It is not necessary to use an offshore company located in a tax haven or in a low-tax country to pay less tax.
Nor it is advisable to convey your income or assets through a shell company and / or an offshore company, thus risking the verge of illegality and have substantial bureaucratic obstacles to reduce the tax burden: on the one hand, anti-money laundering rules require different transaction limits of corporate vehicles (conduit company) as the identification of the beneficial owner (see anti-money laundering measures in force in Italy); the other, in the OECD countries has been intensified the issue of tax anti-avoidance rules and the conclusion of international agreements on exchanges of tax information.
To pay less tax legally and effectively is enough to know the tools that offers lawfully Italy, as the flat tax for foreigners, the patent box, the tax deductions for the exploitation of intellectual property, the flat-rate scheme for new VAT and facilities startup.
The Patent Box, unknown by many, it is a real opportunity for technology companies and who holds or is the owner of intangible assets, such as a website value, an app, a patent etc.
It is a package of tax breaks, allowing you to greatly reduce the level of taxation of your company up to 1/3 of the current one.
Patent box literally means “box of patents”.
In practice, the patent box is a very considerable tax break for startups who hold intellectual property and intangible assets in general.
It’s called Patent box, because it is a measure initially conceived only for patents. However, later, it was extended to trade marks and works covered by copyright, such as an app, a software, a website etc …
It’s stupid not to take this kind of advantage.
The problem is another: the biggest limit to start enjoying the benefits provided by the patent box is the technical-professional training of accountants and business advisers, having never applied the rules relating to it, are often unprepared.
The application of the patent box requires the interpretation and proper application of various regulations and circulars of the Italian Revenue Agency (Agenzia delle Entrate) and it is not easy to find an accountant who knows how to apply them.
Then you need to have documented research and development expenses, but this is not a problem: are expenses that almost all startups routinely argue.
The tax exemption granted by the Italian state is equal to:
- 30% in the first year of application;
- 40% in the second year;
- 50% net third year.
However, it must be admitted that many tax consulting firms do not apply this exemption because they are not specialized and / or technically prepared, not being able to assign the correct value to a patent or a technological asset.
To pay less taxes it is important to learn how to calculate the exemption of the patent box and submit it to your tax advisers.
First, you must know that the relief does not target the entire income received from startup, but only a slice of income, which is defined “subsidized income” (reddito agevolabile).
To calculate the “subsidized income” is the Italian Revenue Agency to give us the necessary instructions.
Of course, to take advantage of the exemption and start paying less tax our company must have or be the holder of technology assets, which can be legally protected or patented.
Ask us more informations to learn how to calculate the patent box.
Flat tax in Italy
It ‘s a favorable tax regime which applies to persons who, jointly:
- are natural persons (it is a relief regime not extended to companies) with foreign earnings;
- They are residing abroad for at least nine years of tax in the last 10,
- Hold a very high income.
This system allows you to pay less tax in respect of taxes on personal income. And in fact is possible to achieve a significant tax savings by paying a lump sum of € 100,000 imposed on foreign source income.
When should the application of the flat tax?
It goes without saying that the application of the concessional tax regime called flat tax should when the personal tax on income generated abroad and payable in Italy is above the threshold of € 100,000.
Without taking into account deductions and allowances, if we examine the existing income tax rates that apply to the various income, the flat tax is convenient when the annual taxable income is more than € 250,000.
The flat tax option is valid for 15 years.
In practice, with the introduction of the flat tax Italy has become a kind of offshore tax haven for those individuals who hold significant assets and foreign income, transferring tax residence in the “Bel Paese”.
Flat-rate scheme (“regime forfettario” in Italy)
The flat-rate scheme is a facility that allows you to pay less taxes than the amount of taxes that would be payable by opening a VAT, in the ordinary regime.
To fall within the flat-rate scheme and start paying a lower level of taxes, the entrepreneur must be within certain income brackets; if it exceeds certain thresholds, it can only opt for the normal VAT arrangements.
