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

Taxation Systems

In Spain, the tax system is based on residency, meaning that residents are taxed on their worldwide income, while non-residents are taxed only on income earned in Spain.

The Spanish tax system is progressive, with tax rates ranging from 19% to 47% for different income brackets. Deductions and credits are available for certain expenses, such as healthcare and education.

On the other hand, Italy also operates on a residency-based taxation system, similar to Spain. 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 Spain, social security contributions are mandatory for both employees and employers and cover various benefits such as healthcare, unemployment, and pensions. The contribution rates vary depending on the type of employment and income level.

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

Business Taxes

 In Spain, businesses are subject to corporate income tax at the national level, with a standard rate of 25%. Additionally, there may be regional and municipal taxes applicable to businesses.

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

Value Added Tax (VAT):

In Spain, VAT, known as “Impuesto sobre el Valor Añadido” (IVA), is a consumption tax levied on the value added to goods and services. The standard VAT rate in Spain is 21%, with reduced rates of 10% and 4% applicable to certain goods and services.

In Italy, VAT, known as “Imposta sul Valore Aggiunto” (IVA), is also a consumption tax applied to goods and services. The standard VAT rate in Italy is 22%, with reduced rates of 10% and 4% for specific categories of 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 tax calculator
• Tax advisor italy
• Tax incentives italy

Relocation Considerations:

Professionals considering relocating from Spain 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 Spain and Italy share similarities in their tax systems, they also have distinct features and complexities. Business professionals contemplating a move from Spain to Italy should seek professional tax advice to navigate the intricacies and optimize their tax planning strategies effectively.