Business & Corporate Taxation – San Marino

Flat corporate income tax (IGR) on taxable profits. Lower than Italy (27.9% total) and EU average (21%). Applies to: limited liability companies (S.r.l., minimum €25,500 capital), joint stock companies (S.p.A., minimum €77,000 capital), foreign companies with permanent establishment.

50% reduction in corporate tax for all new business activities for first 5 years. Transitionally extended through 2030. Effective rate 8.5% instead of 17%. Plus exemption from annual authorization fee and renewal fees for first 3 years. Major incentive for new entrepreneurs.

Highly innovative startups with under 10 employees and revenue under €300,000 qualify for special progressive taxation from 0% to 8%. Even better than general new business rate. Must meet innovation criteria: high-tech, R&D focused, or disruptive business model.

San Marino doesn't apply VAT. Instead: General Consumption Tax (Imposta Generale sui Consumi - IGC) called Monofase. Single-stage tax on goods and services imported to San Marino. Standard rate 17%, same as corporate tax rate.

Reduced rate 6%: essentials like food, books, medicines. Super-reduced rate 2%: certain cultural goods. Exemptions: financial services, education, healthcare, exports. Special agreement with Italy regulates cross-border trade to prevent double taxation.

Critical advantage: businesses can completely recover Monofase tax paid on imports. Impact goes to zero for companies. Only end consumers effectively pay. Unlike VAT, no reporting on transactions with local firms. Simpler administration.

Reduction of taxable income for fixed assets and capital goods investments when: (1) held over 5 years, AND (2) used for technological upgrades, real estate improvements, or business expansion. Encourages long-term productive investment.

Companies can exempt portions of income from intellectual property that qualify under specific 'nexus ratio' cost requirements. Must show substantial R&D expenditure. Aligns with OECD BEPS Action 5. Patent box regime for innovation-driven income.

Private investors in qualifying San Marino startups get exceptional deductions: Years 1-3: 80% of investment deductible from taxable income. Years 4-7: 60% deductible. Years 8-12: 20% deductible. Example: Invest €50,000 in year 1, deduct €40,000 from income = save €8,000-14,000 tax depending on bracket.

Businesses can offset up to 80% of losses against taxable income for 3 years following. Cannot carry forward 100%, but 80% limit still generous. Helps startups and businesses during difficult years. No indefinite carryforward like some jurisdictions.

San Marino has 23 Double Taxation Treaties based on OECD Model with countries including: Italy, Switzerland, Austria, Germany, France, UK, Singapore, UAE, Qatar, Malta, Cyprus, Seychelles. More being negotiated. Prevents double taxation on cross-border income.

31 Tax Information Exchange Agreements (TIEAs) signed. Automatic information exchange operational since September 2017. Signed FATCA agreement with USA in 2015. Bilateral agreements with 110 jurisdictions to send information, 90 to receive. Full transparency, no longer tax haven.

Not EU member but customs union agreement for trade with EU. Facilitates import/export. Some EU directives inapplicable (especially direct taxation). Negotiating Association Agreement. Strategic position for EU market access without full membership obligations.

Taxes paid abroad definitively (not recoverable) on business or self-employment income may be deducted from net San Marino tax due. Deduction admitted up to amount corresponding to ratio between foreign revenues and total revenues. Prevents double taxation.