Managing Taxation

This chapter provides overviews of Italian income tax withholding and delivered rules for income tax withholding and discusses how to:

Set up income tax data.
Report income tax data.

Understanding Italian Income Tax Withholding

This section discusses:

Additional monthly payments.
Tax reductions.
Additional IRPEF taxes.
Job-end adjustments.
Separate taxation.

Additional Monthly Payments

Additional monthly payments, even when paid along with regular monthly salaries, must be kept separate from all other earnings in the tax calculation. The system applies the same monthly brackets it uses for normal payments, but stores the resulting values in a separate accumulator.

The system separately applies contribution deductions to additional monthly income to obtain the taxable income value.

Tax Reductions

The net tax is determined by subtracting certain deductions from the gross tax. This includes deductions for:

Subordinate employment, which is dependent on whether an employee has a regular or temporary contract.
Family dependents: spouse, children and other relatives.
Deductible costs.
Income not liable for tax.

For specific income ranges the assessable tax income is lowered with respect to the actual income through the application of a no-tax area, which is the amount of income that is not liable for tax.

Additional IRPEF Taxes

Additional taxes are local taxes. They are calculated as part of the year-end adjustment as a percentage of that year’s taxable income. These taxes are paid in installments in the next year. This category includes:

Additional county tax.

This tax percentage is made up of a fixed percentage (currently 0.9%) plus a possible additional part that varies by region. The percentage applied corresponds to the region of the payee’s physical address as of adjustment time. If the payee has changed address lately, the county as of 60 days prior to time of the adjustment is considered.
Additional city tax.

This tax percentage varies by city.

If the annual tax detractions are greater than or equal to the annual gross IRPEF tax, causing the net IRPEF value to be zero, then no additional IRPEF tax is due.

Job End Adjustments

You must also make adjustments when a payee’s employment ends.

The system calculates the adjustment values by doing the following:

Computing monthly values for taxes and tax reductions for the month in which the adjustment is taking place.
Computing yearly values for taxes and tax reductions as of the termination date.
Retrieving what has already been withheld from the employee during the year, including the current month.

The difference between what should be withheld on an annual base and what has been actually withheld so far, including the current month, is the adjustment value. Adjustments are calculated at year-end or on termination.

Separate Taxation

In Italy, income related to previous years is taxed separately from the income for the current year. To calculate separate taxation, the system:

Averages the employee’s taxable earnings from the two years preceding the retroactive payment. This calculation excludes other retroactive payments or end of employment allowances.
Applies current tax brackets and percentages to this amount to produce the gross tax.
Subtracts the tax reductions not previously applied from the gross tax to produce the net tax.

The tax is deducted from the retroactive payment and separated from current and end of employment taxes.

Understanding Delivered Rules for Income Tax Withholding

Global Payroll for Italy provides rules to calculate and deduct estimated income tax from monthly earnings and to make year-end and end-of-employment adjustments. You can identify the elements delivered for calculating and deducting income tax by the element names that start with the prefix IRP.

Monthly Income Tax Estimates and Deductions

Global Payroll for Italy provides rules for IRPEF income tax including:

Determination of tax rates according to Scaglioni tables.

Use the Scaglioni Table page enter the Scaglioni rates.
Data input pages and elements to calculate tax detractions for family dependents.
Elements to calculate net salary.
Data input pages and elements to calculate additional county, city, and state IRPEF taxes.

Year-End and End-of-Employment Adjustments

Global Payroll for Italy provides rules for year-end and end-of-employment adjustments including:

Accumulators to calculate taxes paid.
Elements to compare annual and monthly calculations.

Viewing Delivered Elements

PeopleSoft delivers a query that you can run to view the names of all delivered elements designed for Italy. Instructions for running the query are provided in the PeopleSoft Enterprise Global Payroll 9.0 PeopleBook.

Setting Up Income Tax Data

This section provides an overview of income tax data setup and discusses how to:

Maintain Scaglioni values.
Set up additional income tax defaults.
Set up city tax details.
Set up state tax details.
Set up county tax details.
Set up income tax dependant data.

Understanding Income Tax Data Setup

Before processing income tax withholding, you must:

Set up current Scaglioni values for tax brackets using the Scaglioni ITA component (GPIT_SCAGL_TABLE).
Set up additional IRPEF default information using the Local IRPEF Defaults ITA component (GPIT_ADDDFLT_TABLE).
Set up current municipal, regional, and provincial IRPEF tax percentages using the City IRPEF Details ITA component (GPIT_ADDCOM_TABLE) and the State IRPEF Details ITA component (GPIT_ADDPRO_TABLE).
Set up income tax dependent data.

