Prerequisite

All income, wherever produced, by resident subjects in cash or in kind, continuous or occasional, from any source, is subject to the general income tax.
Non-resident subjects are taxable persons limited to income produced in the territory.

Definitions

The following shall be understood as:

• Tax: the general income tax.
• Taxpayer: the taxable person of the obligations tax, or, the subject who, faced with a fact or a legal act revealing his/her ability to contribute, linked to the tax presupposition, is required to pay the latter. The taxpayer assumes the qualification of tax substitute when he/she is required to collect the tax due from another taxable person and to pay it to the Tax Administration, interposing himself/herself in the relations between the latter and the subjects.
• Tax Administration: the set of offices, bodies and authorities responsible for implementing tax provisions.
• Tax Office: the Office of the Public Administration responsible for the collection, control and assessment of the general income tax.
• Natural person: the individual holder of income. This definition also includes self-employed workers and owners of economic activities carried out in the form of individual businesses, partnerships and joint ventures.
• Cross-border worker: any worker who, employed in the territory of the State, resides in the territory of another State where he or she generally returns every day or at least once a week.
• Legal person: the legal entity constituted by the organised group of people and assets, to which the law attributes legal capacity.
• Economic operator: the entity who, regardless of the legal form, holds a licence or similar authorisation aimed at carrying out an economic activity.
• Residence: the place within the territory of the State in which a person carries out acts of private life, regardless of whether this constitutes the place of his or her registered residence in the State or his or her domicile.
• Centre of vital interests: the concentration within the territory of the State of the prevalence of the economic, patrimonial, social and family interests of a subject.
• Principal residence: the home where the taxpayer has his registered residence, or, in the absence of registered residence, his actual abode.
• Owner: the owner of the property or the holder of another real right on the same or the lessee in a financial leasing contract.
• Group of companies: the group of companies, resident and non-resident in the territory of the Republic of San Marino, consisting of the controlling company, or in any case capable of exercising a significant influence, and the companies directly or indirectly controlled by it, or in any case subject to a significant influence.
• Companies controlled companies:
  • those in which another company has, directly or indirectly, the majority of the votes that can be exercised for the purpose of appointing the members of the administrative body;
  • those in which another company, including on the basis of agreements with other shareholders, has, directly or indirectly, sufficient votes to exercise a dominant influence, for the purpose of appointing the members of the administrative body;
  • those over which another company has the right, by virtue of a law, another legislative or regulatory provision, a contract or a clause in the articles of association, to exercise a dominant influence for the purpose of appointing the members of the administrative body.
• Companies subject to significant influence: those in which another company has, directly or indirectly, at least 20% of the voting rights that can be exercised for the purpose of appointing the members of the administrative body, provided that there is no other partner, external to the “Group of companies”, who has the absolute majority of votes exercisable for the same purposes.
• Party related to the natural person: the companies controlled by the natural person as well as family members such as the spouse, relatives within thesecond degree and relatives within the second degree.
• IT application: is the IT procedure to which access is made possible electronically to the taxpayer, or to the person delegated by the taxpayer, which allows the insertion and transmission of tax declarations and the management of tax debit and credit balances.
• Electronic signature: constitutes the process, traced by the application, with which the user, duly registered and identified, after accreditation, validates the information entered.
• User: is the person who accesses the application, after identification, inserts the requested information and validates the contents. The user may be the taxpayer required to fulfill the declaration obligations, the employer, for the fulfillment of the obligations, or one of the delegated subjects.

Tax period

The tax is due for calendar years, each of which corresponds to an autonomous tax obligation.
The attribution of income to the tax period is governed by the rules relating to the category to which they fall.

Taxable persons

The general income tax applies to:

• to natural persons resident in the territory of the State;
• to natural persons not resident in the territory of the State for income therein products.

Natural persons are considered residents if, in the tax period in question, at least one of the following conditions applies:

• they have their registered residence in the State for the majority of the tax period;
• they reside for the majority of the tax period in the territory of the State;
• they have their centre of vital interests in the territory of the State.

