadastral values of land and assets, which constitute
the basis for calculating the tax on immovable property. Recommendation 1 of
2019, in line with previous years, calls on Italy to shift the tax burden away from
32
PROPERTY TAXATION
labour, in particular by reducing tax expenditures and reforming the

unupdated cadastral values.
A recent (unfinished) reform attempt was introduced by Law No 23 of 11
March 2014 (so-called fiscal delegation), which aimed - through the reform of
the land register (Article 2) - to correct the inequality of current annuities, which
was exacerbated by the introduction of a new multiplier for the calculation of
the experimental municipal tax (IMU). Among the principles and criteria for
determining the cadastral value, the delegation indicated, in particular, the
definition of the territorial scope of the market and the determination of the
asset value using the square metre as unit of size instead of the number of
compartments. It was intended to ensure the involvement of municipalities in
the rent-review process, also with a view to taxing buildings not yet recorded.
That reform took place at unchanged levels of revenue, taking into account
the socio-economic conditions and the size and composition of the household,
as reflected in the ISEE, to be noted also by means of the information provided
by the taxpayer, for which special measures of early protection were provided
for in relation to the award of new pensions, including in the form of
administrative self-protection. There was also a mechanism for Parliament to
monitor the rents review process.
It provided for a preferential tax regime for the securing of buildings, in
particular for works to adapt buildings to the legislation on safety, energy and
architectural renovation.
At the same time, the law aimed at updating equitable transfers to
municipalities and aimed at redefining the competences of the census
committees, in particular by entrusting them with the task of validating the
statistical functions (published in order to ensure the transparency of the
estimation process) used to determine the asset values and annuities, as well as
introducing deflatory procedures for litigation.
However, the delegation was implemented only with regard to the
composition, powers and functioning of the census committees, by means of
Legislative Decree No 198 of 2014, published in the Official Gazette of 13
January 2015.
The Ministerial Decree of 27 May 2015, published in the Official Gazette of 4 June
2015, identified criteria for the designation by the National Association of Italian
Municipalities, of the members of the local and central census committees. For more
details, please refer to the recent hearing of the Director of the Revenue Agency in the
context of the above-mentioned fact-finding survey on property taxation.
33
IRES AND CORPORATE TAXATION

In Italy, the type of direct taxation levied on business activities depends on
the nature of the taxable person (natural persons or legal persons) and their
organisation (partnerships or capital companies). In general, self-employed
persons and sole proprietorships are subject to IRPEF, while legal persons (with
the notable exception of partnerships) are subject to IRES, the Italian corporate
income tax.
As in the case of the IRPEF, recent changes have also intended to reduce the
tax burden on enterprises, by leaving the fundamental structure of the tax
unchanged, while affecting rates and the complex system of tax deductions (i.e.
the rules for determining tax bases) and tax credits.
Apart from income taxation, the regional tax on productive activities (IRAP,
introduced by Legislative Decree No 446 of 15 December 1997) plays a key
role, both in terms of its function in financing the national health system and its
impact on the so-called tax wedge.
Direct taxation on the enterprises: IRES

In short, the IRES (corporate income tax, disciplined by the Consolidated
Income Tax Act – TUIR, Presidential Decree No 917 of 22 December 1986) is
a personal and proportional tax at a rate of 24% (measure in force since 2017,
as a result of the 2016 Stability Law; previously, the rate was 27.5%). Taxable
persons are mutual insurance companies, cooperative societies and capital
companies established in Italy, public bodies, private bodies and trusts
established in Italy and any type of company, whether or not having legal
personality, not established in Italy.
Taxable amount calculation depends on each taxable person: as a general
rule, capital companies and resident institutions use business income as the basis
of assessment, taking into account tax changes established by TUIR, either
decreasing or increasing (including deductible costs and expenses). In case of
non-resident legal persons, income generated in the territory of the State is
taxable when derived from commercial activities and provided that there is a
permanent establishment in Italy. Specific rules apply to non-commercial
entities; for them, the taxable amount is determined on the basis of rules in force
for natural persons.
Permanent establishment and taxable amount

The economic impact and turnover of international e-commerce, and the
provision of telematic services without physical location, have required a
revision of the tax base and, in particular, of the concept of “permanent
establishment”, in order to adapt it to the new socio-economic situation. At the
same time, these requirements urged international institutions to seek specific
34
agreements to standardise tax bases and, therefore, to limit tax competition

between countries and avoid the creation of genuine tax havens.
Indeed, it has been pointed out by several parties that the lack of coordination
of tax policies has led to intense tax competition between countries at global
level, which has led to a progressive reduction in corporate profit tax levels in
recent decades. This decrease in the level of taxation has led to revenue losses
that go beyond the ones resulting from tax elusion.
With regard to the tax base, the national tax debate focused mainly on the
concept of “permanent establishment”, which is a necessary precondition for
taxation of income in Italy. The 2018 Budget Law (Law No 205 of 2017) made
significant changes to its regulation and to its determination criteria, redefining
the traditional categories of physical and personal permanent establishment, in
order to release the link between the physical presence of an activity in the State
and the applicability of tax legislation. In particular, the possibility of finding a
permanent establishment in Italy has been introduced even in the case of
significant and continuous economic presence in the territory of the State built
in such a way that it does not have a physical strength in the territory of the State
(new Article 162 (2) (f-bis) TUIR).
On the international front, it is worth mentioning the legislative initiative to
create a Common Consolidated Corporate Tax Base in the EU, consisting of
two legislative proposals: a proposal for a Directive on a Common Corporate
Tax Base (CCTB) and a proposal for a Directive on a Common Consolidated
Corporate Tax Base (CCCTB).
The aim of the European proposal is to establish a single set of rules to
calculate the corporate tax base in the EU internal market, to reduce
administrative costs and improve legal certainty for businesses, by standardising
the calculation of their taxable profits in all EU countries. This would allow
Member States to fight aggressive tax planning. These initiatives do not aim at
harmonising tax rates or possible tax credits in the EU, which remain in the
sovereign law of the Member States.
The draft CCTB Directive - still under discussion in the absence of
unanimous agreement - proposes a very broad definition of tax base, that makes
all revenues taxable, with the exception of those explicitly exempted. Exempted
revenues include profits of permanent establishments of a company situated in
the State in which the company has its head office, and income from dividends
or from the sale of shares held in a company outside the group. In addition, the
draft rules propose the deduction from taxable revenues of business expenses
and other costs.
In this regard, the Director of Finance Department of the Ministry of
Economic Affairs and Finance, during the hearing held before the Finance
Standing Committee of the Chamber of Deputies, pointed out that the European
Commission could use Article 116 of the EU Treaty, which presupposes the
existence of distortions of competition in the internal market due to disparities
35
in national rules. The Treaty provides for the Commission to have the power to
interact with Member States whose national legislation distorts the conditions
of competition in the internal market, causing a distortion which must be
eliminated.
Considering tax inequality from the point of view of an infringement of the
fair competition rule would allow decisions to be taken no longer by unanimity,
but by qualified majority. In this way, any obstructive positions taken by some
Member States would no longer be able to block decisions. This would be an
innovative approach, which, however, could be limited in its difficult
application, essentially linked to the need to objectively assess and measure the
distortion of the single market.
Rates
With regard to rates, as previously anticipated, the 2016 Stability Law
lowered the IRES measure for all firms from 27.5% to 24%, with effect from
2017.
The 2019 Budget Law (paragraphs 28-34) introduced the so-called mini-
IRES, i.e. the application of a reduced rate of 15% to part of the income of
enterprises increasing employment levels and making new investments. This
measure was then replaced (Article 2, Decree-Law No 34 of 2019) by a
progressive reduction in the IRES rate on the part of the company’s income
linked to the reuse of profits, adjusted over time to reach 20% from 2023 (also
never in force).
At last, the 2020 Budget Law restored, from 2019, the application of the so-
called fiscal mechanism for aid to economic growth (ACE), abolishing the
abovementioned incentive measures for undertakings, linked to the
reinvestment of profits, put in place in 2019.
The ACE, established for the first time by Decree-Law No 201 of 2011, and
whose rules have been revised several times in the following years, consists of
a deduction of part of equity increases, or rather a deduction of an amount
corresponding to the notional return on new equity. Therefore, the advantage is
granted to enterprises whose equity is increased by contributions in cash and by
reserves, in order to provide an incentive for capitalisation. To calculate the
deductible amount, components which have contributed positively
(contributions, retained earnings) and negatively (capital reductions with
allocation to members, acquisition of shareholdings in controlled companies,
purchases of companies or branches of business) to the capital are summed up.
This is multiplied by a percentage rate, which was set at 1.3% by the 2020
Budget Law.
The 2020 Budget Law increased IRES to 27.5% (instead of the ordinary
measure of 24%) on income coming from activities under public concession
schemes, in the tax years 2019, 2020 and 2021.
36
In this connection, we would point out that, in its judgment No 10 of 2015,

the Constitutional Court declared the constitutional illegitimacy of the so-called
Robin Hood Tax (i.e. the supplement to the IRES rate for companies operating
in the oil sector, the electricity sector and the transport and distribution of
natural gas, introduced by Article 81 of Decree-Law No 112 of 2008), without
retroactive effect; the rule has been criticised from the point of view of
reasonableness and proportionality.
We would also point out that the 2019 Budget Law repealed the optional
corporate income tax (IRI) system introduced by the 2017 Budget Law and
governed by Article 55-bis of TUIR. This mechanism would have allowed sole
proprietorships, collective and limited partnerships under the ordinary
accounting system, and limited liability companies with limited ownership, to
apply a proportional and separate taxation of their business income at the IRES
rate. The entry into force of the scheme was deferred until 1 January 2018. The
repeal of IRI is established with effect from 2018.Therefore, in the light of the
postponement of entry into force and subsequent repeal, the scheme has, in
essence, never been effective.
The so-called web tax

