Direct taxes San Marino offers a competitive tax regime.
The legislation on direct taxation has a modern structure, characterised by a competitive tax rate, as well as by simplified and computerised procedures, both for individuals and businesses.
Ordinary Corporate Income Tax is equal to 17% of taxable income.
However, new business activities run in the form of sole proprietorship or self-employment, whose owners have not carried out in San Marino, in the twelve months before the submission of the request, an economic activity similar to that for which access to the benefit is requested, are entitled to a tax exemption equal to 50% of the ordinary taxation for the first 5 years of operation, which reduces taxation to 8.5% of income..
Moreover, new business activities benefit from exemption from payment of the annual licence fee and from the renewal fee for the following three years of operation.
Such benefits also apply to companies with share capital whose shareholders have not run in San Marino, during the twelve months prior to the submission of the request, a business activity similar to that for which access to benefits is requested, when these:
- are newly established companies;
- hire at least one worker, including the director, even if not registered in the public placement lists, provided that he/she is hired on a full-time basis, within six months of the issuance of the license and one additional worker is hired within twenty-four months of the issuance of the license.
Additional incentives for all business activities:
- reduction of taxable income from 40% to 90% up to the value of capital goods or real estate investments;
- deduction of tax losses from taxable income (up to 80% of income).
Law 166/2013 (as amended by Law 155/2017 and Delegated Decree 108/2018)
Costs are fully deductible with the exception of:
- advertising costs and sponsorships, which can be deducted up to 8% of operating income;
- data processing and market research costs, which can be deducted up to 10% of operating income;
- entertainment costs, which can be deducted up to 5% of operating income.
Such limitations may be removed in specific cases.
In San Marino:
- dividends paid to individuals are taxed at 5%.
- royalties paid to non-residents are taxed at 20%.
- A withholding tax of 13% is levied by companies on interests paid on loans granted by other companies and individuals. This withholding tax does not apply if the financing is granted by a San Marino credit institution (Law 165/2005 LISF).
- A withholding tax of 11% is levied on interests on current accounts and deposits. This withholding tax does not apply to non-residents.
- A withholding tax of 5% is levied on interest and income from repo transactions. This withholding tax does not apply to non-residents.
In case of dividends, interests and royalties paid to foreign individuals and entities the terms of the relevant double taxation agreement (if present) apply.
The sums or values resulting from the distribution, in cash or in kind, of profits or other reserves, also in case of liquidation, by companies or entities having legal personality, not residing in the territory of the Republic of San Marino, do not contribute to the formation of the income of the receiving company, since 95% of such amounts is excluded from the formation of the receiving company or institution.
Such exclusion applies on the condition that the participation in such companies or entities has been held continuously for at least twelve months and it results from company records and from at least one budget.
There is no taxation on capital gains on the transfer of shareholdings in resident or non-resident companies if:
- the shareholdings are held continuously for 12 months before they are sold;
- the shareholdings are recorded as long-term investments in the first financial statements after their acquisition.
All economic operators of San Marino who pay, even occasionally, fees in cash or in kind or in any other way for services of self-employment or similar to persons residing abroad (directors, auditors, or as a result of coordinated and continuous collaboration, use of trademarks, intellectual property, copyrights, industrial inventions and the like) must apply, at the time of payment, a withholding tax of 20%.
The withholding tax does not apply to reimbursements relating to documented travel, board and lodging expenses and documented expenses incurred in the name and on behalf of the client, when the receipt or the invoice is in the name of the client.
For high-tech startups tax relief for a total period of 12 years, as provided by Delegated Decree no. 25/2019
Indirect tax rate on goods and related services imported to San Marino by economic operators called "import tax or single-stage tax" is equal to 17%. Such tax is refunded when goods are subsequently re-exported. Certain categories of goods (e.g. food, medicines, etc.) are subject to different rates depending on the reference product table (e.g. 2%, 6%).
The purchase of capital goods is subject to a non-refundable 1% preferential rate.
The 1% rate is applied to capital goods with a unit value higher than € 500.00.
A 7% rate is applied to vehicles used both for business and private use, with limitations on the number and engine capacity.
For second-hand goods, 50% of the relevant rate is applied.
Regulation governing depreciations and provisions
All tangible and intangible assets used for business and self-employment as well as the multiannual expenditures are depreciated/amortised on the basis of the maximum annual percentage rates shown in the following table.
Employers who increase the average number of employees, provided that at least 50% of them is resident, qualify for a tax credit on the general income tax due equal to:
- 5 % of the tax for each new worker, for businesses with a number of employees greater than or equal to 5;
- 10% of the tax for each new worker, for businesses with less than 5 employees.
This tax credit cannot exceed 25% of the total tax due.
If the new resident worker belongs to a weak category (long-term unemployed, disabled, etc.), the above percentages are increased by a further 5% for each worker hired. The tax credit cannot exceed 40% of the total tax due.
Additional incentives are envisaged for female employment click here.
|Tax applies to income wherever produced TAXATION "ON A WORLWIDE BASIS" With foreign tax CREDIT||Tax applies only to income generated in the territory of San Marino TAXATION "ON TERRITORIAL BASIS"|