HOW TO GUIDES

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Tax on Capital Gains


Income from capital is the proceeds received from the investment of capital.

The taxation system varies depending on the different types of income. In the majority of cases the proceeds of financial activity are not declared on the tax return but are subject to a withholding tax of 12.5 percent or 27 percent.

Alternatively, an investor can opt for a regime of managed saving (risparmio gestito) or organised saving (risparmio amministrato). In such cases it is the bank or the authorised intermediary who carries out the payment of the taxes due.

Interest

For residents interest on a bank account or post office account and the interest on bonds and similar instruments with an expiry of less than 18 months is subject to a withholding tax of 27 percent. Interest on bonds and similar instruments with an expiry after 18 months are subject to a substitute tax of 12.5 percent.

For non-residents there are specific cases of exemption. Such exemptions apply when the income is received by people resident in countries with which conventions are in force to avoid double taxation and which allow an adequate exchange of information. The interest on bank accounts or post office accounts of non-residents is excluded from taxation.

Dividends

Dividends paid out by a limited company to shareholders are subject to different taxation regimes depending on the type of shareholding (qualifying or non-qualifying) and on the entity paying out the dividend (quoted or non-quoted company).

Qualifying shareholdings are those above a minimum percentage of the share capital, which varies from 3 percent to 25 percent, depending on the type of company. Non-qualifying shareholdings are percentages of share capital lower than the above-mentioned.

Dividends received from a qualifying shareholding in a resident company are subject to taxation on 40 percent of their amount and they must be declared in the person's income tax return.

Dividends from non-qualifying shareholdings are subject to a withholding tax of 12.5 percent.

For non-residents, in general, there is a withholding tax of 27 percent but the earner has the right to reimbursement of up to four ninths of the deduction of the tax paid abroad on the same income.

For income paid to savings shareholders (azionisti di risparmio) (a different category from the ordinary shareholders with limited powers to participate in the meetings) there is a withholding tax of 12.5 percent.

Capital Gain

The capital gain from the transfer of qualifying shareholdings is taxable to the extent of 40 percent and must be declared in the tax return.

The capital gain from the transfer of non-qualifying shareholdings is subject to a substitute tax of 12.5 percent.

Other types of capital gain are subject to a substitution tax of 12.5 percent.

There are special rules for shareholdings in companies resident in countries with privileged tax systems.

There are exclusions and exemptions for non-residents if they satisfy specific subjective and objective conditions.