As anticipated, the advent of the digital economy has created major tax
challenges. In the globalised world economy, tax policies have faced high
mobility of taxpayers and capital, a high number of cross-border transactions
and the internationalisation of financial structures, with significant risks of tax
evasion and avoidance, as well as commercial policies aimed at exploiting the
legislative and tax gap between the laws of the various countries.
Specific attention is given to the tax regime for the supply of goods and
services without a physical or legal presence (e.g. e-commerce), as well as to
cases where consumers access digital services free of charge, in return for the
mere payment of their personal data (e.g. Google, Facebook, etc.)
Following input from the European Council, in March 2018 the European
Commission presented a legislative proposal to develop a temporary tax on
revenues from digital services (digital services tax), pending the implementation
of a long-term structural solution to be agreed at the OECD. The temporary tax
would apply to revenues from activities where users play a central role in value
creation and which are not adequately covered by current tax rules (e.g.
revenues from the sale of targeted online advertising, from digital
intermediation activities that allow users to interact and which facilitate the sale
of goods and services between them and from the sale of data generated by
information provided by users). Member states where users are located would
collect these tax revenues.
37
Work on digital services tax has been ongoing in the European institutions
since March 2018. Following a debate at the Economic and Financial Affairs
Council in March 2019 and the lack of unanimous agreement on the proposal,
the Council decided to pursue a two-track approach:
 the Council and the Member States will continue to work together to reach
agreement on a global solution at OECD/G20 level by 2020;
 in the event of failure of international negotiations or failure to reach an
agreement by the end of 2020, the Council may revert to discussing an EU
approach. The President of the European Commission, von der Leyen, has
recently expressed the view that, in the absence of a common global solution
by the end of the year, the EU will have to act alone, also to avoid the risk of
fragmentation in the regulation of the Member States.
A first Italian attempt to tax digital services was made with the Digital
Transaction Tax, governed by the 2018 Budget Law. It should have applied to
digital transactions relating to electronically supplied services, at a rate of 3 per
cent applied to the value of the individual transaction, exclusive of VAT.
The 2019 Budget Law (Law No 145 of 2018) repealed the previous rules,
introducing a tax on digital services, to be applied to entities providing such
services with a total revenue of EUR 750 million or more, of which at least EUR
5,5 million was generated in Italy for the provision of digital services. The tax
is levied on revenues at a rate of 3 per cent and is paid within the month
following each quarter.
The 2020 Budget Law (Law No 160 of 2019) amended the rules governing
the digital services tax, inter alia, in order to clarify how the tax should apply to
affected payments, the returns and the frequency of the levy, but above all to
release the application of the tax - as far as possible - from the adoption of
implementing measures. The Revenue Agency’s decision on the identification
number, which is necessary to identify taxable persons who are not established
in the Italian State, is currently being issued.
Article 2 of Decree-Law No 3 of 2021 extended the deadline for payment
of the digital services tax from 16 February 2021 to 6 March 2021 and the
deadline for submitting the relevant tax return from 31 March 2021 to 30 April
2021.
In this connection, we would point out that the Revenue Agency’s decision
of 15 January 2021 lays down the operational rules for the first application of
the framework, in particular by identifying:
 the objective scope of the tax introduced, highlighting the excluded digital
services;
 the way in which the tax base and the digital services tax are determined;
 the connecting factors with the territory of the State;
 payment of the tax;
 the declaration requirements;
38
 the essential requirements for compliance;

 the accounting obligations of taxable persons;
 the joint and several liability of residents for the fulfilment by non-resident
taxable persons of their obligations to pay the digital services tax;
 reimbursements for overpayments.
In this context, Decree-Law No 50 of 2017 introduced, for non-resident

companies belonging to multinational groups with revenues exceeding EUR 1
billion and supplying goods and services in Italy for an amount of more than 50
million, using resident companies or permanent establishments of non-resident
companies, the possibility of having access to an enhanced cooperation
procedure for the definition of tax debts due in relation to any permanent
establishment.
In the Tax Package of 15 July 2020, the Commission submitted a proposal
for a Directive (DAC 7) to introduce an automatic exchange of information
between Member States’ tax administrations for profits generated by sellers on
digital platforms and to strengthen administrative cooperation by clarifying
existing legislation.
Non-profit sector
Law No 106 of 6 June 2016 conferred on the Government a delegation to
reform the socalled third sector (non-profit associations and companies), the
social enterprise and the regulation of the universal civil service.
Legislative Decree No 111 of 3 July 2017 - Third Sector Code was issued,
subsequently supplemented and corrected by Legislative Decree No 105 of
2018, which inter alia reorganises and comprehensively revises special rules
and other provisions in force relating to entities in the non-profit area, including
the tax rules applicable to these bodies.
The Decree also regulates the solidarity certificates of non-profit entities
(which may be issued by all entities registered in the National Single Register,
including entities with commercial activity) and other forms of social finance
(including peer-to-peer lending).
In short, Title X of the Code (Articles 79 to 89) governs the tax treatment of
entities in the third sector. Essentially, entities in the third sector - other than
social enterprises - follow the tax system provided for in Title X of the Code,
which contains specific support measures. The TUIR rules on income tax are
also applicable to the same entities, insofar as they are compatible. An optional
tax regime is introduced for determining the corporate income of non-
commercial entities, that is to say those carrying out, exclusively or
predominantly, activities in the general interest, based on profitability ratios.
Rules identify activities characterised as being non-commercial. In particular,
such activities shall be presumed to be non-commercial if the revenues do not
39
exceed by more than 10 per cent the related costs for each tax period, and for
no more than two consecutive tax periods. A tax credit is granted to those who
make donations to entities in the third non-commercial sector. Provisions
conferring additional benefits, not provided for in the previous tax rules, are also
introduced; a single set of rules of deductions and tax credits is introduced in
favour of those making liberal payments to entities in the third non-commercial
sector and social cooperatives.
With regard to voluntary organisations and social promotion associations, a
number of activities are listed which, for income tax purposes, are considered
non-commercial, if they are carried out without the use of professionally
organised means for the purposes of market competitiveness. Volunteer
organisations also benefit from the deductibility of 35 % of payments made to
them; some acts (such as constitution and those relating to the performance of
the activities) regarding voluntary organisations are exempt from registration
duties. Income from immovable property used exclusively for the pursuit of
non-commercial activities is exempt from IRES.
The tax system for social promotion associations, registered in the special
section of the National Single Register of the third sector, is regulated, largely
in continuity with previous rules, but with some updating and rationalisation
measures. Voluntary organisations and associations for social promotion are
allowed to apply a flat-rate scheme, with simplified accounting, for their
commercial activities, provided that they do not exceed the limit on revenue of
EUR 130,000 in the previous tax period. Specific rules have been introduced
concerning the obligations to keep accounting records for the activities of third
sector entities.
By Legislative Decree No 112 of 3 July 2017 (amended by Legislative

Decree No 95 of 2018), the rules governing social enterprises were revised:
among other things, a social enterprise is allowed to distribute dividends to its
members (within certain limits) and the range of activities which constitute
social utility for legal purposes are extended, with the grant of tax incentives.
2021 Budget Law provides for the deduction of 50% of profits, in favour of
non-commercial entities, as from 1 January 2021, provided that they carry out,
exclusively or principally, one or more activities of general interest in pursuit
of civic, solidarity and utility objectives (paragraphs 44-47).
Superdepreciation, overdepreciation and tax credits

As stated above, over the years, the taxation of the production sector has been
progressively adjusted - without prejudice to the fundamental features of direct
taxes - by introducing numerous advantages in the form of deductions and tax
credits. This system of benefits has reduced the tax burden on business, on one
hand, and - through targeted interventions in specific sectors - has supported
economic growth.
40
In particular, the aim was pursued by the so-called superdepreciation

(superammortamento) and overdepreciation (iperammortamento) measures
introduced by the 2016 Stability Law and the 2017 Budget Law respectively,
and subsequently extended until 2019-2020. Those advantages enabled
companies to increase, for tax purposes, the costs of acquiring certain capital
goods (and, therefore, their deductibility from direct taxes), in particular
tangible and intangible assets linked to investment and technological
innovation.
Instead of extending these measures, the 2020 Budget Law replaced them
with a new tax credit for expenditure in new capital goods. It covers all
businesses and, with regard to certain investments, also professionals. The credit
is granted at a rate that is different according to the type of goods being invested.
It covers investment in new capital goods, including intangible assets for
technological transformation according to the Industry 4.0 model. The Rilancio
Decree (Decree-Law No 34 of 2020), issued as part of the measures to deal with
the economic and health emergency, extended from 30 June to 31 December
2020 the final date for the effectiveness of the so-called superdepreciation (that
lets enterprises increase by 30% the cost of acquisition of new equipment).
With regard to tax credits, we would point out here that the 2020 Budget Law
(Law No 160 of 2019) extended to 2020 a number of tax credits already in
existence, and comprehensively regulated the tax credit for investments in
research and development, in ecological transition, in technological innovation
4.0 and in other innovative activities, to support the competitiveness of
enterprises.
The 2020 Budget Law extended to 2020 the benefit of the tax credit for
training expenditure in the field of technology 4.0, with a revised annual limit.
The benefit, established by the 2017 Budget Law and amended by the 2019
Budget Law, provides for a tax credit of 50% of the expenditure incurred by
small enterprises for this purpose, and 40% for the expenditure of medium-sized
enterprises.
New tax credits were introduced by emergency decrees issued to deal with
COVID-19 (including credit for the sanitisation of working environments),
while strengthening existing measures (increase in the tax credit rate for
investments in research and development activities in the Mezzogiorno regions,
as a result of the Rilancio Decree, Decree-Law No 34 of 2020).
It should be borne in mind here that, like the IRPEF tax advantages, the
complex sectoral advantages relating to the production sector are fully covered
by the so-called tax exemptions, that is to say, that set of tax benefits - stratified
over time - which require the attention of the legislator with a view to reforming
the tax system, simplification and rationalisation.
Innovative start-ups and SMEs

