US vs. Italian Tax Structure
Identify the key differences between the US tax structure and the Italian tax structure for businesses on a federal and state level.
Italian Tax Structure
- The corporate income tax, called the IRES for Imposta sul Reddito delle Societa, is 24%.
- Certain investment fund management companies and securities investment companies are subject to a 3.5% surtax added to the corporate income tax rate.
- The regional tax, called the IRAP, is 3.9% for general companies, 5.57% for bank and financial institutions, and 6.82% for insurance companies.
- The average rates vary by region. Each region can increase rates by up to 0.92%.
- Resident companies, which are any companies having their legal or administrative headquarters or their principal business activity in Italy, are taxed on their worldwide revenue. Non-resident companies are taxed only on Italian-source income.
- Taxable income is business income, which is net income earned in a financial period.
- Generally, capital gains are treated as ordinary income. Under certain conditions, capital gains derived from the sale of participations may be 95% tax-exempt.
- Other taxes levied on Italian businesses include capital duty, social security, stamp duty, transfer tax, and web tax.
US Tax Structure
- In the US, businesses can incur income tax, self-employment tax, employment tax, and excise tax.
- The US corporate income tax on resident C corporations is 21%.
- Taxable corporate profits are a corporation's receipts less allowable deductions, which includes the cost of goods sold, wages, interest, nonfederal taxes, depreciation, and advertising.
- Corporate profit is also subject to a second layer of taxation at the individual shareholder level on dividends and on capital gains. The maximum tax rate on dividends and capital gains is 23.8%.
- Individuals who work for themselves pay a self-employment tax, which is a social security and Medicare tax.
- When businesses have employees, they have to pay social security and Medicare taxing, federal income tax withholding, and federal unemployment (FUTA) tax.
- Businesses may also pay excise tax depending on the activities they carry out.
- The majority of US states also levy corporate income taxes, which range from 3% in North Carolina to 12% in Iowa, and are an average of 6%.
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