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Regional tax on production activities (IRAP, Imposta Regionale sulle Attività Produttive)

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Regional-tax-on-production-activitiesThe regional tax on production activities (IRAP) is a local tax collected by the Region where the production ac-tivities liable for tax are carried out.

If taxpayers perform their activities in establishments and offices situated on the territory of several regions, the distribution of the taxable income, and, therefore, of IRAP, is made in proportion to the cost of the employees working in the various regional establishments and offices.
Entities subject to IRAP
IRAP is due by those subjects regularly engaged in an independently run activity in the production of goods or services in the Region.
In particular, the following entities are subject to IRAP:
• entities subject to IRES: resident commercial companies and institutions, and non-resident companies and institutions of any type with or without legal status;
• joint-name partnerships, limited partnerships and those equivalent to simple partnerships practicing arts and professions and professional associations;
• agricultural producers receiving agricultural income (individuals or groups), except for those exempt from VAT;
• public and private non-commercial institutions and public administrations;
• individuals receiving company income; and individuals receiving income from self-employed work.
IRAP does not apply to mutual investment funds, pension funds, European economic interest groups (EEIG) and door-
to-door salesmen.
For subjects not resident in Italy, IRAP only applies when the activities are conducted over a period of at least three months through a permanent establishment.
Tax assessment basis and rates
The determination of the tax base differs, depending on whether the taxpayer is a commercial company, an agricultural producer, public or private non-commercial institutions or public administration offices.
If the taxpayer performs different activities, the tax base on which the rate applies is made up of only the sum of the positive figures. For example, if a taxpayer has a tax base of EUR 100,000 relating to a commercial com- pany and is also an agricultural producer using a tax base equal to EUR -20,000, the rate will be applied to a tax base of EUR 100,000.
IRAP applies to the net production value, which is the difference between:
positive components, consisting of the income from sales or provision of services, variations in stocks (if positive) and other operating income and revenues, and
negative components, consisting solely of the cost of purchasing goods and services, the cost incur- red for using third party goods, variations in stocks (if negative), depreciation, and amortization of fixed assets and sundry management charges.
Employment costs, costs deriving from the provision of temporary self-employed work and financial charges are not deductible for IRAP purposes. Therefore, such a special deduction has been applied in relation to the cost referring to those employees who have a timeless contract in place.
The general rate applied is equal to 3.9%. In some regions this rate may be higher.
Special rules apply to establish the taxable assessment basis of specific entities such as: banks, financial in- stitutions and companies and insurance companies, and, in some cases, different rates are applied as well.


 

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