Start-ups benefit from specific tax advantages.
41
Innovative start-ups, governed by Decree-Law No 179 of 2012, are newly

created enterprises engaged in the development, production and marketing of
innovative products or services with high technological value. This type of
enterprise, which must meet specific requirements, is granted preferential
measures, both in the start-up and development phases. In addition to the
necessary requirements, the firm must meet at least one of the alternative
requirements identifying the innovative character of the activity: it must incur
research and development costs amounting to at least 15% of the greater of the
total cost and value of production; employ, as employees or collaborators,
highly qualified personnel in certain alternative measures; it must be the owner
or depositor or licensee of at least one industrial property right, or the holder of
the rights in an original computer program.
Innovative start-ups are not subject to the annual fee payable to the Chambers
of Commerce and, as clarified by Circular 16/E of the Revenue Agency of 11
June 2014, to the secretarial fees and stamp duty normally due for compliance
with the Business Register (Article 26 of Decree-Law No 179 of 2012).
Innovative start-ups are also covered by a framework derogating from the
law on letterbox and systematic loss-making companies. Therefore, if they
obtain inappropriate revenues or are at a systematic tax loss, they are not subject
to the tax penalties laid down for so-called letterbox companies, such as the
imputation of a minimum income and a minimum taxable amount for IRAP
purposes, the limited use of the VAT credit, the application of the 10.5% IRES
surcharge (referred to in Article 26 of Decree-Law No 179 of 2012). They are
also exempt from the requirement to affix a conformity stamp by offsetting
VAT claims (Article 4 of Decree-Law No 3 of 2015).
Their directors and employees are exempt from taxation and contributions,
in respect of the part of their labour income resulting from the allocation of
shares, participating financial instruments or rights of those undertakings
(Article 27 of Decree Law No 179 of 2012).
Structural tax incentives are granted for investment in venture capital of
innovative start-ups from natural and legal persons: an IRPEF deduction of 30%
of the investment, up to a maximum of EUR 1 million, is provided for natural
persons. For legal persons, the incentive consists of a deduction from the IRES
tax base of 30% of the investment, up to a maximum of EUR 1,8 million. From
2017 onwards, the use of the incentive is conditional on continued participation
in the innovative start-up for a minimum of three years. With regard to
incentives of a financial nature, we would like to recall the possibility for these
categories of firms to raise risk capital in an innovative way, in particular
through online portals (crowdfunding); this way of raising capital, initially
reserved for start-ups and innovative SMEs, was extended to all SMEs (Stability
Law 2017).
Decree-Law No 3 of 2015 introduced into the law the definition of innovative
small and medium-sized enterprises, designed to benefit from certain
42
simplifications, advantages and incentives reserved for innovative start-ups.

These provisions apply only to innovative SMEs which are not more than 7
years old, subject to the conditions and limits laid down in European State aid
rules.
In order to facilitate investment in start-ups, the 2017 Budget Law provided
for the possibility for listed companies to acquire at least 20% of the tax losses
of investee start-up companies, subject to specific conditions.
The Rilancio Decree-Law introduced de minimis benefits to invest in
innovative start-ups. As an alternative to ordinary tax advantages on
investments by natural persons, a deduction of 50% of investments in the share
capital of one or more innovative start-ups is available only for companies
registered in the special section of the business register at the time of the
investment. This deduction is granted under the de minimis State aid framework
laid down in Regulation (EU) No 1407/2013, under specific conditions and
within the maximum invested limit of EUR 200,000 during three tax period.
The same de minimis tax relief scheme is also applicable to innovative SMEs.
Taxation of the financial sector

The legislator has intervened on several occasions on the taxation of banks
and insurance companies, also to coordinate their regulation with the new rules
on crises and reforms in this sector.
The 2016 Stability Law (Law No 208 of 2015) provided that financial
intermediaries and the Italian National Bank (Banca d’Italia) are required to
apply an additional 3.5% to the standard IRES rate. However, investment fund
management companies and securities brokerage companies are excluded.
The 2019 Budget Law increased the advance payment on insurance tax from
59% to 85% for 2019, to 90% for 2020 and finally set at 100 % as from 2021.
The 2020 Budget Law deferred the deductibility rates, for IRES and IRAP
purposes, laid down in certain legal provisions and already postponed by the
2019 Budget Law. In particular, deduction of the 12% share of the stock of loan
write-downs and losses for credit and financial institutions extends to the current
tax period on 31 December 2022 and the three following; for the current tax
period as at 31 December 2028, the deduction of 10% of the impairment of
receivables and other financial assets resulting from the recognition of the loss
allowance for expected losses, and to the tax period running on 31 December
2025 and the four following the deduction of 5% of the stock of negative
amortisation items relating to the value of goodwill and other intangible assets.
IRAP
The regional tax on productive activities (IRAP), governed by Legislative
Decree No 446 of 15 December 1997, is payable in respect of the usual exercise
of an independently organised activity, aimed at the production or exchange of
goods or the provision of services. Taxable persons are traders and self-
43
employed persons, whether acting individually or jointly, private non-

commercial bodies and public authorities and bodies.
It is a secondary tax, that is to say a tax introduced and regulated by the law
of the State, and whose revenue is attributed to regions, which must therefore
exercise their fiscal autonomy within limits laid down by State law.
Revenue from IRAP, according to national law, is destined to finance the
National Health Service.
IRAP is applied to the value of net production, resulting from the activity
carried out in the territory of the region or autonomous province, calculated
differently according to the type of entity and the activities performed.
The tax shall be determined by applying to the net production value rates laid
down by law. In particular, the standard rate is 3.9%. It is borne by banking and
financial firms by 4.65% and, in the case of insurance companies, by 5.9%.
The Regions and Autonomous Provinces may, by their own law, vary the
rates according to sectors of activity and categories of taxable persons. The
IRAP rules were supplemented by Legislative Decree No 68 of 6 May 2011 on
provincial and regional tax federalism, which lays down rules applicable only
to ordinary regions. They may reduce the rates to zero and provide deductions
from the tax base in accordance with EU law and the case-law of the Court of
Justice of the European Union.
The special status Regions and the Autonomous Provinces of Trento and
Bolzano are also allowed to lower rates to zero, by virtue of specific rules
contained in their special statutes or in their implementing provisions.
The main legislative measures aimed at reducing the tax wedge include
measures that affected IRAP deductions, in particular labour cost components.
The 2015 Stability Law (Law No 190 of 2014) provided for full deductibility
from IRAP of the cost of permanent employees. The measure applies to IRAP
taxable persons, with the exception of non-commercial bodies, public
authorities and bodies with regard to institutional activities. That deduction was
then extended by the 2016 Stability Law, albeit subject to specific limits, also
to the costs incurred in recruiting seasonal workers, subject to certain conditions
linked, inter alia, to the duration of the relationship.
With reference to the “autonomous organization”, which is a precondition for
the application of the IRAP to self-employed workers, the 2015 Stability Law
made it clear that there is no independent organisation for doctors who have
signed specific agreements with hospitals, for the pursuit of the profession, if
they receive more than 75% of their total income for their activities in those
establishments. Anyway, the amount of income generated and expenses directly
linked to the activity carried out are irrelevant for the existence of an
independent organisation. However, it can be established if there are elements
that exceed the standard and parameters laid down in agreements with the
National Health Service.
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The 2016 Stability Law exempted from IRAP entities operating in the
agricultural sector, small-scale fishing cooperatives and their consortia, and
cooperatives and their consortia which primarily provide services in the forestry
sector, including in the interests of third parties, as from 2016.
The same measure increased the amounts deductible by IRAP in favour of
some smaller entities, reinforcing the deductions in favour of general
partnerships and limited partnerships (and treated as such) and natural persons
engaged in commercial activities, as well as natural persons and civil-law
partnerships operating in the arts and professions.
45
EXCISE DUTIES AND VAT

