Italy Approves Income Tax Deferral For Small Businesses

by Ulrika Lomas, Tax-News.com, Brussels

18 November 2009

The Italian government has approved a decree which allows certain interim income tax payments, which were due by the end of this month, to be delayed to the date of final payment in June 2010.

Previous to the announcement, it had been expected that the payment deferral would involve the state and local corporate income taxes (IRES and IRAP), as well as personal income tax (IRPEF). As it now stands, the 20% delay in the interim IRPEF payments due by the end of November will amount to some EUR3.6bn (USD5.4bn).

As the tax is only deferred, there will be no overall capital effect on the government’s annual budgetary receipts. It has been said that any interim shortfall will be covered, until payment in June next year, by funds received under the present tax amnesty.

Apart from the exclusion of the corporate sector by the omission of corporate income taxes from the decree, normal employees paying income tax deducted monthly out of their salaries will also receive no benefit. The beneficiaries of this measure will be the estimated 3.3m unincorporated businesses and the self-employed, such as sole traders, artisans, small retailers and professionals, who pay IRPEF in bi-annual installments.

The deferral of those payments is said to be designed to retain liquidity in the Italian economy over the next few months, to help the economy in its first stages of growth after the economic recession.

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