The effective date for the increased tax rates of withholding tax and the “substitution tax” relating to investment income is 1 July 2014.
The law decree has an entry into force date of 24 April 2014. Under Italy’s legislative system, the law decree will be presented to Parliament for ratification. If, however, the law decree is not ratified within 60 days of publication, it will have no legal effect.
Taxation of investment income
Under article 3 of the new law decree, the withholding tax and substitute tax rates on various types of financial instruments—including interest, premiums, and capital gains—increase from 20% to 26%.
This increase will be effective from 1 July 2014 and, with a few exemptions, will affect withholding tax and substitute tax on:
- Interest, premiums, and any other proceeds regulated by article 44 of the Italian incomet tax law (i.e., capital income)
- Capital gains from financial instruments (gains regulated by article 67(1) (c-bis) – (c-quinquies) of the Italian income tax law)
The new law reduces the standard rate of the regional tax on productive activities (imposta regionale sulle attività produttive, IRAP) from 3.9% to 3.5%.
Other IRAP rates are also reduced—for example, the IRAP rate for financial institutions is reduced from 4.65% to 4.2% and for insurance companies, reduced from 5.9% to 5.3%.
Regional authorities may adjust these rates by up to 0.92%.
Read a May 2014 report [PDF 345 KB] prepared by the KPMG member firm in Italy: Tax Alert: New Italian tax measures
For more information, contact a tax professional with KPMG Italy:
Giuseppina Del Gatto