Indirect taxes include value added tax (VAT) and excise duties on alcohol,
tobacco and energy. The common VAT system is generally applicable to goods
and services that are bought and sold for use or consumption in the EU. Excise
duties are levied on the sale or use of specific products. EU legislative activities
are aimed at coordinating and harmonising VAT law and harmonising duties on
alcohol, tobacco and energy with the aim of ensuring the proper functioning of
the internal market.
Excise duties
As regards excise duties, it should be noted that they have been harmonised
at European level for many years. Their structure and measure differ
according to the type of product affected by each tax (in general, excise
duties are levied on alcohol, tobacco and energy products, and the European
Parliament document identifies its characteristics and differences). Generally
speaking, the structure of excise duties and minimum rates are set by EU rules
and it remains open to Member States to increase the rate.
Excise duties have been increased over time, including for emergency
purposes: the increase in excise duty rates has immediate financial effects for
the tax authorities, not least because they affect goods whose demand is not
closely linked to price (such as petrol and tobacco).
As regards revenue from excise duties (Blu Book 2019 of the Customs and
Monopolies Agency), the value of the contribution to the tax authorities for
2019 was approximately EUR 34.2 billion; excise duties on energy products
account for 92.95 %, while excise duties on alcohol account for 4%. It
should also be noted that over the last three years total demand for tobacco
has fallen by around 1,2 million kg (-1.59 % compared with 2017), driven by
the fall in cigarette consumption (-6.80 % in volume since 2017).
In this connection, we would point out that the 2020 Budget Law increased
excise duties on manufactured tobacco (paragraph 659). In particular, the
amount of the minimum excise duty and the minimum tax burden (the latter
applicable to cigarettes) on manufactured tobacco has been increased, as well
as the amount of the basic rate on those products. The basic rates on
manufactured tobacco - the component used to calculate the global excise
duty, which in turn forms part of the overall excise duty - have also been
increased and the levy on snuff or mastic tobacco has been unified.
Tax Decree 2019 (Decree-Law No 124 of 2019) intervened on many aspects

of excise legislation.
The new rules aim at preventing fraud and tax evasion in the fuel
distribution chain and in the field of excise duties on energy products, inter
46
alia by limiting the use of the declaration of intent for non-application of VAT;
changes have been made to the requirements regarding the reliability and
integrity of the parties involved in the distribution chain; tax warehouses above
a certain threshold were obliged to adopt the computerised system INFOIL for
the management of energy products. Provision has also been made for telematic
means of transmission of the customs accompanying document for the transport
of fuels and the quantities of electricity and natural gas, when they are
transported and delivered to final consumers.
We would point out, however, that the so-called Rilancio Decree deferred
the validity of a number of provisions on excise duty introduced by the
aforementioned Decree because of the economic and health emergency caused
by COVID-19.
With regard to excise duties on alcohol, the 2019 Budget Law (Law No 145
of 2018) introduced specific tax relief on beer. In particular, the excise duty on
beer has been reduced from EUR 3 per hectolitre to EUR 2.99 per hectolitre
(paragraph 689) from 1 January 2019.
2021 Budget Law carried out a comprehensive review of the consumption
tax on substitutes for smoking products, and also introduced changes in the
area of smoke-free inhalation tobacco. The consumption tax for non-
combustion inhalation products consisting of liquid substances, whether or not
containing nicotine, is reviewed and increased. In addition, distance selling of
non-combustion inhalation products consisting of liquid substances carried out
in Italy is permitted, in accordance with procedures laid down by the Customs
and Monopolies Agency.
Further anti-fraud provisions were introduced by the 2021 Budget Law,
with particular reference to obligations of operators of energy products depots
that are subject to excise duty; to the extension of the INFOIL system to all
commercial warehouses of energy products, with a storage capacity of not less
than 3.000 cubic metres, by the deadline of 31 December 2021; to the
establishment of an automatic mechanism for blocking letters of intent, in the
event of the identification of false exporters; to rules on operating licences for
tax warehouses of energy products.
Value added tax — VAT

Value added tax (VAT) is also a harmonised tax at European level (article
113 of the Treaty on the Functioning of the European Union - TFEU), governed
by the so-called VAT Directive (Directive 2006/112/EC), which established the
common system of value added tax.
Pursuant to Article 1 of DPR 633 of 1972, VAT Decree, value added tax
applies to supplies of goods and services carried out in the territory of the State
in the exercise of a business or in the exercise of arts and professions and to
imports by any person.
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With regard to VAT rates, we would point out that, with effect from 1
October 2013, the standard rate has been recalculated at 22% (2013 budget
law). The legislation also provides for two reduced rates: a rate of 10% and
one at 5%, which was introduced by the 2016 Stability Law (paragraphs 960-
963). Finally, until the introduction of the definitive system provided for in the
VAT Directive, the super-reduced rate of 4 % remains in force, provided that
the rate was in force on 1 January 1991 and that its application meets well-
defined reasons of social interest (Article 110, VAT Directive).
Among the most recent amendments in the field of VAT there is article 123
of Decree-Law No 34 of 2020 (known as: Rilancio Decree), which definitively
removes the so-called safeguard clauses which, with effect from 1 January
2021, provide for increases in the rates of value added tax and excise duty on
certain fuel products.
Paragraphs 2 and 3 of the 2020 Budget Law (Law No 160 of 2019) provided for
full sterilisation for 2020 and partial sterilisation from 2021. For the following
years, the reduced VAT was expected to be increased from 10 to 12 % and a normal
VAT increase of 3 percentage points for 2021 (to 25 %) and 1.5 percentage points (up
to 26.5 %) from 2022 onwards, and the increase in net revenue expected from the
increase in excise duties on fuel was also adjusted.
These safeguard clauses to protect public finance balances were introduced by the
2015 Stability Law, in order to avoid the reduction of fiscal benefits and deductions
provided for by previous measures. It increased the standard and reduced VAT rates
by 3.5 and 3 percentage points respectively and excise duties on petrol and diesel to
an extent that would result in higher revenues of not less than EUR 700 million. These
increases, originally planned from 2016 onwards, were postponed and adjusted over
time, until full sterilisation by the aforementioned Rilancio Decree.
VAT evasion
It should be noted that, according to the estimates presented in the Report on
Tax Evasion, annexed to the NADEF 2020, VAT is the most evaded tax in
Italy: in the 2013-2018 range, the average VAT gap in value is 35.5 billion;
the lowest value of around EUR 33 billion was reached in 2018.
According to a study carried out by the European Commission (Study and
Reports on the VAT Gap in the EU-28 Member States: 2019 Final Report), in
absolute terms in 2017 Italy at European level continues to have the largest
VAT shortfall (around EUR 33.6 billion) in all EU Member States, followed
by Germany (EUR 25 billion) and the United Kingdom (EUR 19 billion) (total
EU evasion: EUR 137 billion).
We would also point out that the extent of this evasion appears to be largely under-
estimated by Italian taxpayers. A research carried out by The European House -
Ambrosetti (Cashless Revolution: The progress made by Italy and what remains to be
done Report 2020) shows that 7 out of 10 Italians underestimate the volume of VAT
evasion, not knowing how Italy stands in relation to the other 27 countries of the
48
European Union. Less than one third of the sample (31.7 %) provided the correct
answer that Italy is the worst country in the EU for absolute volumes of VAT evasion.
The proposed changes to VAT

In a recent question to the Chamber of Deputies, the Prime Minister proposed
a possible intervention on VAT rates, in relation to the possibility of
introducing measures to support consumers. In Germany, VAT has recently
been cut from 19 % to 16 % and from 7 % to 5 % for a period of six months
from 1 July to 31 December 2020, with an estimated cost of EUR 20 billion for
the State’s coffers.
Electronic invoicing and electronic transmission

Article 1 (209) of Law No 244 of 2007 introduced the obligation to send
invoices electronically to the Public Administrations, while the subsequent
Decree of the Ministry of Economic Affairs and Finance No 55 of 3 April, 2013
implemented the obligation of electronic invoicing between public
authorities and suppliers as of 6 June 2014 for ministries, tax agencies and
national social security bodies, and 31 March 2015 for other public
administrations, including local authorities.
Since 1 January 2017, the Ministry of Economic Affairs and Finance has
made the Interchange System for the transmission and receipt of electronic
invoices available to taxable persons for VAT purposes. From the same date,
persons supplying goods and services (businesses, craftsmen and professionals)
may submit electronically to the Revenue Agency data on the daily fees for
supplies of goods and services, in lieu of registration obligations.
The 2018 Budget Law provided for the obligation to issue only electronic
invoices via the Interchange System from 1 January 2019 both in the case of
the supply of goods or services between two VAT operators (B2B transactions,
i.e. Business to Business) and from an Iva trader to a final consumer (B2C
transactions, i.e. Business to Consumer transactions). Those who are covered
by the preferential flat-rate scheme or who continue to apply the tax advantage
scheme are exempt.
Mandatory electronic invoicing through the Interchange System enables the
tax authorities to acquire in real time the information contained in invoices
issued and received between traders, enabling the tax authorities to carry out
timely and automatic checks on the consistency between the VAT declared
and the VAT paid, and to boost digitalisation and administrative
simplification.
A Report on the effects of the introduction of e-invoicing, presented by the Revenue
Agency during the hearing at the VI Committee on Finance of the Chamber of
Deputies on 24 June 2020, shows that e-invoicing has a positive impact of around
EUR 3,5 billion. In particular, the increase in VAT revenue from voluntary payments
by taxpayers (not attributable to the business cycle) was estimated at around EUR
49
2 billion. This was confirmed in the NADEF 2020, which shows that in 2019 there
was an increase in VAT revenue of more than EUR 2.9 billion.
In order to promote better traceability, the gradual replacement of tax receipts

started on 1 July 2019. In 2020, tax receipts have been replaced by a
commercial document, which is issued exclusively using an electronic
recorder (RT) or a web procedure made available free of charge by the
Revenue Agency. Persons engaged in retail trade and similar activities, for
which the issue of an invoice is not mandatory (if not requested by the
customer), must certify the charges by storing and transmitting them
electronically to the Revenue Agency. This obligation has been triggered from
1 July 2019 for economic operators with a turnover of more than EUR 400,000
and from 1 January 2020 for others, with penalties being applied from 1 July,
then postponed to 1 January 2021 in view of the difficulties linked to the
Coronavirus emergency.
As of 31 July 2020, around 1.200.000 VAT operators reported to have started the
process of electronic storage and transmission of tax receipts, of which
approximately 990,000 were using RT and approximately 530,000 through the use of
the Revenue Agency’s web procedure (around 320,000 operators use both methods).
As regards the charges arising from the use of vending machines, there are currently
around 30.000 operators, who transmit these data for around 700,000 dispensers. 659
operators, on the other hand, transmit charges for the supply of petrol and diesel.
Proposals to amend e-invoicing

