Investment in Italy

Investment in Italy6.7.3Specifics of non-resident taxationNon-resident individuals are subject to individual income tax on Italian-source income. Asa general rule, income tax is calculated in the same way as for resident individuals, on theaggregate income derived from Italy.Non-residents must file an annual tax return for income from Italian sources, other thanincome subject to a final withholding tax or to substitute tax. The procedure is the same asfor resident individuals.Income from employment (including pensions) is subject to taxation in Italy if the work isperformed in Italy. Pensions, similar allowances and termination payments are also subjectto taxation in Italy if paid by the state, residents of Italy or Italian permanent establishmentsof non-residents.Investment income and professional income are subject to a final withholding tax or to asubstitute tax. Where withholding or substitute tax is not applied, the non-resident is, whenfiling a tax return, subject to taxation at the ordinary income tax rates.Income from a business carried on in Italy is only taxable if it is earned through a permanentestablishment. Income from a profession practised in Italy by a non-resident is subject to a30 percent final withholding tax if the payer is a withholding agent. Income from a professionincludes directors’ fees paid by a resident company.Non-residents are also subject to IRAP on the net value of production derived from abusiness or profession run/practised in Italy through a permanent establishment or a fixedbase for at least three months.Dividends are subject to a final withholding tax of 27 percent (12.5 percent in the case ofsaving shares, e.g. shares without voting rights) unless a lower rate applies under a taxtreaty. If tax was also paid on the dividends in the recipient’s country of residence, a refundequal to four-ninths of the Italian withholding tax may be claimed.In general, interest payments to non-resident individuals are subject to a final withholdingtax at the rates applicable to interest paid to residents. However, a 27 percent rate applies toloan interest paid to individuals resident in a country or territory outside the European Unionwith a preferential tax regime.In addition, interest paid to non-residents on deposit accounts with banks and post officesis exempt. Interest paid to non-residents on bonds issued by the state, banks or listedcompanies, and with a maturity of at least 18 months, is exempt if the beneficial owner isresident in a country with which Italy has an adequate exchange of information. In order tobenefit from this exemption, the non-resident must deposit the bonds with a resident bankor other approved intermediary.Royalties paid to non-residents are subject to a 30 percent withholding tax, which isgenerally applied to 75 percent of the gross payment, resulting in an effective rate of 22.5percent. However, if the recipient is not the author or the inventor and the underlying rightwas acquired without consideration the tax is applied to the full amount of the royalties.66© 2012 KPMG S.p.A., KPMG Advisory S.p.A., KPMG Fides Servizi di Amministrazione S.p.A., KPMG Audit S.p.A., Italian limited liability share capital companies, and Studio Associato Consulenza legale e tributaria, anItalian professional partnership, are member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.