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POLITICS

Here’s what the Italian budget means for foreign residents

With Italy's finalised 2020 budget set to be approved, we look at what it will mean for those of us living in the country.

Published: 21 November 2019 12:08 CET
Here's what the Italian budget means for foreign residents
Will the new budget mean you'll have more of these in your pocket? Photo: AFP

Italy's recently-installed coalition government hopes that its fiscal plan for next year will allow it to avoid a VAT hike, without sending national debt skyrocketing.

Here, The Local takes a look at elements of the budget which could be particularly important for foreign residents.

This article was written for Members of The Local. Read more about Membership here.

Italy's Five Star Movement-Democratic Party government said last month that the key aims of the budget were tackling tax evasion while raising enough revenue to cancel a scheduled hike in VAT, twhile its wider goal is to rein in the country's massive (and growing) deficit and jump-start its sluggish economy.

READ ALSO: Europe warns Italy over spending, but gives green light to the budget

 

Italian Prime Minister Giuseppe Conte in Brussels on Thursday October 17. Photo: AFP

“The bill does not stop at eliminating the [increased] VAT clause for 2020, but contains important provisions for work, the environment, investments, families and disabilities,” the government said in a statement.

No VAT increase

Cancelling a planned hike in VAT next year will leave Italy with a 110 billion euro tax gap, but the government believes it will be able to make up this loss through other measures – particularly by clamping down on tax avoidance.

Clampdown on tax-dodging

Government ministers have said a clampdown on major tax-dodging by big companies and CEOs is the focal point of the tax plans.

By going after tax evaders, they hope to bring between €800 million and €1 billion euros back into public coffers.

The government is discussing measures including longer prison terms for tax evaders as well as enforcing a three percent tax on web giants like Facebook and Google.

Italy has a tax evasion rate of about 30 percent, one of the highest in Europe, although companies and CEOs rank among the biggest tax dodgers, with an evasion rate almost 19 times higher than that of employees.

Five Star Movement (M5S) leader Luigi Di Maio stressed on Thursday that the government will be beefing up jail terms for big tax evaders, but will not be targeting small business owners.

Encouraging card payments

In a related effort to regularise Italy's enormous shadow economy and its culture of cash payments, the budget includes measures intended to incentive card payments and electronic transactions, including charges for large cash withdrawals.

READ ALSO: Italy's black market is now worth more than €200 billion

“We want to introduce incentives to push the acquisition of card readers by shop owners and traders, and talk with operators about reducing commission,” Economy Minister Roberto Gualtieri said.told the Sole 24 ore newspaper on Thursday.

The measures will cut the maximum cash payment that can be made in Italy from the current 3,000 euros down to 1,000 euros by 2022.

The government has said it would also drastically reduce the expense of electronic transactions.

Photo: AFP

Taxes on plastic, company cars and sugar

After an outcry from businesses, a planned tax on plastic has been softened and will now be limited to some types of packaging – mainly that used for food and drinks. The government is reportedly revising its plans to increase taxes on the use of company cars.

Gualtieri also said the budget bill would include a sugar tax, but that it would be “restricted to drinks and not applied to snacks” as had previously been discussed by ministers. Taxing sugary soft drinks is expected to bring in 234 million euros to state coffers next year.

Gualtieri added: “there are no interventions on petrol and there won't be a retroactive intervention on tax breaks, which has been talked about.”

Flat tax for entrepreneurs

The government has confirmed it will go ahead with the introduction of a flat 15 percent tax rate for small business owners and self-empoyed workers earning less than €65,000 annually.

Tax cuts for low-to-middle earners

A proposal to reduce the “tax wedge” for Italian employees (the difference between before-tax and after-tax wages) has also been included, at an expected cost of some three billion euros.

Deputy Economy Minister Antonio Misiani announced that cuts to the tax wedge would give each worker around 500 euros more income per year net, on average.

Extended baby onus
Italy's “baby bonus”, which has so far been reserved for families with a total income below 25,000. will become available to everyone from 2020. It's paid in monthly installments, with payments varying across the following income brackets:

  • Up to €7,000: bonus of €1,920 per year (as before)
  • Between €7,000 and €40,000: bonus of €1,440 (reduced)
  • Over €40,000: bonus of €960 (new)

The rate applies to children born or adopted in 2020, and increases by 20 percent if a second child is born or adopted in the same year.

This is not the same as the existing bonus mamma, or “mothers' bonus”, which the government confirmed will continue next year. This is a sum of 800 euros paid to parents on the birth of each new baby.

READ ALSO: How ageing Italy plans to bump up its birth rate in 2020

Childcare payments

From 2020, payments of between €1,500 – €3,000 will also be made available per family, depending on income, to help with the cost of nursery school or babysitting.

Increased paternity leave

Mandatory paternity leave is increasing from five to seven days. The government said it aims to bring it up to ten days within the next few years, but has so far struggled to fund the scheme.

Every extra day of leave costs €10 million, meaning they'll have to allocate a total of €70 million to the measure in 2020.