In view of the results obtained, the Court of Auditors (Court of Auditors’
Memory on the Economic and Financial Document 2020) suggests that the
legislator consider whether it would be appropriate to go beyond the
optional nature of electronic invoicing for taxpayers using the so-called
flat-rate scheme, with the necessary approval of the European Commission.
The Court underlines that it is very important for the proper functioning of the
system as a whole to acquire the full knowledge of the exchanges between all
economic operators; moreover, the reasons for making compliance only
optional (Article 1 (692) of Law No 160/2019) can now be considered to have
been exceeded, given the level of operational simplification achieved by the
current technologies available on the market.
Simplification of tax compliance

Over the years, a number of legislative measures have been adopted to
simplify taxation:
 Decree-Law No 70 of 13 May 2011 introduced tax simplifications
concerning, inter alia, the abolition, for employees and pensioners, of the
obligation to report annually data on deductions for dependent family
members, if not varied, and the abolition of notifications to the Revenue
50
Agency in connection with building renovations benefiting from income tax

deduction;
 In the following year, Decree-Law of 2 March 2012 introduced provisions
aimed both at facilitating the rectification of tax filing mistakes and
omissions and at reducing administrative burdens for citizens and
businesses;
 Decree-Law No 69 of 21 June 2013 lays down provisions aimed at
simplifying electronic communications to the Revenue Agency for persons
registered for VAT, abolishing the obligation to submit a monthly form
770, extending tax assistance to the taxpayer and facilitating the taxpayer in
the context of the debt collection procedure.
Pursuant to Law No 23 of 11 March 2014 (delegation law for tax reform),
the following legislative decrees were issued:
 Legislative Decree No 175 of 2014, which introduced, inter alia, the pre-
completed tax return, raised the limit for exemption from the inheritance
declaration and removed the obligation to submit ad hoc forms in order to
join certain special tax schemes;
 legislative Decree No 127 of 2015 on the electronic transmission of
invoices or data relating to VAT transactions and the monitoring of
supplies of goods through vending machines;
 Legislative Decree No 128 of 2015 on legal certainty in relations between
the tax authorities and taxpayers and, in particular, inter alia, with the express
rules on abuse of rights and the introduction of the cooperative compliance
regime;
 Legislative Decree No 156 of 2015, which introduced measures to revise the
rules governing disputes and tax disputes;
 Legislative Decree No 159 of 2015, which aims to simplify and rationalise
the rules on collection.
More recently, Decree-Law No 34 of 30 April 2019 laid down further rules

to simplify tax compliance, including:
 simplifications of formal checks of tax returns and deadline for submitting
electronic returns;
 unit payment simplifications;
 simplification in the area of summary fiscal reliability indices;
 information obligations of taxpayers applying the flat-rate scheme;
 simplification of declarations of intent relating to the application of value
added tax.
It should also be noted that Article 153 of the Rilancio Decree shifted the
deadlines laid down for the experimental start of drawing up draft VAT
registers and notifications of periodic VAT assessments by the Revenue
51
Agency, providing for an extension to 2021, thus aligning the date with the
launch of the pre-completed VAT return.
The report on the results achieved with regard to measures to combat tax
and tax evasion provides for the rationalisation of tax obligations, including
actions to combat tax evasion by means of a comprehensive plan based on the
simplification of rules and obligations and a new and more effective alliance
between taxpayers and the financial administration.
To this end, the agreement between the Minister for Economic Affairs and Finance
and the Director of the Revenue Agency defining the services of the Revenue Agency
for the period from 1 January to 31 December 2020 (Government Act: (194) recalls
the use of digital services and payments from remote channels; the extension of the
new PA payment form to other payment documents; promotion of the area of the
website reserved for intermediaries; maintaining a high standard of the level of digital
services, assessed in terms of citizens’ and intermediaries’ satisfaction with the full
range of online services.
Tax simplification proposals

Despite the numerous simplification measures that have taken place over the
years, Confindustria at a recent hearing at the Sixth Committee on Finance of
the Chamber of Deputies stated that according to the World Bank’s Doing
Business report, Italian enterprises need an average of 30 working days (238
hours) to meet their tax obligations correctly. The average value for OECD
countries is only 20 working days (160 hours), with best-performer countries
that manage to contain this indicator on just over 7 days (around 50 hours).
According to Confindustria, therefore, our tax system takes 10 days more than
the systems of our competitors. In order to reduce this tax complexity,
Confindustria and the Consiglio Nazionale dei Commercialisti presented a
comprehensive joint document (companies and accountants for a simpler tax
system) containing numerous proposals for tax simplification.
We would also like to recall the fact-finding survey on the process of
simplifying the tax system and the relationship between taxpayers and tax
authorities at the Senate’s Finance Committee.
52
TAX COLLECTION AND COMPLIANCE

Tax-roll collection is the procedure for the recovery of sums of money that
citizens owe to public bodies. They may relate both to tax and other debts (e.g.
fines). This type of procedure was originally envisaged solely for the collection
of income taxes and is governed by Presidential Decree No 602 of 29 September
1973.
Article 17 of Legislative Decree No 46 of 26 February 1999 specifies that the
enforced collection of State revenue, including other than income taxes, and
of other public bodies, including social security bodies, excluding economic
revenue, is carried out through the tax-roll. Fees, penalties and interests are
recorded in tax lists and are divided into ordinary and extraordinary tax lists
(extraordinary lists are drawn up when there is a serious danger to collection).
Article 29 of Decree-Law No 78 of 2010, in order to reduce the period for
enforced recovery of tax claims, provided that documents issued by the Tax
revenue agency - Agenzia delle Entrate from 1 October 2011 (relating to the
tax period in force on 31/12/2007 and subsequent years) are enforceable; once
the deadline for submitting a tax appeal has expired, they legitimate the
enforcement of tax collection ( so called ‘enforceable assessment’).
As soon as they are issued, the documents take the form of tax orders, both
an order to comply and an enforceable instrument (enabling enforcement to be
initiated), and once the tax assessment notice has been notified, the taxpayer
must (within the prescribed period) pay the sums due, without any need to wait
for the further payment order to be notified.
Tax collection results

In 2019, the overall annual collection result was EUR 19,9 billion (+ 3.4 %
compared to EUR 19,2 billion in 2018), of which EUR 5,1 billion comes from
enforced collection, EUR 12,6 billion from direct payments and EUR 2,13
billion from initiatives relating to the promotion of compliance.
In the area of taxes administered by the Revenue Agency, the normal recovery from
control activities amounts to EUR 16,8 billion, an increase of 4.1 % on the previous
year (EUR 16,2 billion).Of this, EUR 11,7 billion comes from direct payments (sums
paid as a result of documents issued by the Agency or agreements to defer litigation),
an increase of 4 % compared to 2018; EUR 2,1 billion is the result of compliance
activities, which has also been achieved thanks to more than 2,1 million alerts sent by
the Agency; on the other hand, the recovery resulting from the ordinary tax rolls for
which the Revenue Agency is responsible amounts to EUR 3 billion.
However, the Court of Auditors (Report on the General Accounts of the State
2019, Court of Auditors, 24 June 2020) points out that in 2019 there was a high
concentration of tax investigation carried out on smaller amounts: out of a
total of 508.101 investigations, including automated partial ones, 259.133
controls (51%) resulted in a higher ta x recovery between EUR 0 and EUR
1,549.
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Amounts to be collected (so-called warehouse)

In a recent hearing at the VI Committee on Finance of the Chamber of
Deputies, the Director of the Revenue Agency highlighted the steady growth
of debt rolls that are still to be collected. As of 30 June 2020, the value of the
remaining accounting burden, entrusted by the various creditor bodies to the
collection agent since 1 January 2000, amounted to approximately EUR 987
billion, of which EUR 405.3 billion, or approximately 41% of the total,
seems difficult to recover due to taxpayers conditions (EUR 152.7 billion are
owed by bankrupt persons, EUR 129.2 billion come from deceased persons and
businesses that have ceased, EUR 123.4 billion from non-taxable persons, on
the basis of data in the tax register); EUR 440.3 billion, or about 45% of the
total amount, relates to enforcements already carried out, but that have not
allowed full recovery of debt; a further EUR 50.2 billion (5% of the remaining
total) is suspended for self-protection measures issued by the creditor
institutions, on the basis of court rulings, or because the remaining amounts are
part of the shares covered by tax amnesties.
Measures to promote compliance