Pages Used to Set Up Income Tax Withholding

Page Name	Object Name	Navigation	Usage
Scaglioni Table	GPIT_SCAGL_TBL	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, Scaglioni ITA, Scaglioni Table	Enter Scaglioni rates, when necessary. PeopleSoft delivers the elements that populate the income tax brackets; however, you must maintain them.
Local IRPEF Defaults	GPIT_ADD_DFLT_TBL	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, Local IRPEF Defaults ITA, Local IRPEF Defaults	Enter system defaults for additional IRPEF tax payments. You must enter additional income tax information into the system.
City IRPEF Details	GPIT_ADDCOM_TBL	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, City IRPEF Details ITA, City IRPEF Details	Enter local tax percentages.
State IRPEF Details	GPIT_ADDPROV_TBL	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, State IRPEF Details ITA, State IRPEF Details	Enter state tax percentages.
County IRPEF Details	GPIT_ADDREG_TBL	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, County IRPEF Details ITA, County IRPEF Details	Note. This page is not used to track the county tax percentages. Instead, we deliver a bracket, IRP BR ADDREGVAR, for calculating the percentages for county tax.
Bracket Data	GP_BRACKET_DATA	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Elements, Supporting Elements, Bracket Data, Bracket Data	Review and update the county tax percentages stored in the IRP BR ADDREGVAR bracket.
Specify Tax Reduction	GPIT_TDETR_FAMDEP	Global Payroll & Absence Mgmt, Payee Data, Taxes, Specify Tax Reduction ITA, Specify Tax Reduction	Enter spouse or dependant type and age, and percentage of dependency.

Maintaining Scaglioni Values

Access the Scaglioni Table page.

The data on this page is delivered and maintained by PeopleSoft.

Setting Up Additional Income Tax Defaults

Access the Local IRPEF Defaults page.

Number of Installments

Enter the number of installments in which additional tax is withheld.

Common Fixed Percentage

For each kind of additional tax, the applied percentage comprises a fixed value (decided by the central government) and a variable percentage (decided by the local government). Enter the fixed percentage.

Addl IRPEF Paid at Adjustment (additional IRPEF paid at adjustment)

Select this check box to pay all additional IRPEF at adjustment time.

Fixed % Reduce Others IRPEF %

The fixed value entered here can reduce the IRPEF percentage of the Scaglioni by which gross tax is computed.

Setting Up City Tax Details

Access the City IRPEF Details page.

Local Variable Percentage

Enter the variable percentage for the selected city tax.

Setting Up State Tax Details

Access the State IRPEF Tax Details page.

Local Variable Percentage

Enter the variable percentage for the selected state tax.

Setting Up County Tax Details

Access the Bracket Data page.

The payroll process uses the bracket IRP BR ADDREGVAR to determine the percentage for county tax. Global Payroll for Italy delivers data for this bracket. Use the Bracket Data page to review the delivered values.

Setting Up Income Tax Dependant Data

Access the Specify Tax Reduction page.

Salary of Reference

Enter the salary to use in the calculation of ranges of tax deductions. If blank, the system uses an estimate based on the payee’s earnings as follows:

Year to day (YTD) income/YTD tax days * 365

Other Income

Enter additional income to use in the calculation of dependent detraction ranges. Select the currency for the additional income.

Dependant

Select either:

Dependant spouse or

Dependant child in place of if the dependent is a child in place of a spouse.

Exempt taxation assignee out

Select if the payee is not entitled to tax reductions because the payee is an assignee out tax exempt.

Note. You must select this check box in addition to selecting a tax exempt status on the Define Assignee Data page.

Disable for Veneto

Select this check box if at least one dependant is disabled.

Child/Other Dependents

Type of familiar dependent

Select from the following:

Children (all dependant children except disabled children and children in place of spouse).

Child less than 3 years (included in number of children).

Child after the first (additional children after first, included in number of children).

Other dependents.

Disabled children (not included in number of children).

Dependent Number

Enter the number of dependants charged at this percentage.

Percentage of Charge

Enter the percentage of the tax reduction that is received by the payee. When a child has two working parents, the parents can decide how the tax reduction for the child is divided between them. Use this field to define the percentage of the reduction is received by the payee.

Reporting Income Tax Data

Global Payroll for Italy enables you to create these reports that include tax data:

IRPEF F24 control report.
CUD reports.
770 year-end report.

Number of Installments	Enter the number of installments in which additional tax is withheld.
Common Fixed Percentage	For each kind of additional tax, the applied percentage comprises a fixed value (decided by the central government) and a variable percentage (decided by the local government). Enter the fixed percentage.
Addl IRPEF Paid at Adjustment (additional IRPEF paid at adjustment)	Select this check box to pay all additional IRPEF at adjustment time.
Fixed % Reduce Others IRPEF %	The fixed value entered here can reduce the IRPEF percentage of the Scaglioni by which gross tax is computed.

Salary of Reference	Enter the salary to use in the calculation of ranges of tax deductions. If blank, the system uses an estimate based on the payee’s earnings as follows: Year to day (YTD) income/YTD tax days * 365
Other Income	Enter additional income to use in the calculation of dependent detraction ranges. Select the currency for the additional income.
Dependant	Select either: Dependant spouse or Dependant child in place of if the dependent is a child in place of a spouse.
Exempt taxation assignee out	Select if the payee is not entitled to tax reductions because the payee is an assignee out tax exempt. Note. You must select this check box in addition to selecting a tax exempt status on the Define Assignee Data page.
Disable for Veneto	Select this check box if at least one dependant is disabled.