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July's Paying people abroad

Paying people in Italy

This month’s look at International Payroll turns its focus on Italy. The boot shaped country is renowned for its beautiful coast line, cuisine and fashion labels. But how are people paid there?

Individual situations vary, and the Italian tax system is very complicated, but employers are obliged to deduct tax at source from an employee, and to make additional contributions to social security, the same as most.

Tax

Taxation of an individual’s income is based on the following:

Up to €15,000	23%
€15,001 – €28,000	27%
€28,001 – €55,000	38%
€55,001 – €75,000	41%
Over €75,000	43%

Social security

The compulsory social security insurance scheme is managed by the National Institute for Social Security (INPS) and covers all employees and their families, with a wide range of benefits. The following are the primary benefits offered to all workers:

• Old age pension after at least 20 years of contributions (pensionable age is 65 for men and 60 for women)
• Disability pension and surviving dependents’ pension
• Unemployment benefits
• Sickness benefits
• Maternity benefits
• State‐subsidised medical care
• Insurance against accidents and occupational diseases
• Subsidies in the event of labour redundancy resulting from a temporary financial crisis or similar situation.

Contributions to the National Medical Insurance Scheme, which provides medical assistance to employees and their families, is paid as part of regional tax due on income – Imposta regionale sulle attività produttive (IRAP). Medical assistance, depending on the employee’s income, covers hospitalisation in a public hospital, a family doctor, some medicines and certain medical tests and examinations.

Social security contribution rates vary depending on the type of business and the category of the employee. Typically the employer’s contribution is between 35% – 43% of the salary and the employee’s contribution is usually 9% of the salary.

End of Year

The tax year in Italy ends on 31 December.

All employment wages, tax and social security contributions are reported in a final yearly document called the Certificazione unica dei redditi di lavoro dipendente (CUD), the P60 equivalent. By the middle of March of each year, employers must provide all employees with two originals of the CUD documenting salary and taxes paid during the previous year.

Every year a new model of the CUD is released by the Ministry of Finance, due to the introduction of new tax provisions. As a rule each CUD is divided into four parts: Employer (withholding agent) information; Employee general information (birth date, residency, tax code); Employer’s tax information; and Social security data.

Ceridian provides payroll services in over 50 countries, including Italy, helping international businesses stay compliant, gain more control and improve cost management. For more information, contact our International services team on 0800 0482 737.