A number of the provisions of the 2019 Tax Decree and the 2020 Budget
Law intend to extend and make more timely the information available to the
Revenue Agency and the Tax Police (Guardia di Finanza) both for carrying out
controls and to strengthen preventive action and improve cooperation with
the taxpayer, by making greater use of persuasive instruments (communications
to promote compliance).
In particular, paragraphs 681 to 686 of the 2020 Budget Law provide that, for the
purposes of analysing the risk of evasion carried out using information contained in
the financial reports file held by the tax register, the Revenue Agency and the Guardia
di Finanza, technologies, processing and interconnections with other databases at
their disposal may be used to identify risk criteria useful for detecting positions to be
analysed, and to promote spontaneous compliance, subject to specific conditions for
the protection of personal data. Cases in which the exercise of specific rights in relation
to the protection of personal data is limited include actual prejudice to activities of
preventing and combating tax evasion.
The innovative point of view lies, in short, in the possibility for the Revenue
Agency to switch from deductive logic to inductive logic in control activity
by means of data mining (extraction of useful information from large amounts
of data using automatic or semi-automatic methods) carried out upstream of the
determination of risk criteria.
The Parliamentary Budget Office (Budget Policy Report 2020 (UPB)) notes that
the effectiveness of these rules, that should provide an addictional revenue of EUR
460 million, depends crucially on:
 the ability of the Revenue Agency to exploit its information potential, i.e. to have
the appropriate statistical and IT expertise and professional human resources;
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 the effective resolution of problems related to the processing of personal data.
With regard to the contrast between rules aimed at combating tax evasion and
citizens’ privacy, we would point out that in the European Union 16 out of 27 Member
States publish the names of tax evaders and those who owe state money (name and
shame). This practice concerns not only European countries, but also 23 US states and
other countries in the world, such as Australia, Mexico, Nigeria and Uganda.
Moreover, in France (where the publication of the name of the tax payer is lawful)
with the 2020 Loi des finances, the tax and customs authorities can collect and
process by automated means, i.e. by means of algorithms, the information
published by users in their social network profiles and use it in order to combat tax
and customs offences, in order to select the persons to be checked. The information
disseminated publicly by the users themselves, that is pooled and shared, will be
included in the tax scanner, thus excluding private conversations within the social
networks and, in general, everything that is accessible only through passwords.
The opinion adopted by the VI Finance Committee on the National Reform

Programme for 2020 points out the need to ensure an appropriate mechanism
for regular monitoring and reporting on measures set up to combat tax
evasion, in accordance with scientifically reliable rules and analysis tools, also
with an information perspective to Parliament, in order to evaluate any
legislative measures aimed at removing bureaucratic burdens and intrusive
controls that have no real effectiveness in preventing and punishing evasive and
fraudulent conducts.
Tax amnesties
With regard to tax amnesty measures (so-called tax peace), it should be noted
that in recent years various measures (including emergency measures) have
made it possible to define certain types of tax claims, as well as disputes pending
before the tax authorities, in a way that is facilitated; in essence, taxpayers were
asked to pay the sums due, also by instalments, in exchange of a substantial
discount on the sums claimed (generally without paying penalties and interests)
and with specific tax and/or penal positive effects.
In particular, both the 2019 Budget Law (Law No 145 of 2018) and Decree-
Law No 119 of 2018 introduced a number of overall measures to allow the
closure of slopes with tax authorities through a variety of instruments:
 facilitated settlement of tax rolls, documents in the tax inspection procedure
and pending disputes;
 automatic cancellation (write-off) of some low-value debts;
 regularisation of formal irregularities in previous tax periods;
 facilitated closure of debts of natural persons in economic difficulties;
 facilitated completion of traditional own resources of the European
Union (customs tariffs) and VAT collected on importation, entrusted to
the collection agent from 1 January 2000 to 31 December 2017.
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Subsequently, Decree Law No 34 of 2020 let taxpayers, who had lost the
benefits of the preferential allowances (for failing, insufficiently/ late paying of
instalments due in 2019), request further deferment of payments (pursuant to
Article 19 of Presidential Decree No 602/1973) for the sums still due.
We would point out that in 2019, with regard to increased revenue from the
preferential definition of tax debts and fiscal peace measures, the result was broadly
the same as in 2018 with regard to the recovery resulting from extraordinary measures
amounting to EUR 3 billion. Of these, EUR 2,1 billion (-19 % compared to 2018)
derive from the allowances relating to the Revenue Agency, and EUR 900 million
from the preferential definition contained in Articles 1, 2, 6 and 7 of Decree-Law No
119 of 2018 (so called tax roll scrapping).
The latest collection data can be found in the Ministry of finance bulletin on
January-August 2020. In summary, in the period January-August 2020, the
tax revenue established on the basis of jurisdiction amounted to EUR 271.566
million, representing a reduction of EUR 16.692 million compared to the same
period of the previous year (- 5.8 %).
The revenue from tax assessment and control activities amounted to EUR
5,564 million (-EUR 2,369 million, or -29.9 %), of which: EUR 2,544 million
(-EUR 1,627 million, -39.0 %) came from direct taxes and EUR 3,020 million
(- EUR 742 million, -19.7 %) from indirect taxes.
Tax collection by local authorities

Substantial innovations concerned (paragraphs 784 et seq. of the 2020
Budget Law) tax collection of local authorities, with particular reference to
the instruments for the exercise of powers of taxation.
In detail, these rules have provided, also for local authorities, the enforceable
tax assessment, along the lines of what is already provided for national tax
revenue, which makes it possible to issue a single declaratory document meeting
the requirements of the enforcement order. It operates, with effect from 1
January 2020, with regard to the sums pending on that date.
In addition, the 2020 Budget Law:

 has intervened on rules governing the direct payment of local authority revenue,
providing that all sums received by local authorities in any way accrue directly to
the local authority’s treasury;
 has systematically regulated the access to data by bodies and entities entrusted with
the collection service;
 has revised the procedure for appointing tax collection officials and personnel;
 in the absence of regulation by local bodies, it has specifically regulated the deferral
of payment of the sums due to them;
 has set up a special section in the register of collection agents, which must include
the persons carrying out the functions and support activities prior to the
establishment and collection of local revenue;
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 has provided that the transcripts, registrations and cancellations of attachments and
mortgages requested by the person who issued the order or enforcement act are free
of charge.
From a different point of view, in application of the principle of subsidiarity

and in order to strengthen the means of combating tax evasion, the legislator has
over time provided for greater involvement of local and regional authorities
in the process of assessment and collection. Tax Decree No 2019 (Decree Law
No 124 of 2019) extended to 2021 the incentive provided to municipalities that
participate in tax assessment activity, which is 100% of the tax collected,
following qualified reports sent by those authorities.
Measures taken to address the emergency

In the course of 2020, in order to deal with the Coronavirus emergency,
measures were taken to suspend payments and the power of assessment of
the tax authorities. These measures, initially introduced for the so-called red
area, were gradually extended to the entire national territory by Decree-Law No
18, 23 and 34 of 2020.
Finally, Decree-Law No 129 of 20 October 2020 laying down urgent provisions on
recovery of taxes (now merged in Decree Law No 125/2020) extended to 31
December 2020 the suspension of the notification of new payment orders, the
payment of previously sent notices and other acts of the collection agent. At the
same time, it also extends to 31 December the period valid for instalments of sums
due by taxpayers, also providing that instalment benefit is lost with the non-payment
of 10 instalments, instead of 5. It also postpones by 12 months the deadline for to
notify tax notices and rolls.
These measures, as stated in the NADEF 2020, have the effect that, unlike in
previous years, the estimated revenue expected for 2020 is significantly lower
than the one realised in the previous year by around EUR 6.8 billion.
Proposals for a reform on tax collection and compliance

In the Commission’s report on the identification of priorities for the use of
the Recovery Fund, comments made by the VI Finance Committee (meeting of
29 September 2020) were taken into account. In particular, a tax reform was
indicated, with particular reference to improving compliance and revising the
collection system, along the following lines of action:
(a) innovation in the structure of tax agencies, with a view to simplifying
procedures and reducing the time taken to pay refunds and contributions,
responding, in the delivery of services, to indicators linked to simplification,
processing times and user satisfaction, also with a view to fully implementing
a “single allowance” as a first step in a comprehensive reform of family
policies;
(b) innovation and digitalisation, strengthening services for citizens,
encouraging the use of electronic means of payment (smart POS) embedded
57
in electronic cash registers, aimed at simplifying traders’ obligations,

including for the purposes of bank traceability and speeding up tax refunds,
and to strengthen tools in support of control activities, by making better use
of the available information resources (network analysis, machine learning
and data inspection);
(c) facilitating the gradual transition, for natural persons and partnerships under
simplified accounting arrangements, and subsequently for all self-employed
workers, to a cash tax system that goes beyond the advance payments
mechanism of the IRPEF, simplifying and improving tax compliance and
encouraging investment in capital goods, the costs of which could be
deducted from income, thereby also encouraging growth in the country;
(d) identification - in order to ensure greater competitiveness of the production
system and encourage the capitalisation of firms through leverage - of
additional and more powerful forms of tax incentives for savings, albeit
limited in time, in line with what is already provided for in the individual
savings plans;
(e) reform of the collection system, providing for a stable annual financial
sustainment to ensure the budgetary balance of the Revenue Agency and by
gradually eliminating the backlog (including by cancelling bad debts), to
enable the collection agent to adjust the recovery action, in accordance with
the principles of effectiveness and efficiency;
(f) reform of the tax justice system, by means of a comprehensive reform of
the organisational arrangements of its jurisdiction, in order to resolve issues
relating to the independence, autonomy, specialisation and
professionalisation of the tax court, and to promote a renewed relationship of
sincere cooperation between the State and the taxpayer, as well as to
encourage tax mediation and means of deflating litigation, with a positive
impact on speed and certainty of collection.
The measures under consideration by Parliament

The Chamber’s Finance Committee is currently examining a number of
legislative proposals concerning the preferential definition of taxes,
assessment, collection and tax disputes, with a view to encouraging economic
recovery (A.C. 1575 Caretta, A.C. 2457 Martino, A.C. 2465 and 2555 Bitonci).
In a nutshell, draft laws 2457, 2465 and 2555 provide for automatic tax
definition mechanisms for specific categories of business income; in addition,
draft law 2465 permits the regularisation of assets held abroad; draft law 2555
reproduces and updates a number of so-called tax peace measures already
governed by Decree-Law No 119 of 2018. Lastly, draft law 1575 makes it
possible to define ‘simple notices’ in a speedy manner.
58
PERSONAL INCOME TAX IN MAIN EUROPEAN COUNTRIES

