Sunnyvale, CA -- (SBWIRE) -- 09/26/2011 -- The Italian Ministry of Economy has announced that it has approved the legislation of Law Decree no. 138 of August 13/2011 and Law Decree no. 148 of September 14/2011 which includes an increase in the rate of Value Added Tax (VAT) to 21% from the existing rate of 20%.

The increased VAT rate is effective from September 17, 2011.

The aforesaid decrees shall affect investment in Italy by way of:
- A New Withholding Tax of 20% on financial Income
- An increase in VAT rate to 21%

The emergency decree aims to cut the Italian deficit and balance the budget by 2013.

Withholding Tax on Financial Income
Under the new regime, a flat 20% domestic withholding tax shall apply on Interest, Dividends and Capital gains (on non-qualified participation). The new withholding tax regime is likely to be effective from January 1, 2012.

VAT Rules
As the VAT General Laws are different for goods and services, the correct VAT rate to be applied must be identified depending on the point of time when the operation/sale can be considered as "preformed.”.

Accordingly, sales performed before the effective date will remain subject to the old 20% rate; while sales performed starting from the effective date (publication of the new Law in the Official Gazette) will be subject to the new 21% rate.

Additionally, the Italian Government has also imposed a corporate tax surcharge named ‘Robin Hood Tax’ on certain ‘rich’ industry sectors including energy, banks and financial institutions.

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