The lump Vat 2017: There are two types of tax relief:
- for new vat, the flat-rate system startup, which provides for reduced personal income rate of 5% for the first 5 tax years and 15% from the sixth year. The social security contributions (INPS contributions) affect instead for the 27% corporate income.
- for already launched VAT, the flat-rate ordinary regime with rate at 15%.
Those who can opt for the flat-rate scheme also very few accounting requirements, being able to benefit from significant simplifications.
For those who aspire to become entrepreneurs, they would benefit from the flat rate system, it is advisable to register for VAT only if they have a turnover of at least equal (or greater) to euro 5,000.
In other cases, without being eligible for tax reliefs, the opening or maintaining of a VAT it is only advisable if the annual earnings are superior to 8,000 € (this is an assessment to be made case by case, with the assistance of a consultant).
Startup in Italy
To pay less taxes in Italy is important to know the system of tax breaks reserved for innovative startups in Italy.
To become innovative start-ups, the company must meet certain requirements established by law.
Recognition of innovative start-up is achieved by registration in the commercial register – special section, set up at the Chamber of Commerce.
The main advantages are obtained with the inscription are:
- tax benefits;
- Benefits on staff hiring (labor standards favor the entrepreneur, “the SO-CALLED startupper”, rather than the employee).
The tax advantages are of two different types:
- Tax advantages for the owner of a start-up innovation;
- Tax benefits for those investing in a start up innovative (not to be overlooked because it is an incentive to stimulate the investment of external capital).
The tax benefits for startupper entrepreneur are:
- Exemption of Chambers rights;
- Exemption of duty for registration in the Register of Companies;
- It does not apply the rules governing the shelf companies.
What does this mean?
The shelf companies are corporate structures created to handle boats, cars, homes and other goods mainly luxury. They are called “shell” because it suits the entrepreneur to pay less tax, not having the aim to make a profit.
Returning to the facilities provided for the startup regime, the tax advantages for investors are:
- Tax deduction of 19% or 25% for physical persons;
- Tax deduction of 20% or 27% for companies;
- The advantages in terms of hiring and job performance:
Assumption: the innovative start-ups may enter into fixed-term contracts from 6 to 36 months, up to 4 years from the constitution;
The innovative start-up can pay employees and professionals with the formula “work-for-equity”, ie offering the provider or a professional interest in share capital.
Take advantage of the deductions on income from intellectual property to pay less tax
Royalties and intellectual property are two words that you should consider if you’ve just formed a company or if you manage already one inItaly.
Many entrepreneurs operating in the digital economy, ignore the opportunity to strategically leverage their intellectual property (trademarks, website, software, apps, etc.).
The tax benefits resulting from the exploitation of intellectual property, are remarkable and can be achieved through the use of a license agreement.
In fact, if intestinal to an individual (yourself) an intellectual property (e-books, mobile application, software, trademarks, patents, etc.) And enters into a license agreement with your startup, to give the same right to resell your work, the Italian law provides in favor of the physical person the right to have a significant tax break on royalties received.
Unless you know what are the royalties I will immediately explain: are the pecuniary dues you pay to exploit the intellectual property of others.
Well, the law recognizes a standardized deduction, ie a tax base reduction, equal to:
- 40% if the royalties are received by a natural person under 35 years of age;
- 25% if the royalties are received by a natural person with an age equal to or older than 35 years.
The taxable abatement regards taxation purposes IRPEF (income tax).
Also, it’s not all!
On income earned by the individual, not the tax applies.
This most tax advisors do not know, therefore, would you do well to remind him if he has doubts about: the revenue from license agreements received by a natural person in Italy should not be subject to Value Added Tax.
How you can see from reading this article, it is not necessary to flee outside Italy to pay less taxes, but is however advisable to know the legal instruments offered by the Italian tax system.