France
1. Income tax
Income tax is governed by article 1A et seq. of the General Tax Code (CGI).
The calculation of income tax is laid down in Article 197 of the CGI, as
amended by Article 2 of the Finance Law for 2020 (Loi No 2019-1479 du 28
décembre 2019 de finances pour 2020- LF 2020) and, most recently, by Décret
No 2020-897 du 22 juillet 2020 portant incorporation au code général des
impôts de divers textes modifiant et compleétant ceres dispositions de ce code.
The current rule provides for the following rates, based on the division of
taxpayers into four income bands:
Income (in EUR) Rate

0 to 10.064 0%
From a fraction of more than 14 %

10,064 but not more than 27,794
For the fraction exceeding 45 %
157,806
At the end of 2011, the government approved a number of measures to reduce

public deficit, including the introduction of an “exceptional contribution on
high incomes”. Article 223e of the CGI, introduced by Article 2 of the Finance
Law for 2012 (Loi n. 2011-1977 du 28 décembre 2011 de finances pour 2012
— LF 2012), fixed at 3 % the contribution rate to be applied to the reference tax
fraction of between EUR 250,000 and EUR 500,000 for single, widows,
separated or divorced persons and between EUR 500,000 and 1 million for
taxpayers subject to joint taxation (married couples or PACS couples).The
contribution rate is increased to 4% for income above EUR 500,000 for single,
widows, separated or divorced persons and EUR 1 million for taxpayers subject
to joint taxation (couples in matrimonial or PACS).That contribution, again in
accordance to Paragraph 2 of the LF 2012, applies until the tax year for which
the general government deficit is zero.
2. Family quotient
According to the ‘quotient familial’ governed by Articles 194 to 197 of the
CGI, the taxpayer is liable to income tax on all profits and incomes of the
members of the tax family (‘foyer fiscal’), consisting of the taxpayer, any spouse
59
(or partner in the case of a PACS), any minor children and any disabled
members who depend on the taxpayer.
In order to determine the family quotient, it is necessary to determine the
number of shares (or parts representing the family loads) allocated to each type
of taxpayer (e.g. single, married, divorced, widower), considering those who
depend on other taxpayers.
The family quotient is the result of the division of the total income of the
foyer fiscal by the number of shares to which it is entitled. The number of shares
has a considerable impact on determining the tax on the income to be paid.
Specifically, the tax is calculated on the basis of the family quotient, i.e. only
on a proportion of the total income, but the actual tax burden is the result of
‘individual taxes’ multiplied by the number of parts (or shares) in the tax
household.
Article 194 of the CGI provides a table showing the number of shares to be
taken into account for the division of the total income of the foyer fiscal:
Household status Number of

parties (or quotas)
Single, divorced or widowed without dependent children 1
Married without dependent children 2
Single or divorced with a dependent child 1.5
Married or widowed with a dependent child 2.5
Single or divorced with two dependent children 2
Married or widowed with two dependent children 3
Single or divorced with three dependent children 3
Married or widowed with three dependent children 4
Single or divorced with four dependent children 4
Married or widowed with four dependent children 5
Single or divorced with five dependent children 5
Married or widowed with five dependent children 6
Single or divorced with six dependent children 6
Example
A married couple has 3 children and a taxable income of EUR 100,000 per
year. The family quotient is equal to the taxable income divided by the number
of shares: EUR 100,000/4 = EUR 25,000.
Income tax is calculated by applying the progressive income tax over a full
proportion:
 the first income band (from EUR 0 to EUR 10,064) is exempt from tax, so
that EUR 14,936 (25,000-10,064) remains to be taxed;
60
 the second income bracket (from EUR 10,064 to EUR 27,794) is taxed at
14%, i.e. EUR 2,091.04 (14,936 x 14 %) per unit.
Thus, in order to calculate the amount of tax due, given that the ‘tax
household’ consists of 4 parts, the contribution obtained must be multiplied by
the number of parts:
 EUR 2,091.04 x 4 = EUR 8,364.16, rounded to the nearest EUR 8,364.
If children were not taken into account, income tax would be calculated on
the basis of 2 allowances and its theoretical amount would rise to EUR 18,288.
The couple therefore benefits from a tax advantage of EUR 9,924,
excluding the application of the limit on increases in the family quota and the
possible set-off of debts and tax advantages available to the couple.
a. Limitation of the effects of the family quotient

Increases in the family quotient (half shares, quarters of shares in the case of
alternating residences in addition to 1 or 2 shares, depending on the taxpayer’s
personal circumstances) may be subject to a limit in order to limit the tax
advantage provided for by the family quotient system.
The tax reduction limit linked to the family allowance is laid down in Article
197 of the CGI:
 EUR 1,567 for each additional half related to dependant members, in the
general case;
 EUR 936 for half of the additional fee, for those who have raised one child
alone for at least 5 years.
b. Specific limits
Specific limits shall apply to taxpayers who are in one of the following
situations:
 single parent keeping the children alone: EUR 3,697 for the full share granted
to the first dependent child (single, divorced or separated taxpayers raising
one or more children alone);
 disabled or disabled person due to war: an additional tax reduction of EUR
1,562 shall be applied when the limit of EUR 1,567 is reached for half of
the additional share granted. The final benefit is therefore limited to EUR
3,129;
 widower with dependent children: an additional tax reduction of EUR 1,745
is granted once the limit for the first two additional half-allowances plus one
quota is reached. This limits the tax advantage to EUR 4,879.
See also the ‘Family quotient’ factsheet at:
Https://www.economie.gouv.fr/particuliers/quotient-familial.
61
Germany
The personal income tax (Einkommensteuer), which is the main source of
revenue in Germany, is governed by the Einkommensteuergesetz — EStG
(Income Tax Act) in the consolidated version of 8 October 2009, as last
amended by Law of 12 August 2020.
The tax is progressive in nature and applies to the following types of income:
 income from agricultural and forestry activities (§ § 13-14a EStG);
 income from commercial or industrial activities (§ § 15-17 EStG);
 income from self-employment (§ 18 EStG);
 compensation of employees (§ § 19 EStG);
 property income (§ 20 EStG);
 rental and leasing income (§ 21 EStG);
 other income (§ § 22-23 EStG).
The tax base excludes maintenance due by spouses, unemployment benefits,

study grants, and income below- in 2020 - EUR 9,408 in case of single (or even
separated or divorced) persons or EUR 18,816 for married couples, including
civil partnerships. Above the exempt threshold (Grundfreibetrag), the rates vary
continuously and gradually between 14% (Edecegssteuersatz) and 42%.The
highest rate (Spitzensteuersatz) of 45% applies only to income above EUR
270,500.
The following table summarises the income tax rates for 2020 under § 32a
EStG:
Income (in EUR) Rate

0 to 9,408 0%
9,409 to 57,051 14%
(initial variable rate depending
on income)
57,052 to 270,500 42%
270,501 and more 45%
On this tax an additional social solidarity tax (Solidaritätszuschlag) of 5.5 %

(Paragraph 4 Solidaritätszuschlaggesetz) is applied. The solidarity surcharge
was introduced by Law of 24 June 1991 and, with the subsequent wording of
1995, was justified by the additional costs of German reunification, which
included debts and pension obligations of the East German Government (DDR),
as well as the costs of upgrading infrastructure and environmental rehabilitation
in the new Länder.
Under Paragraph 106 (3) and (5) of the Basic Law (Grundgesetz), income tax
revenue accrues to the Federation, the Länder and the municipalities. The latter
receive 15 % of income tax revenue, while the remaining 85% is divided into
62
half (42.5% each) between the federal government and the governments of the
individual Länder.
The tax office (Finanzbezirk) of the district in which the taxpayer is
domiciled is responsible for the assessment and collection of personal income
tax. Each taxpayer may also calculate its taxes on the website of the Federal
Ministry of Finance (https://www.bmf-steuerrechner.de/ekst/eingabeformekst.xhtml),
depending on the civil status and on the basis of the relevant tax year (from 1958
onwards).
United Kingdom
1. Income tax
Income tax, governed by the Income Tax Act 2007, applies to the total income
of individuals resident in the United Kingdom, wherever the income has been
generated (so-called world-wide principle). This tax applies to different types
of income such as — to name only the main ones — compensation of employees
and self-employment, income from pensions, rental income, dividends, capital
gains and income received by trusts. On the other hand, certain types of income
are eligible for exemption: income from child support; interest income on tax
refunds; maternity allowance; pensions paid to war widows; disability pensions.
For the purposes of determining the Income tax, the tax period in the United
Kingdom runs from 6 April of each year to 5 April of the following year.
The tax is subject to progressive rates, by income bracket, up to a maximum
of 45 %. For each category of income, the domestic legislation (with some
variations for Scotland and Wales) provides for specific rules for determining
the total income, starting from the gross compensation received and applying
personal allowances laid down by law. Taxation is structured on the basis of
four income thresholds (bands), consisting of a band corresponding to a
progressive threshold for the deduction of personal income tax from the level of
total income, provided that this does not exceed £100,000 (personal
allowances); two tax bands, one basic and one high (basic and higher rates,
applied to income not exceeding £50,000 and £150,000 respectively); the latest
range of income is above GBP 150,000 threshold (additional rates).
The following table shows the personal income tax rates for the tax year
2020-2021:
Categories of income Income brackets Tax rate

