How does Personal Income Tax work in Italy?
Personal income tax in Italy is based on a system of withholding tax and progressive taxation, meaning that the amount of tax you pay increases with your income. Here's a detailed overview of how personal income tax works, including the rates for different income levels and additional regional and municipal taxes.
Progressive Taxation Rates for 2023
As of January 1, 2023, the following income tax brackets apply to yearly income in Italy:
- €0 - €15,000: 23% tax rate
- €15,001 - €28,000: 27% tax rate
- €28,001 - €55,000: 38% tax rate
- €55,001 - €75,000: 41% tax rate
- €75,000 and above: 43% tax rate
These rates are applied progressively, meaning that different portions of your income are taxed at different rates. For example, if your income is €30,000, the first €15,000 is taxed at 23%, the next €13,000 (up to €28,000) is taxed at 27%, and the remaining €2,000 is taxed at 38%.
Regional Income Tax
In addition to the national income tax, residents in Italy are also subject to a regional income tax. The rate of this tax depends on the region where you reside and can vary from 1.23% to 3.33%. Each region sets its own rate within this range, contributing to regional budgets and services.
Municipal Income Tax
Similarly, a municipal income tax is levied depending on the municipality of residence. This tax can range from 0% to 0.8%. Like the regional tax, the exact rate is determined by the local municipality and is used to fund local services and infrastructure.
How It All Adds Up
The total personal income tax liability for an individual in Italy is the sum of the national income tax (based on the progressive brackets), the regional income tax, and the municipal income tax. This system ensures that those with higher incomes contribute more to both national and local budgets, while also accounting for regional and municipal differences in taxation.
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