As employees, the bulk of the work is with your employer. Italy has a sort of pay-as-you-earn system (generally referred to as 730 after the form used), which incorporates various personal deductions. You will be asked by your employer to provide information on your family status (if you have a dependent spouse and/or children), if you are making deductible mortgage payments, life insurance premiums or supplementary pension contributions, if you have other deductibles such as medical expenses, or if you have other income needing to be declared. Make sure that you keep your company up to date with any changes in these situations.

If you would prefer not to let your employer know about certain situations - say other sources of income that you would prefer to keep secret - then you can use an outside CAF (centro di assistenza fiscale) or a commercialista when it comes to filing your tax return.

In straightforward situations, all of your income tax payment and filing requirements will be fulfilled through the 730 system. The company will deduct each month an amount of tax that is one-twelfth (assuming 12 monthly payments) of the total tax expected to be due for the year. There will then be an equalisation (conguaglio) at the end of the year, which usually affects your January salary.

In more complicated situations, you may have to file a separate tax return (dichiarazione dei redditi), which is now called a Modello Unico, though it used to be called - and many people still refer to it as - the 740 (pronounced SetteeQuaranta). In theory, Italy (like the USA, but unlike the UK) taxes you - if you are tax-resident in Italy - on your worldwide income.

ICI (The Imposta Comunale sugli Immobili) is an annual property tax paid in June and December.

IRAP (Imposta Regionale sulle Attività Produttive).This is a relatively new tax (introduced 1998) which replaced ILOR, ICIAP, TSS and a variety of other minor taxes. It has to be paid by businesses on a sort of gross profit figure and includes health contributions for both the employer and employees.

IRPEF (Imposta sul Reddito delle Persone Fisiche) The IRPEF is a direct and progressive tax on personal income derived from any source (salary, income from property, dividends, etc.). This tax is paid by means of deductions from one's paycheck, or if one is self-employed, with a tax return (dichiarazione dei redditi, now called the Modello Unico). Taxes usually have to be paid by the end of May and returns filed by the end of June, but deadlines often vary year to year.

Here are the rates applicable on taxable income for 2000:

Local incomes taxes can add up to 1% to these rates.

IRPEG An abbreviation for corporate income tax.

IVA (Imposta sul Valore Aggiunto or Value Added Tax), an indirect tax charged on most products and services. IVA usually amounts to 20% and creates no complication for the consumer, as it is already included in the price of retail goods.

Social Security Charges are around 10% of income.