Personal allowance up to £12,500 0%
Basic rate 12,501 to 50,000 20%
Higher rate 50,001 to 150,000 40%
Additional instalments over 150,000 45%
Source:GOV.UK, Income Tax Rates and Personal Allowances, 2020-2021
63
Deductions are also provided for specific types of income and certain
categories of taxpayers. For example, a deduction of GBP 1,000 is provided
for trading allowance and, under certain conditions, for rental income. Personal
status, on the other hand, has an impact on the deductible income, since married
couples or couples in civil partnership may benefit, within certain income
thresholds, from special deductions as married couple allowances
(Source:GOV.UK., Married couples’ allowance).
Full tax exemption is provided for public subsidies granted to disadvantaged
groups. On the other hand, with effect from 2016, the adjustment of deductions
in proportion to the age of the taxpayer has ceased to apply.
The existing deduction mechanism for personal tax liability also applies to
income generated by forms of savings and financial investments.
The personal allowance may be used by the taxpayer for the deduction of
other income consisting of interest earned on savings (in the form of life
insurance, accumulation plans, participations in trusts or investment funds).
Income of this kind is subject to a maximum deductible amount of GBP 5,000
per annum, degressive in proportion to other income received up to the
allowance for annual income of £17,500 or more.
Personal income from equity dividends, previously (until 2016) taxed at
rates commensurate with the taxpayer’s income bracket (from 7.5% for non-
taxable or basic income, up to 42.5% for the bracket subject to the additional
rate), currently benefits from a deductible threshold of up to GBP 2,000
(dividend allowance). Subsequently, income exceeding that threshold is taxed
at 7.5% if the taxpayer is subject to basic rates, 32.5% for the higher-rate income
band and 38.1 % for income subject to additional instalments.
The collection of taxes takes place differently, depending on whether the
declarant is an employee (or pensioner) or a self-employed person.
In the first case, the so-called PAYE (Pay As You Earn) system applies,
under which the employee receives his or her remuneration less deductions on
account levied by the employer, while the final credit or debit balance is
determined annually when submitting the tax return. On the other hand, for self-
employed persons or for complex tax transactions, the procedure for self-
declaration (self-assessment) is laid down, which involves compiling and
sending their tax return (also in electronic form) to the tax authorities (HM
Revenue & Customs).
Income from employment and self-employment is also subject to national
insurance contributions, which are borne by employees and employers in
different proportions and in relation to income brackets.
2. Taxation of financial gains
Income from capital gains (i.e. from financial assets earned by the taxpayer
by virtue of the difference in value between the purchase price and the price of
64
the subsequent disposal of a particular asset) is taxed if it exceeds the annual

exemption threshold currently of GBP 12,300 (but of GBP 6,530 if the income
derives from shares in a trust).
The capital gain tax, in particular, is due to the capital gain generated by the
disposal of;(a) movable property, if the value of which exceeds GBP 6,000
(excluding motor vehicles); (b) real estate (except first dwelling provided that a
certain threshold of total income is not exceeded); (c) shares; (d) capital goods
(including industrial property rights and goodwill).
The rate shall be determined in relation to the goods supplied and the
taxpayer’s income bracket. It is therefore 20% for taxpayers classified in the
higher income classes (higher and additional rates), and 28% for the same
category of taxpayer when the capital gain is generated by the transfer of a
residential property. On the other hand, a taxpayer subject to the basic rate and
who has earned a capital gain which does not exceed the relevant bracket is
subject to a tax of 10% and 18% respectively in the case of residential property.
On the other hand, capital gain tax is levied at the rate of 20 %, and 28 % in the
case of residential property, on amounts exceeding the maximum limit subject
to a basic rate (Source:GOV.UK, Capital Gains Tax).
In a limited number of cases, the tax applicable is not calculated on the capital
gain, but on the market value of the asset transferred (transfers between spouses,
donations to foundations, transfer of assets acquired before 1982).
Spain
The personal income tax (Impuesto sobre la Renta de las Personas Físicas—
IRPF) is governed by Law 35/2006 (Ley 35/2006, de 28 de noviembre, of the
Impuesto sobre la Renta de las Personas Físicas y de Modificación parcial de
las leyes de los Impuestos sobre Sociedades, sobre la Regta dela Regta de las
Residentes y sobrede l’alteración parcial de las leyes de los Impuestos sobre
Sociedades, Sobre la Regta de no Residentes y sobre de la Imprimonio parcial
de las leyes de los Impuestos sobre Sociedades, Sobre la Regta de Regta de
Residentes y sobre, 439/2007https://www.boe.es/buscar/act.php?id=BOE-A-
2007-6820, and the Royal Decree 439/2007).
The IRPF is a personal and direct levy based on the principles of equality,
generality and progressivity. It affects various categories of income: labour,
capital, income from economic activities, gains in assets, other statutory income
allocations.
Since 1 January 2016 the rates vary from 19% to 45%, but the percentage
of the rate may change depending on the Autonomous Community of residence.
The total rate is the sum of the rate set at State level and that of the
Autonomous Community (Tramos IRPF 2020).
65
Income (in EUR) State rate Autonomous Total rate

rate
0 to 12,450 9.50% 9.50% 19%
12,450,01 to 20,200 12% 12% 24%
20,200.01 to 35,200 15% 15% 30%
35,200.01 to 60,000 18.5% 18.5% 37%
Over 60,000,00 22.5% 22.5% 45%
The table refers to a general autonomous type of tax which is applicable only
to non-residents in Spain. In any other case, it is necessary to consult the specific
tables of the Autonomous Community in which the taxpayer resides.
It should also be noted that some Autonomous Communities (Navarra,
Basque Country) have full competence over tax transfers, so that they can
determine the total share of the IRPF, for example in Navarra the rates are
different, with a maximum rate of 52%.
See Jose Trecet, “Tablas de IRPF por comunidades autónomas:Cuánto
pagarás en la declaración de la renta según donde vivas’, Business Insider, 26
April 2020.
In October 2020, the Spanish Government proposed to add to the existing
bands an additional rate of 47% set for income above EUR 300,000.The reform,
contained in the draft budget law (Proyecto de Ley de Presupuestos Generales
del Estado para el año 2021, submitted to the Congress of Deputies on 28
October 2020), would still enter into force in 2021.
See also “El Gobierno aprueba los Presupuestos de 2021, con subidas en el
IRPF, Sociedades y Patrimonio”, Europapress, 27 October 2020.
APPENDIX — GRAPHS AND TABLES
Composition of the tax revenue of the main Italian tax categories, compared
with those of the EU-28 and EU-27 in 2018. The following graphs and tables
are taken from European Commission report Taxation Trends – 2020 edition.
66
67
Quantitative breakdown of tax revenue in Italy
68
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3 febbraio 2021

In the current emergency context, and considering the resources available

The same law allowed persons engaged in business activities, arts or

It should be pointed out that a number of extraordinary fiscal measures have

IRPEF AND TAXATION ON LABOUR

The progressive nature of the tax is also ensured by the existence of a

Reducing the tax wedge

SourceNational Chamber of Accountants

The system of deductions and deductions (tax expense or tax expense)

 household loads (17.7 %)

In more detail, household care deductions in 2018 amount to around EUR

Of particular interest is an analysis of the data on deductible charges at

It is particularly important in this context to regulate the facilities for

According to the latest Annual Report on Tax Expenditure (annexed to the

In 2021, most of the tax expenditures have an impact on the IRPEF

According to an analysis of the data from the IRPEF declarations, in 2018

In comparison with 2017, deductible expenses show an increase of 0.5 %,

In 2018, the deductible charges also include liberal payments to non-profit

 around 1.9 million professionals registered in 27 orders and colleges generate

2. Corporate income tax - IRES

3. Flat-rate income tax on letting out a house or flat

4. Taxation of financial gains

5. The optional regime for new residents

6. Flat tax for pensioners

Tax reform in economic planning documents

In the context of Mission 1, Digitalisation of the public administration is

The proposed amendments to the IRPEF: the measures under

Other proposals to amend the IRPEF

penalised by a number of substitute schemes for other forms of income.

The Court of Auditors, at the hearing in the context of the fact-finding

More generally, the following are also mentioned:

Property taxation in the context of local finance

The IMU and the single fee

The 2020 Budget Law:

With reference to the IMU, in addition to the transitional measures linked to

Renovation of buildings and superbonuses

The waste tax

The tax rate is determined in accordance with Presidential Decree No 158

transport of sorted fractions, treatment and recovery, and incentives to

The tariff components shall be determined in accordance with the tariff

Indirect taxes on transfers

on the so-called municipal federalism) by amending, as from 1 January 2014,

Emergency measures to combat the spread of COVID-19

transferred to the lessor instead of payment of the corresponding part of the

Issues for consideration: the reform of the cadastre

labour, in particular by reducing tax expenditures and reforming the

IRES AND CORPORATE TAXATION

Direct taxation on the enterprises: IRES

Permanent establishment and taxable amount

agreements to standardise tax bases and, therefore, to limit tax competition

In this connection, we would point out that, in its judgment No 10 of 2015,

The so-called web tax

 the essential requirements for compliance;

In this context, Decree-Law No 50 of 2017 introduced, for non-resident

By Legislative Decree No 112 of 3 July 2017 (amended by Legislative

Superdepreciation, overdepreciation and tax credits

In particular, the aim was pursued by the so-called superdepreciation

Innovative start-ups and SMEs

Innovative start-ups, governed by Decree-Law No 179 of 2012, are newly

simplifications, advantages and incentives reserved for innovative start-ups.