Pension reform

Despite months of rumours and squabbling within the government, there will be no change to the recently-introduced “Quota 100” pension system. Italian media reports however that the scheme will not be renewed once the current three-year trial period expires in 2021.

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For members

TAXES

How much should you pay your Italian accountant to do your taxes?

Italian taxes are notoriously difficult to navigate and even trickier to deal with yourself, meaning you may want to turn to a 'commercialista' for help. But how much should you pay for their services?

Published: 18 September 2024 12:42 CEST
How much should you pay your Italian accountant to do your taxes?

If you ask someone in Italy who a commercialista is, you may get several different answers: accountant, consultant, financial advisor or administrator.

In fact, they can be all of these at once as, along with the patronati, they’re residents’ first port of call when dealing with the complex bureaucratic processes surrounding almost anything official in the country.

Commercialisti are also the people who can file and submit your yearly tax returns for you. 

If you live in Italy or generate income in the country, you’ll likely need to file your taxes once a year during the so-called dichiarazione dei redditi (‘income declaration’). 

Unlike in other European countries, where it’s fairly easy for taxpayers to file tax returns independently, doing this can be very tricky in Italy, not least because of the complicated language being used. 

And mistakes can cost you dearly as the Italian taxman could charge you hundreds or even thousands of euros if you submit late, forget some details or enter the wrong information.

That’s why many around Italy choose to hire a commercialista. But how much should you pay for their services?

Overview

Commercialista fees can vary greatly depending on the type of services you need and the complexity of your financial situation.

If you’re an employee with a single source of income and are seeking help with filing taxes, or claiming tax deductions or incentives, fees will be on the low end of the spectrum. 

But if you have multiple sources of income, or have foreign income or assets and are subject to taxation in multiple countries, the commercialista will need expertise in international tax law, which may significantly raise costs.

READ ALSO: The Italian tax calendar for 2024: Which taxes are due when?

If you are a freelancer or the owner of a small business, you may need monthly consulting and regular services such as bookkeeping and VAT reporting. In this case, services may be bundled in an annual package. 

Finally, if you own a large business or corporation, you may need to hire more than one commercialista to deal with payroll management, VAT declarations, and corporate tax filings. 

Please note that the cost of a commercialista can also vary by region as prices tend to be higher in large metropolitan areas such as Milan or Rome, while you may find particularly advantageous rates in small towns and less populated areas around the country. 

Annual tax returns

According to financial advice platform Fiscozen, income tax filing services generally start at €120 but can rise to over €700 depending on your personal situation.

Generally speaking, tax filing fees are higher if you’re a VAT number holder (or partita Iva) as this entails more work on the part of the commercialista (think of all the invoices issued and claimable VAT detractions) compared to an employed individual or pensioner.

Paying taxes

Most types of taxes in Italy (from income to property taxes to waste collection charges) must be paid by completing and submitting form F24 (modello F24) with Italy’s tax office.  

A commercialista can do this for you, with services costing between €15 and €30 per form, according to online investment advisor Moneyfarm. 

Registering a new business

Freelancers and business owners in Italy are required to register with Italy’s tax office by getting a VAT number (known as partita Iva). 

If you’re starting out as a freelancer, hiring a commercialista to get your personal VAT number and set up an electronic invoicing system on your behalf will cost you €150 on average, according to Fiscozen.

Fees will be higher if you’re starting a new business as this generally involves more paperwork and compliance with a number of tax requirements. 

In this case, a commercialista’s services may cost anything between €300 and €500, though you’ll also have to factor in the payment of a number of taxes (including up to €200 for the Certified Start of Business Report, or SCIA). 

‘Year-long administration’

As mentioned earlier, if you are a freelancer or a business owner, you may need monthly consulting services, as well as regular bookkeeping, VAT reporting and – if you have employees – payroll management. 

In this case, commercialista services may be bundled in a gestione annuale (‘year-long administration’) package. 

According to Fiscozen, a 12-month package for freelancers operating under Italy’s flat tax scheme costs €60 a month on average (€720 a year). 

But costs can be much higher for freelancers working under the so-called regime ordinario (‘ordinary regime’) and business owners. 

In this case, you may pay anything from €2,000 to €4,000 a year depending on: number of clients, business size and number of employees (if applicable).

How can I find a commercialista?

All commercialisti in Italy must be registered with national association CNCDEC (Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili). 

The association’s website gives you the option to look for registered professionals in your area (see an example via the screen grab below).

A screen grab of the search tool on Italy's national 'commercialisti' association's website

A screen grab of the search tool on Italy’s national ‘commercialisti’ association’s website. Source: Consiglio Nazionale dei Commercialisti

As with most things in Italy however, word of mouth is key, so make sure to ask friends and family for recommendations if you can.

Alternatively, online forums and message boards for foreign nationals in Italy often share names of professionals that are particularly experienced in international tax law.

Finally, you can also find a list of commercialisti working in your area in Italy’s pagine gialle (Yellow Pages). 

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