Partnerships are not taxable persons; the income produced by said companies, in proportion to the profit participation shares, is attributed to each partner regardless of the actual perception.
Associations between professionals are assimilated to partnerships.

Classification of income

Income, including that produced abroad, is classified as follows:

• capital income;
• income from land and buildings;
• income from work and pensions;
• business income;
• other income.

Default interest and interest for payment deferral constitute income of the same category as that from which the credits on which such interest has accrued derive.
The income obtained in replacement of income, also as a result of the transfer of the related credits, and the compensation obtained, also in the form of insurance, as compensation for damages consisting in the loss of income, excluding those deriving from permanent disability or death, constitute income of the same category as those replaced or lost.
The proceeds deriving from participation association contracts are included in capital income if the contract provides exclusively for the contribution of capital; otherwise they are considered assimilated to income from employment.

Taxable base

The taxable base is constituted, for resident taxpayers, by the total income made up of all the income of the taxable person, net of the expected deductible charges, and with the exclusion of:

• income subject to separate taxation;
• income subject to withholding taxes as tax;
• exempt income.

For non-resident taxpayers, the taxable base is constituted by income produced in the territory of the State.
The following contribute to forming the income of the taxpayer, as they are imputed to him:

• income, excluding that of work as income of one’s own, of minor children living with one’s family, including recognized natural children, adopted children and affiliates;
• the income of others of which one has free disposal or administration without obligation to render accounts.

Deductible expenses

From the overall income, net of exempt income and income subject to separate taxation, if not already deductible in the determination of individual income and cumulatively with other permitted deductions, the following are deducted, if incurred in the reference tax period:

• expenses incurred in the territory of San Marino for the purchase of goods or servicesrdocumented by an invoice or equivalent document or carried out using electronic payment instruments defined by delegated decree;
• expenses incurred relating to diagnostic consultations, therapies or non-insurance products, falling within the categories defined by a specific circular from the Tax Office, provided that they are documented by an invoice or equivalent document or carried out using electronic payment instruments referred to in letter a) above;
• deductible liabilities provided for by tax regulations.

The liabilities referred to in point a) above are deductible for the maximum amount corresponding to the difference between €9,000.00 and the amount of the deduction.

The total amount of the deductible liabilities referred to in point b) above is determined in an amount equal to €2,500.00.

The deductions are not applicable where the Tax Office provides a synthetic assessment of the total income of the taxpayer, unless the taxpayer demonstrates that the synthetic assessment is due to force majeure.

The liabilities referred to in point a) can be used by tax residents in the territory of the State as well as cross-border workers and pensioners.

The liabilities referred to in points b) and c) can only be used by tax residents in the territory of the State.

The provisions may be modified by delegated decree, which may also integrate and modify the methods of application of the same, as well as provide for limitations on the types of goods and services referred to in the previous point a).

The Tax Office, as part of its control and assessment activity, may disavow in whole or in part the application of the deductible liabilities when it finds, subject to proof to the contrary provided by the taxpayer, phenomena of abuse and/or undue deduction aimed exclusively at obtaining the tax benefit.

Deductions subjective

The following are deductible from the tax on income owned by natural persons:

• euro 250.00 (two hundred and fifty/00) for a dependent spouse who is not legally and effectively separated;
• euro 250.00 (two hundred and fifty/00) for each dependent child;
• euro 125.00 (one hundred and twenty-five/00) for parents and parents-in-law even if they do not live together;
• euro 125.00 (one hundred and twenty-five/00) for each other dependent cohabiting family member;
• euro 125.00 (one hundred and twenty-five/00) for relatives and in-laws who actually exercise the right to maintenance.

With reference to the letter b) are considered dependents:

• minor children, including natural children, adopted children and affiliates;
• adult children permanently unable to work, those under the age of twenty-six who attend legal courses of study, including natural children, adopted children, affiliates and finally those who are unemployed; the latter must be regularly registered on the job placement lists and must not have refused job offers compatible with the duties provided for by their membership list and must also be living with the taxpayer.

