Germany vs Italy taxes (2026): wage tax, forfettario and CGT

Germany vs Italy tax rates at a glance

Tax	🇩🇪 Germany	🇮🇹 Italy
Income tax	Basic allowance: EUR 12,348 Entry rate: 14% Top rate: 45% Solidarity surcharge: 5.5% Church tax: 8% / 9% Employee pension, unemployment, health and care contributions: Capped	Personal income tax: 23% - 43% Regional surtax: 1.23% - 3.33% Municipal surtax: 0% - 0.9% Employee social security: around 10% Tax on wages: withholding applies
Corporate tax	Corporation tax: 15% Solidarity surcharge: 5.5% Trade tax base rate: 3.5% Trade tax effective range: 7% - 20.3% DMTT / Pillar Two: 15%	Corporate income tax: 24% IRAP: 3.9% Financial sector IRAP: higher Digital services tax: 3%
Capital gains tax	Securities gains tax: 25% Solidarity surcharge: 5.5% Church tax: 8% / 9% Saver allowance: EUR 1,000 / EUR 2,000 Private-sale holding period: 1 year / 10 years	Capital gains tax: 26% Government bonds: 12.5% Real estate gains: 0% / 26% Crypto gains: 33%
Dividend tax	Dividend withholding tax: 25% Solidarity surcharge: 5.5% Church tax: 8% / 9% Annual saver allowance: EUR 1,000 / EUR 2,000	Dividend withholding tax: 26% Foreign dividends: 26% Corporate participation exemption: 95%
Wealth tax	Net wealth tax: 0% Net worth tax: 0% Annual asset tax: 0%	Net wealth tax: 0% IVIE: 1.06% IVAFE: 0.2% IVAFE on privileged regimes: 0.4%
Inheritance / estate tax	Tax class I: 7% - 30% Tax class II: 15% - 43% Tax class III: 30% - 50% Tax-free allowances: EUR 20,000 - EUR 500,000	Spouse and direct descendants: 4% Brothers and sisters: 6% Other relatives up to 4th degree: 6% Other beneficiaries: 8%
VAT / GST / sales tax	VAT: 19% / 7%	VAT: 22%

Who wins on each tax

Personal income taxItaly

Italy's national IRPEF tops at 43% before local surtaxes, below Germany's 45% plus solidarity surcharge, though social-security mixes differ.

Corporate taxItaly

Italy combines 24% IRES with generally 3.9% IRAP; Germany's corporation tax plus trade tax often approaches 30%.

Capital gains taxGermany

Germany generally taxes securities at 25% plus solidarity surcharge after a EUR 1,000 saver allowance; Italy's standard substitute tax on financial gains is 26% (33% for most crypto from 2026).

Inheritance taxItaly

Italy generally uses 4%, 6% or 8% with relationship allowances; German inheritance and gift tax is 7% to 50% after allowances.

The verdict

Ordinary employment is heavy in both countries. Germany withholds wage tax on a 0% to 45% scale plus solidarity surcharge and capped social security. Italy's IRPEF runs 23%, 35% and 43% plus regional and municipal surtaxes, with employee INPS around 10% and a much larger employer layer.

Italy is often the better special-regime story: qualifying small businesses can use forfettario substitute tax instead of ordinary IRPEF, and most financial income is taxed at a 26% imposta sostitutiva. Germany has no equivalent small-business flat tax and generally taxes securities at 25% plus surcharge through withholding.

Choose Germany for predictable payroll, listed portfolios and a larger industrial market. Choose Italy when succession rates, a qualifying forfettario or new-resident lump-sum, or Italian operating life matter more than wage-tax uniformity.

How to read this comparison

Germany and Italy are both high-compliance EU payroll states. The difference is how much of the bill is standardised. German employees usually see wage tax withheld against a national progressive tariff from 0% to 45%, with solidarity surcharge on many liabilities and church tax in participating states. Social security is capped and collected through payroll. Self-employment and partnerships then meet trade tax as well as income tax, which is why a German sole trader is rarely a low-tax structure.

Italy also withholds on employment, but the final IRPEF bill includes regional surtax of about 1.23% to 3.33% and municipal surtax of up to 0.9%. National bands are 23% to EUR 28,000, 35% to EUR 50,000 and 43% above that. That ordinary stack is not the whole Italian toolkit. Qualifying small businesses may use the forfettario regime, a substitute-tax route that replaces ordinary IRPEF on eligible turnover. Separately, most dividends and capital gains are taxed at a 26% imposta sostitutiva, with 12.5% on government bonds and 33% on most crypto gains from 2026. New residents arriving from 1 January 2026 who qualify for the inbound lump-sum pay EUR 300,000 a year on eligible foreign income, with family members generally at EUR 50,000.

Corporate comparisons are closer than the slogans. Italy uses 24% IRES plus generally 3.9% IRAP. Germany uses 15.825% corporation tax including solidarity plus municipal trade tax, often around 30% combined. VAT is 19% in Germany and 22% in Italy. Germany has no net wealth tax; Italy has no general wealth tax but charges IVIE and IVAFE on foreign real estate and foreign financial assets.

Choose Germany when the person is on German payroll or needs a uniform listed-securities withholding system. Choose Italy when the file actually fits forfettario, the 26% financial substitute tax, Italian succession rates or a genuine new-resident lump-sum — not because the top IRPEF rate is two points below 45%.

Which one fits you

🇩🇪 Choose Germany if you're a…

Employees on German payroll withholding
Listed-securities investors using Abgeltungsteuer
Groups that need Germany's industrial customer base

🇮🇹 Choose Italy if you're a…

Qualifying small businesses considering forfettario
Families comparing 4%/6%/8% succession rates
Inbound residents who genuinely fit the lump-sum regime

Frequently asked questions

Is Germany or Italy better for employees?

Germany is usually more uniform because wage tax is withheld from payroll on a national tariff. Italy's IRPEF plus local surtaxes and INPS can be similar or heavier depending on region, so net pay should be modelled rather than read from the top rate.

Does Italy's forfettario beat German self-employment tax?

It can for a qualifying small business that meets the forfettario conditions, because substitute tax replaces ordinary IRPEF on that activity. It is not available to every freelancer, and German trade-tax and income-tax rules still apply if the activity remains German.

Which country is better for inheritance?

Italy is usually lighter on close-family transfers with 4%, 6% or 8% rates. Germany's 7% to 50% scale after allowances can be much heavier outside large exemptions.