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Italian Senate Approves Changes To 2014 Budget

by Ulrika Lomas, Tax-News.com, Brussels

04 December 2013


On November 26, by means of a confidence vote, the Italian Senate approved a "maxi-amendment" which completely replaces the proposals originally made by the Government in its draft 2014 Budget in October.

The changes made to the Government's so-called "Stability Law" measures mainly concern residential and industrial local property taxes, and individual income tax deductions.

With the abolition of the controversial local property tax (IMU) on first residences from January 1, 2014, the new "service tax" to fund all local services will now be called IUC (the unified local tax), rather than TRISE. IUC will be formed of IMU (levied on all property owned, except for first non-luxury residences), TASI (a tax on general local services paid by all property owners, with 10 percent to 30 percent payable by lessees) and TARI (the current local tax on environmental and waste services, levied on either the property owner or lessee). The total rate of IMU plus TASI cannot be greater than 1.06 percent of a property's value.

In effect, therefore, while IMU on first residences is being eliminated, the tax will survive beyond this year and remain payable on all other real estate, including luxury and second houses and commercial and industrial properties. On these other properties, IUC will act as an additional tax to their remaining IMU payments.

In addition, for businesses, there will be an increase to 30 percent for the deductibility of IMU against both federal and local corporate income tax in 2014. It is foreseen that the deduction will fall to 20 percent in the succeeding two years.

Another important new facet to the Budget is a restructuring of the proposed annual tax deductions such that their benefit will now be felt by workers with an annual income of up to EUR35,000 (USD47,500), rather than the original proposal of EUR55,000. The maximum annual tax reduction of EUR225 will be concentrated on those workers with a gross annual income of between EUR8,000 and EUR15,000.

For the next three years, there will be an anti-poverty pilot scheme to establish a minimum income, which will be financed by a "solidarity contribution" deducted progressively from annual pensions above EUR90,000.

The Budget will now progress to the Italian lower parliamentary chamber, where it will be subject to approval and possible further changes.

TAGS: individuals | tax | business | pensions | property tax | law | real-estate | budget | corporation tax | legislation | tax rates | Italy | tax breaks | individual income tax | services

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