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

Taxation Systems

In Ireland, the tax system is based on residency and domicile, meaning that residents are taxed on their worldwide income, while non-residents are taxed only on income earned in Ireland. The Irish tax system is progressive, with tax rates ranging from 20% to 40% for different income brackets.

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

Social Contributions

In Ireland, social security contributions are mandatory for employees and employers and cover benefits such as state pensions, healthcare, and unemployment benefits. The contribution rates vary depending on the type of employment and income level.

Likewise, in Italy, social contributions are mandatory for both employees and employers and cover benefits such as healthcare, unemployment, and pensions. The contribution rates also vary depending on the type of employment and income level.

Business Taxes

In Ireland, businesses are subject to corporate income tax at a standard rate of 12.5%. Additionally, there may be other taxes such as local property tax and VAT.

Similarly, in Italy, businesses are subject to corporate income tax at a standard rate of 24%. Additionally, there may be regional and municipal taxes applicable to businesses.

Value Added Tax (VAT):

In Ireland, VAT is a consumption tax levied on the value added to goods and services at each stage of production or distribution. The standard rate is 23%, with reduced rates for certain goods and services.

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

Tax Incentives in Italy

Italy offers attractive tax incentives to foreigners relocating to the country for work-related reasons. These 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, which allows eligible individuals to pay a flat tax of 15% on their gross income for certain professional activities. This regime is particularly beneficial 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 considering relocating from Ireland to Italy should evaluate the tax implications of their move, including potential tax treaties between the two countries to avoid double taxation.

Italy offers special tax regimes, such as the “Regime Forfettario,” designed to simplify taxation for certain professionals, including freelancers and small businesses. However, eligibility criteria and benefits should be carefully assessed.

In conclusion, while both Ireland and Italy share similarities in their tax systems, they also have distinct features and complexities. Business professionals contemplating a move from Ireland to Italy should seek professional tax advice to navigate the intricacies and optimize their tax planning strategies effectively.