A Comparative Guide to French and Italian Taxation for Workers and for Business Professionals

Taxation Systems

In France, the tax system is primarily based on residency, with residents subject to taxation on their worldwide income. The French tax system is progressive, featuring tax rates ranging from 0% to 45% for different income levels.

Similarly, Italy operates under a residency-based taxation system, with residents taxed on their worldwide income. Italy’s tax system is also progressive, with tax rates ranging from 23% to 43% for varying income brackets. Deductions and credits are available for certain expenses, such as healthcare and education.

Social Contributions

In France, social security contributions are mandatory for both employees and employers, covering various benefits such as healthcare, pensions, and unemployment benefits. Contribution rates vary based on income level and the type of employment.

Likewise, in Italy, social contributions are compulsory for both employees and employers, encompassing benefits such as healthcare, unemployment, and pensions. Contribution rates fluctuate depending on income level and employment type.

Business Taxes

In France, businesses are subject to corporate income tax at a standard rate of 28%. Additionally, there may be local business taxes applicable to businesses.

Similarly, in Italy, businesses are subject to corporate income tax at a standard rate of 24%. Regional and municipal taxes may also be imposed on businesses.

Value Added Tax (VAT)

 In France, VAT is a consumption tax levied on the value added to goods and services at each stage of production or distribution. The standard VAT rate is 20%, with reduced rates for certain goods and services.

Likewise, in Italy, VAT is a consumption tax imposed on the value added to goods and services at each stage of production or distribution. The standard VAT rate is 22%, with reduced rates available for certain goods and services.

Tax Incentives in Italy

Italy offers attractive tax incentives to foreigners considering relocating to the country for work-related purposes. These incentives include tax relief measures for both employees and freelancers, with different regulations for those who moved before December 31, 2023, and after January 1, 2024.

Under the new taxation law effective from 2024, the tax relief percentage has been reduced from 70% to 50% of the taxable income. For individuals who relocated before the end of 2023, a 70% reduction in taxable income is still applicable. Additionally, there’s an opportunity for further tax relief if the worker opts to transfer their tax residence to certain regions, where a 90% exemption can be obtained instead of the standard 70%.

Another noteworthy incentive is the “Regime Forfettario” or flat-rate tax regime, allowing eligible individuals to pay a flat tax of 15% on their gross income for specific professional activities. This regime is particularly advantageous for self-employed professionals and freelancers.

You might also be interested at:

• Taxes in Italy
• Italy income tax calculator
• Italian tax consultant
• Italy tax incentives for foreigners

Relocation Considerations

Professionals contemplating a move from France to Italy should carefully evaluate the tax implications of their relocation, including potential tax treaties between the two countries to mitigate double taxation.

Italy provides special tax regimes, such as the “Regime Forfettario,” aimed at simplifying taxation for certain professionals. However, eligibility criteria and benefits should be thoroughly evaluated.

In conclusion, while both France and Italy possess similarities in their tax systems, they also exhibit distinct characteristics and complexities. Business professionals contemplating a move from France to Italy should seek professional tax advice to navigate these intricacies effectively and optimize their tax planning strategies.