The persons indicated in letters a), c), d) and e) are considered dependents if they have their own gross income for an amount not exceeding that of the social pension in the amount provided for by article 45, first paragraph of Law 11 February 1983 n.15 and subsequent amendments, if resident. The aforementioned limit does not apply to income received by disabled individuals.

The tax deductions for family expenses are related to the months of the year and are not available to non-resident taxable persons.

The deductions referred to in letter b) can be used only by one of the parents or, alternatively, by both in the amount of 50 percent each. If the deduction used by the parents exceeds 100 percent of the same, the deduction is determined at 50 percent for each parent.

The deductions referred to in letters c), d) and e) can be used in full by a single taxpayer or pro rata by the taxpayers who assume the family dependence.

The deductions are increased by 20 percent if the number of dependent family members exceeds two units, or when the dependent family member is a disabled person or a permanently infirm person.

The determination by the Tax Office of income of dependent family members above the threshold, entails for the taxpayer the ineffectiveness of the deduction and the consequent correction of the declaration.

For income from employment, assimilated to that from employment and from a pension of taxable income, the deduction is ineffective.up to €15,000.00 (fifteen thousand/00) are deducted from the tax €100.00 (one hundred/00).

Application of the tax

The general income tax is determined by applying the progressive rate for the indicated brackets.
For subjects with income from self-employment and business, the tax on income other than those mentioned above is determined by applying the progressive taxation for the brackets referred to in the previous paragraph, considering the rates and brackets applicable as a result of the sum of such income to the business or self-employment income.
For the subjects referred to in the previous paragraph, the expected charges apply and are deducted exclusively from income not subject to separate taxation.

Income produced abroad and credit d’imposta

If the overall income of individuals includes income produced abroad, the taxes paid there definitively or to be considered as such, in any case non-repeatable, on such income are allowed as a deduction from the net tax due up to the amount of the tax corresponding to the ratio between income produced abroad and the overall income.
By way of derogation, the taxes paid abroad definitively or to be considered as such, in any case non-repeatable, on business or self-employed income may be allowed as a deduction from the net tax due for such income produced in San Marino; this deduction is allowed up to the amount of the tax quota corresponding to the ratio between the revenues produced abroad and the total revenues, considering any losses from previous financial years admitted as a deduction.
The income is considered to be produced abroad on the basis of reciprocal criteria with respect to those foreseen to identify the application of the tax to non-residents and contributes to the formation of the total income based on the rules in force for the same types of domestic income.
If income produced in more than one foreign country contributes, the deduction is applied separately for each country.
For the purposes of this, the deduction must be made in the tax return relating to the tax period in which the foreign income contributed to forming the total income and such return includes the relevant taxes that have been definitively paid by 31 December of the year of its submission; the credit for taxes paid abroad cannot exceed the amount of the net tax due on the total income.
The deduction is not applicable if the foreign income has not been declared or in the event of failure to submit the declaration.  
If the period to which such income produced abroad belongs does not coincide with the period in which the foreign taxes were actually paid, except as provided in the previous paragraph, the deduction must be made in the declaration relating to this period, always with reference to the year of economic competence.
Any subsequent adjustments to the income produced abroad entail the consequent adjustment of the declaration where this income was declared within three years of the financial year of competence.
For taxes paid abroad, the deduction is due to the individual partners in the proportion established therein.
In the event that the income produced abroad contributes partially to the formation of the income, the deductible foreign tax must also be reduced by a corresponding amount.

Tax rates and brackets relating to the taxation of personal income

The brackets are adjusted every two years based on the increase in the cost of living index.
A maximum amount of €9,000.00 is deducted from the taxable income. This deduction is due for the part corresponding to the ratio between the amount of €40,000.00, reduced by the income referred to in the preceding paragraph, and the amount of €31,000.00. If the aforementioned ratio is greater than or equal to 1, the deduction is due in full; if it is zero or less than zero, the deduction is not due; in other cases, for the purposes of the aforementioned ratio, the first four decimal places are computed.

Aliqunotes on corporate income tax

The general corporate income tax is determined by applying the proportional rate of 17% to the calculated taxable income.