General Information
Country Name: San Marino
Currency: Euro (€) (EUR)
Primary Tax Authority: Central Tax Office (Ufficio Tributario)
Key Legislation:
- Income Tax Law No. 166 of 2013
- Law No. 92 of 2008 on Prevention and Combating of Money Laundering
Fiscal Authority Allocation
Centralized Fiscal System:
San Marino operates a centralized tax system, where taxes are primarily collected at the national level, with no substantial local or municipal taxation.
Corporate Income Tax (CIT)
Standard Rate: 17%
San Marino imposes a flat 17% corporate income tax on resident companies. Entities incorporated in San Marino or that have their effective management there are considered tax residents.
Incentives:
- New Business Incentive: For new businesses, the CIT rate is reduced to 8.5% for the first six years of operation.
- R&D Expenditure: Deductions are offered for certain R&D expenses, encouraging innovation.
Goods and Services Tax (GST) / Value-Added Tax (VAT)
San Marino does not have a traditional VAT system, but instead applies a General Income Tax on Imports (IGR) at a rate of 17%. It functions similarly to VAT for imported goods, but local goods and services are taxed through a simplified consumption tax.
Personal Income Tax (PIT)
Progressive Rates:
San Marino applies a progressive personal income tax, ranging from 9% to 35%, depending on the individual’s income bracket.
- Income up to €10,000: 9%
- Income between €10,000 and €25,000: 13%
- Income above €25,000: 35%
Exemptions:
There are several deductions and exemptions available, including for dependents, education expenses, and medical costs, which reduce taxable income.
Additional Mandatory Contributions
Social Security Contributions:
San Marino has a comprehensive social security system that covers healthcare, pensions, and unemployment benefits.
- Employer Contribution: 22.5%
- Employee Contribution: 10.5%
Withholding Taxes
- Dividends: 5%
- Interest: 13%
- Royalties: 20%
San Marino imposes withholding taxes on dividends, interest, and royalties paid to residents and non-residents, but certain treaty agreements may reduce these rates.
Transfer Pricing Rules
Arm’s Length Principle:
San Marino follows the arm’s length principle for related-party transactions and adheres to international standards, including OECD guidelines. Companies must maintain documentation to demonstrate compliance with transfer pricing rules.
Special Tax Regimes
- Investment Incentives: Companies that invest in priority sectors, such as technology and renewable energy, may qualify for tax credits or reductions in CIT.
- Holding Companies: San Marino offers favorable conditions for holding companies, including reduced taxation on dividends and capital gains under certain circumstances.
Other Taxes
- Real Estate Transfer Tax: 4%
A tax on real estate transfers is levied at 4% of the transaction value. - Excise Duties: San Marino applies excise duties on products such as tobacco and alcohol, though rates are generally low.
Double Taxation Agreements (DTAs)
Growing DTA Network:
San Marino has signed numerous double taxation treaties with countries such as Italy, Luxembourg, and the UAE, aiming to prevent double taxation of income and to promote cross-border trade.
Local Taxes
No Local or Municipal Taxes:
San Marino’s tax system is fully centralized, with no local or municipal taxes imposed on residents or businesses.
Compliance and Reporting
Annual Filing:
Taxpayers are required to file annual returns, with companies subject to corporate tax needing to declare their income and pay the relevant taxes. The deadline for filing is generally six months after the end of the financial year.
Penalties for Late Filing:
Penalties for non-compliance or late filing range from monetary fines to interest charges on unpaid taxes, depending on the severity of the breach.
Recent Developments
Tax Transparency:
San Marino has taken significant steps to comply with international transparency standards, including joining the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes.
Modernization of Tax System:
Recent reforms focus on simplifying tax compliance and promoting foreign investment, including efforts to digitize tax reporting and streamline administrative procedures.
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