Taxes on your income in Italy vs UK
You will be in the Population Registry as having lived there for at least 183 consecutive days over a 12-month period, or your life is centred there.
Living in Italy for less than 183 consecutive days over a 12-month period means that you pay Italian tax only on the income you earned in Italy. Make sure you never pay tax twice on the same income.
How much will you pay on your income?
Income tax rates for 2015 (2016 tax return)
| Annual Income | Rate |
|---|---|
| up to €15.000 | 23% |
| €15.001 - €28 000 | 27% |
| €28.001 - €55 000 | 38% |
| €55.001 - €75 000 | 41% |
| over €75,001 | 43% |
There is also a regional tax of up to 3.33% and a municipal tax of 0.1% - 0.9% (addizionali IRPEF). Each region and municipality is free to set its own rate within the range set out in national law.
Take into account:
- tax allowances (a deduction of between €3.000 and €7.500 to avoid taxing those on low incomes), as well as allowances for dependant family members (dependant wife and/or children).
- any deductions you are entitled to for certain types of expenditure.
So assuming:
you earn €28.000
and you qualify for €7.500 tax allowance
further allowable tax deductions and expenditure of €3.000
your income tax (IRPEF) bill would be €8.475
your regional/municipal taxes (IRAP) would be €857
and your INPS contributions would be €7.250
That would leave you just €8.417 for all you hard work that year (roughly 33% of your profit),
OR
you earn €43.000
and you qualify for €7.500 tax allowance
further allowable tax deductions and expenditure of €5.000
your income tax (IRPEF) bill would be €11.590
your regional/municipal taxes (IRAP) would be €1.269
and your INPS contributions would be €11.020
That would leave you just €14.121 for all you hard work that year (roughly 37% of your profit)
You must register for Iva (VAT) no matter what your turnover is and at the time of writing the rate is 22% but is due to rise later this year to 24%. You should consider this if your clients are not VAT (Iva) registered.
Now compare all that with the taxes you would pay in UK, if may help you decide where to live.
You earn £28,000and you qualify for £11,000 tax allowance
further allowable tax deductions and expenditure of £3,000
your income tax bill would be £3,400
your NAT INS Class 2 contributions would be £145.60
and your NAT INS Class 4 contributions would be (9% on profits) £1,525
That would leave you £19,929 for all you hard work that year (roughly 79% of your profits)
OR
You earn £43,000
and you qualify for £11,000 tax allowance
further allowable tax deductions and expenditure of £5,000
your income tax bill would be £5,400
your NAT INS Class 2 contributions would be £145.60
and your NAT INS Class 4 contributions would be (9% on profits) £2,695
That would leave you £29,759 for all you hard work that year (roughly 78% of your profits)
You do not have to register for VAT.
This is obviously rough calculations and does not consider living expenses (council tax in UK or property ownership tax in Italy) but it helps illustrate what a huge difference the two tax systems have on your income balance. In this case about 10,000 (I am ignoring any exchange rate).
Makes me wonder if this income was regular, year in year out, could one live in Italy (not working) for 182 days of the year and the rest working in UK, and still have a bank balance roughly the same (if not more) as working and living in Italy permanently.
Can this be correct? Any accountants out there like to comment?
You earn £28,000 (with six months work in UK),
after tax and NI deductions leaves you with £19,929
Then how much would it cost to rent a house in Italy and live there gor 182 days?
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