A Comparative Guide to Italian and Swedish 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, featuring tax rates ranging from 23% to 43%, contingent on income levels and other factors.

Conversely, Sweden utilizes a similar residence-based taxation system, with residents subject to taxation on their global income. The Swedish tax system is also progressive, with tax rates varying from approximately 32% to 57%, depending on income levels and other factors.

Social Contributions

In Italy, social security contributions are obligatory for both employees and employers, encompassing benefits such as pensions, healthcare, and unemployment insurance. Contribution rates fluctuate based on income and other factors.

Similarly, in Sweden, social security contributions are mandatory for both employees and employers, offering 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, contingent on the location and nature of the business.

In Sweden, businesses are also subject to corporate income tax, with rates ranging from approximately 20.6% to 22%. Additional taxes, such as the employer’s fee, may apply depending on various factors.

Value Added Tax (VAT)

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

In Sweden, VAT is levied at a standard rate of 25%, with reduced rates available for certain essentials. Similarly to Italy, VAT rates can vary based on the type of product or service

Tax Incentives in Italy

Italy offers enticing tax incentives to foreigners considering relocating to the country for work-related purposes. These incentives comprise 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 Sweden to Italy should thoroughly assess 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 meticulously evaluated.

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