2023 is the year that I turn 49 years old. Where do the years go? 50 next year and strangely enough I don’t feel as anxious about it as I thought I would. I actually feel quite good about it, and I have made some personal commitments to spend more time in nature and exercise regularly, but not excessively (I suffered glandular fever a few years ago and so can’t workout as hard as I used to).
Tax time in Italy
By Gareth Horsfall
This article is published on: 22nd March 2023
It was on one of those walks in nature recently that I actually thought that it’s about that time when our commercialisti start asking us to send our financial information for tax calculation and payment. (unless you are one of those people who is well prepared and has done it already).
Of course, we always have to supply a full list of our incomes and assets (Italian and foreign), bank accounts and properties and taxable assets. However, I am not sure about you, but my commercialista doesn’t really give me much information on the corresponding list of deductions and detractions available to offset/reduce some of our tax bill, so I thought I would write this article to provide you with a full list for the financial year 2022. [A reminder to always check your tax return, once filed by your commercialista, to ensure that errors haven’t been made, especially on the foreign assets section Quadro RW . See my article on this for more information Declaring taxes in Italy
Some of these may be relevant to you, others not, but at least you have the list which you can refer to and always share with others, if you think it might help. There are distinct categories ranging from family expenses to renovation/property expenses as well. Also remember that in ALL cases now, to claim an expense you MUST have paid by electronic/traceable means i.e. bonifico (bank transfer) or carta di credito and you MUST have a corresponding scontrino fiscale in the case of things like farmacia expenses. For larger purchases a fattura (invoice) is required. Without the necessary document you will not be able to claim back the tax relief.
So, without further ado, here is the list:
SPESE FAMIGLIARI
These attract a detraction of 19% of the full value of the expense.
- The abbonamento (pass) for local, regional and inter-regional public transport, up to a maximum of €250 for the cost of the pass
- A maximum spend of €530 or €1219,14 (depending on the type of policy) for life insurance, polizze per infortunio (accident) or permanent disability policies
- All costs for deceased family members i.e. funeral
- A €632 maximum spend per child for kindergarten cost (public or private)
- The costs of infant, (scuola infanzia), junior (primarie) and secondary (secondaria) schools. Also University, Conservatorio and AFAM (Instituto Alta Forma Artistica Musicale Coreutica)
- Costs for students diagnosed with DSA (disturbo specifico dell’ apprendimento) – a category of ADHD
- A maximum spend of €210 for the costs of sport for children until 18 years old
- A maximum spend of €2633 for the costs of rent for students who are living away from their home region, including abroad
-
A full deduction of contributions into an Italian private pension scheme (previdenza complementare) up to an annual limit of €5164,57
SPESE PER LE CASE
- A 19% detraction on mortgage interest, where it has been used for the purchase or construction of the ‘Prima Casa’
SPESE MEDICHE
These all attract a 19% detraction:
- On a spend more than €129,11 for pharmaceuticals, ticket, hospital costs, specialist services and surgery costs. Analisi, thermal cures (when prescribed), medical equipment, glasses and/ or contact lenses that meet the CE standard
- Vets costs from €129.11 to €500 spend
- Costs to assist with maintaining personal independence e.g. the purchase of a vehicle necessary to get to and from hospital. (Limited to a maximum spend of €2100 for those on incomes less than €40000pa)
- A maximum spend of €750 for the cost of life insurance where the benefit is for someone with a serious disability
- Other general medical expenses attract the 19% detraction on the cost, which can then be detracted from your or your family income, where they are being supported by you (a carico)
LIBERE DONAZIONI
the full cost of donations to:
- Cultural and artistic activities
- Cooperative entities in the cultural /artistic sector
- Associations
- Scholastic institutions of every type
- Funds donated to the Italian state
BONUS EDILIZIE
Restructuring and renovation costs
For the tax year 2022, the following deductions are available:
- 60% on the full expenses of repair to the outside of your property – specific criteria apply! BONUS FACCIATA
- 50% on the cost of restructuring with a max spend of €90000 or 80% of the total cost where it was used to restructure for seismic risks. BONUS SISMA
- 65% of the cost for interventions for energy saving measures around the home.
- 50% of the cost of furniture and big elettrodomestici goods (where they meet certain criteria) BONUS MOBILI
- 36% on a max spend of €5000 for landscape work in the garden (reimbursed over 5 years) BONUS VERDE
- 50% for ordinary maintenance
- 75% for interventions for energy saving measures for condomini
- 110% SUPERBONUS for specific work
(** the superbonus has been suspended by the Meloni government because they found a hole of €38 billion in the public finances due to fraudulent activity related to the Superbonus. It is unknown when and if any applications made in 2022 will be reimbursed).
- From 2023 the 110% SUPERBONUS falls to 90% (but is likely to be fraught with the same issues as the 110% bonus, in my opinion)
- 50% of the cost of installing an electric car recharging column
Where you have an income up to €120,000 pa the expenses, as described in this article, will be fully allowed. Where your income is over €120,000pa then the detractions will be reduced according to a formula based on your total income.
And that’s it! Everything that you can detract from your income in 2022 to try and reduce your tax bill in Italy. If that doesn’t make a difference, then you may need to have a look at your overall finances to try and plan in different ways.
Possible Italian tax changes
It should be noted that the Meloni government is currently debating how they can follow through on their election promise to simplify the tax system by reducing the tax bands from 4 to 3, in the coming year, and then hopefully moving to a 2 tax band system. If they manage to pass this then they will likely reduce/remove the system of detractions/deductions by lowering the bottom rate of tax, or maybe introduce a starting rate tax allowance for everyone (unlikely, in my opinion. The talk is that an allowance may be offered to workers [not self-employed] and pensionati) However, they are in first stage negotiations and it may be some time before things come to pass.
The other thing they are currently discussing is simplification of the taxation of investment income and gains. Presently income and gains from certain types of investments cannot be offset against losses from the same investment. A system they called ‘redditi di capitale’ e ‘redditi diversi’. There is talk to remove this, what I consider a rather odd system, and have the same system as everywhere else, income, gains and losses from investment income treated in the same way.
Update on making Voluntary National Insurance contributions UK
Anyone who has a missing contribution record for UK National Insurance contributions in the UK between April 2006 and April 2016 will still have the opportunity to make up these contributions until the 31st July 2023, which will still give you the chance to increase your state pension entitlement from the UK. The previous deadline was the 5th April 2023.
The reasoning behind this decision from the UK government is that from April 2023 anyone retiring will need to have a national insurance contribution record of 35 years to receive the maximum state pension. Between 2006 and 2016 different maximum contribution periods may have applied and therefore the UK government is giving you the opportunity to maximise your contributions until July 2023. After this time, it will only be possible to repay the missing previous 6 years contributions in your national insurance record. If you want to know more, you can look at the www.gov.uk website.
Bear in mind that the state pension office will likely be overwhelmed with requests at this time, so if you need to make a request for back payments then you may need to do so immediately, otherwise they may not be able to respond to you in time.
If you are unsure of your National Insurance contribution record then you can check it online at www.gov.uk/check-state-pension. You will need your UK national insurance number handy.
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