As much as I enjoy the holidays, there’s always a certain sense of relief when they are finally behind us. The New Year gives us a fresh start, which feels great—at least for a couple of weeks. By the end of January, most of us will gradually begin to abandon all of our well-intended resolutions made in those delirious moments of naïve optimism while we were sitting on our couch, sweating out the last hangover of 2012. Do I actually believe that I’m going to stick with a hot yoga program? Ha! And the gluten-free, vegetarian, pro-biotic, raw diet? Kill me now. Well, they seemed like a good idea…
Death and Taxes
So it’s January and back in the good ol’ US of A, football season is almost over and tax season has begun in earnest. Time to brace yourself for the incoming credit card bills and hours of collecting scattered receipts to present to your accountant—normally on the afternoon of April 14th. Here in Italy, the taxing system functions a little differently. A person whose only income is from a salaried job is not obligated to file an annual return. His employer deducts the tax from his monthly paychecks and submits them directly to the tax authorities. On the other hand, someone who is self-employed operates within the moral confines of the honor system (i.e. pay as little tax as possible without getting caught). In any case, the date for filing an annual return for a self-employed individual is July 31st. Plenty of time to think up innovative bookkeeping methods to conceal your actual income.
Italy has a progressive tax rate, just like the US. The 2012 rates in Italy are as follows:
23% € 0 – 15,000
27% € 15,001-28,000
38% € 28,001-55,000
41% € 55,001-75,000
43% € 75,001 and over
*There is also an additional 3% tax levied on incomes over € 300,000. They call this a “solidarity tax.” I just love the branding of this—a nice spin on the idea of “sticking it to the wealthy,” don’t you think? It suggests the notion that “we’re all suffering through this crisis together.” The US could use the services of the Italian government’s marketing consultant right about now.
If you are planning to spend any length of time in Italy, then sooner or later you’ll have to obtain your codice fiscale. This is your fiscal code, similar to a social security number in the U.S. and it is used by the taxing authorities to track your finances. It is an alphanumeric code comprised of 16 characters used to identify anyone residing in Italy, regardless of residency status. Officially it must be assigned by the Italian government, but if you’ve got nothing better to do right now (like reading my blog) then you can calculate it for yourself online (since it is based on your name, sex, birthday, and city/country of origin). There are a number of websites that can do this and the result should be the same no matter which one you use. This one is as good as any:
Below is a diagram showing how they calculate this.
- The first 3 characters are the first 3 consonants of the surname (when the consonants are less than 3, they are integrated with the first vowel until there are 3 characters, if the last name has 2 characters, the third is the letter X)
- the same is for the first name, which provides the second group of 3 letters of the code (when the name contains more than 3 consonants the first, third and fourth are taken)
- the first 2 numbers (seventh and eighth characters of the tax code) are the last 2 digits of the year of birth
- The ninth character is a letter representing the month of birth
- The next 2 numbers are the day of birth, for females increased by 40 units
- the characters from 12 to 15 indicate the place of birth (city code or foreign state code)
- The last character, alphabetic, has a control function.
Then once you’re ready to have it legally assigned to your name, you’ll need to go to the Agenzia delle Entrate (the Tax Agency). Their main Rome office is in Trastevere, on via Ippolito Nievo, 36. Here is their website, as well:
Render unto Silvio that which is Silvio’s
You may ask yourself, “Should I even bother?” Good question. And the answer sort of depends on what you’re doing in Italy versus what you’d like the Italian government to believe you’re doing in Italy. After all, having read some of my other blog posts with regards to fighting the bureaucracy and surviving post office mayhem (for example, Permesso di Soggiorno), it might seem like a lot of trouble just to help them monitor your activities. Well, first let me assure you that this particular task is a notable exception to the Italian rule of impenetrable red tape. Getting your codice fiscale could hardly be easier.
In fact, if you’re too busy to go to their office in Trastevere, I’m sure they’d be willing to swing by your place at a convenient time to help you register with the State Tax Agency. No problem. They might even bring pastries if you ask. Or a glass of Prosecco.
You see, while the government doesn’t really appreciate your sense of urgency in obtaining your work permit or receiving your mail in a timely manner, they are acutely concerned with your adherence to tax law. In case you’re interested, the law states that you’re required to pay Italian taxes if any of the following applies:
- Your permanent home (i.e. family or principal residence) is in Italy;
- You spend over 183 days in Italy during any calendar year (Note that many countries, e.g. Britain, limit visits by non-residents to 183 days in any one year or an average of 91 days per tax year over a four-year period);
- You carry out paid professional activities or employment in Italy, except when secondary to business activities conducted in another country;
- Your center of vital economic interest, e.g. investments or business, is in Italy.
(I found this information on an excellent website called “Just Landed,” so please visit their page for a more in-depth discussion of this topic: http://www.justlanded.com/english/Italy/Italy-Guide/Money/Income-Tax-Liability)
Given all of this, you might initially decide to delay or else completely avoid the simple chore of obtaining your official taxing code. Unfortunately, you really can’t. There are many necessary tasks that require you to divulge this number. For example, if you want to buy an Italian SIM card for your cell phone, they’ll ask you for your codice fiscale along with your I.D. or passport. If you’re going to set up accounts with the utility companies, then they you’ll need it for that, too. And if you elect to participate in the State Healthcare System (the subject of a future post), then you absolutely must have a codice fiscale. In fact, they are starting to combine the health insurance number with the codice fiscale, making it into a single card.
So it’s better not to fight it. Get the number and your card. And then look for other creative ways to avoid paying taxes. If you need any help with this, just ask Silvio.