A Comparative Guide to Italian and Romanian Taxation for Business Professionals

Taxation Systems

In Italy, the tax system operates on a residence-based model, with residents taxed on their worldwide income, while non-residents are taxed only on income earned in Italy. The Italian tax system is progressive, with tax rates ranging from 23% to 43%, depending on income levels and other factors.

Romania, on the other hand, employs a similar residence-based taxation system, with residents subject to taxation on their global income. The Romanian tax system is also progressive, with tax rates ranging from approximately 10% to 50%, depending on income levels and other factors.

Social Contributions

In Italy, social security contributions are mandatory for both employees and employers, covering benefits such as pensions, healthcare, and unemployment insurance. Contribution rates vary depending on income and other factors.

Similarly, in Romania, social security contributions are compulsory for both employees and employers, providing benefits such as pensions, healthcare, and unemployment benefits. Contribution rates are determined based on income level and employment type.

Business Taxes

In Italy, businesses are subject to corporate income tax, levied at a standard rate of 24%. Additionally, regional and municipal taxes may apply depending on the location and nature of the business.

In Romania, businesses are subject to corporate income tax, with rates ranging from 16% to 25%, depending on the type of business and other factors.

Value Added Tax (VAT)

Italy levies VAT at a standard rate of 22% on most goods and services, with reduced rates available for specific items. VAT rates can vary based on the type of product or service.

In Romania, VAT is levied at a standard rate of 19%, with reduced rates available for certain essentials. Like in Italy, VAT rates can vary based on the type of product or service.

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 chooses to transfer their tax residence to certain regions, where a 90% exemption can be obtained instead of the standard 70%.

Another notable 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 Romania 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 assessed.

In conclusion, while both Italy and Romania feature unique tax systems, understanding their differences is crucial for individuals considering relocation. Business professionals contemplating a move from Romania to Italy should seek professional tax advice to navigate these disparities effectively and optimize their tax planning strategies.