Sustaining the economy

Over recent decades, San Marino has undergone strong economic growth, also due in part to an increase in foreign investments. In fact, San Marino offers a number of tax benefits and financial facilities to new companies. Delegated decree no. 65 dated 29 May 2007, “Tax regulations to promote business investment and strengthening”, provides de-rating on re-invested profits for entities producing business income in the event of such entities, during the year in progress, having presented an investment project relating to their company. 

For purposes of the decree, considered as investments are the company projects envisaging:  

a) the acquisition of tangible and intangible assets, the introduction of technological improvements able to upgrade products or existing production processes, or the acquisition of plants or technologies aimed at making new products or creating new production processes: in this case, 60% of the operating profits used for such investments do not represent taxable income; 

b) the acquisition of plants, machinery or technological processes aimed at obtaining considerable and consistent energy savings or the significant reduction of pollutants according to the parameters, the coefficients and the procedures suitable for achieving the considerable and consistent energy saving and/or the reduction of pollutants, as established by specific laws and certified by the authorities legally appointed to carry out inspections; in this case, 90% of the operating profits used for such investments do not represent taxable income.

c) buildings, acquisitions, restructuring jobs or the extension of property aimed at upgrading existing production processes or introducing new production processes. In this case, 30% of the operating profits used for such investments do not represent taxable income.

Central position

It is undeniable that the Republic of San Marino, thanks to its geographic position in the heart of Italy, occupies a strategic position in the centre of Europe. The country is easy to reach from all major European capitals and Rome, Paris, Munich and Vienna are just 1 hour away by plane, while London is 2 ½ hours away. San Marino centre is only 25 km from the San Marino “F.Fellini” international airport, 74 km from Forlì airport and 120 km from Bologna airport. Again, only 25 km away are the railway station and marina. Not far away from San Marino are two large seaports: Ancona (120 km) and Ravenna (86 km).

Stability

Companies operating at international level in San Marino are able to count on good social and economic stability. One of the reasons for this is that most San Marino workers have stable jobs. In fact, expressions such as “job variability” or “precariousness and uncertainty” are not at home in the country because the State has always closely focused on job stability, considered at the bottom of social stability and a major factor for being able to start a family, buy a house, buy goods and make investments – in other words, allow the economy to tick over. San Marino laws have always been constructive in this sense and have always taken this process into account and tried to organize it in the best possible way. 

High employment figures

Another positive effect of economic stability in San Marino are the high employment figures. With only 3.6% unemployment, the Republic of San Marino is in a lead position not only within the EU, but at global level too. 

Safe life, safe property

As most people likely already know, San Marino is considered a haven as regards personal safety and tranquility, especially because of the fact that only a few kilometers beyond the country’s borders, the situation is completely different. This consideration is not only supported by factors such as an almost non-existent crime rate and absolute legal certainty, but also by simple aspects, there for all to see – such as walking out late at night in the parks of San Marino, without feeling in any way unsafe.

Furthermore, in the light of recent and dramatic natural disasters that have hit the rest of the world and also certain areas of Italy, it is impossible not to consider how such fears are practically non-existent for the people of San Marino: thanks in fact to its geological conformation, the country is not considered an earthquake zone and, because it is prevalently a hilly country, there is absolutely no risk of floods. Now, considering that such risk factors tend, to an increasing extent, to influence decisions on where to set up production facilities and make property investments, San Marino, which, according to major international insurance companies, is not a risk zone, has great appeal for property investors inasmuch as the country offers stability, safety and good returns over the years.    

Productivity and quality

The Republic of San Marino boasts numerous small and medium-sized businesses and industries, involving mainly mechanical engineering, building, ceramic production, printing and furnishings. San Marino businesspersons are extremely competitive in such production sectors and trade with virtually all the countries of the world. All these companies are endowed with modern equipment and cutting-edge technologies and make quality their strong point. Production companies account for 10% of the country’s total and contribute 38% of its GDP.  

Social security

As a welfare state, the Republic offers numerous goods and services to its citizens – free health care to people with low-incomes, social assistance to people who are unable to work and have no means of their own, workers’ accident, illness and old-age insurance and unemployment benefits. The country’s social security system protects persons with low incomes in case of need as well as unemployed workers. All San Marino citizens are entitled to both social assistance and social security services. 

Training

San Marino has an excellent education system, strong and fast-expanding. The country’s students can choose from a range of different types of secondary schools, including an Economic Lyceum, which recently went to join existing Upper Secondary Schools (classic, scientific, linguistic and technical institute). Professional training institutes cooperate closely with the business world. The San Marino University (www.unirsm.sm) attracts students from all over the world thanks to a teaching system closely focused on specialization.

Upgrade options are numerous and include university courses and post-graduate master courses. Attending university in San Marino is like studying in a small campus, with an excellent student-lecturer ratio. What is more, both advanced training institutes and the university employ a dual teaching system, i.e., theory and hands-on. Curricula or the fundamental points of the education system are adapted according to the requirements of the economic world and apprentices are given a chance to refine what they have learnt at school through training courses organized by companies or by spending training periods inside the firms themselves.   

Infrastructures

The Scientific and Technological Park project envisaged by the Cooperation Agreement with Italy signed on 31^st March last and to be located astride the Marche and Emilia-Romagna Regions and our country, has been approved. This initiative, to be implemented in conjunction with the Marche Region, will provide plenty of opportunity for concrete growth. Besides scientific and technological developments in fact, other strategic areas which have been identified, and for which special technical work teams will soon be set up, include infrastructures, the environment and welfare. As regards infrastructures, projects will be studied to upgrade the road system linking the two areas and initiatives will be implemented in the field of waste management and eco-sustainable policies, the latter two topics being of special interest to the Republic of San Marino. 

The San Marino tax system

The Law of reference is Law no. 91 dated 13 October 1984, amended by law no. 66 dated 29 May 2007 and by Law Decree no. 153 dated 4 November 2009. The San Marino tax system is appealing for foreign investors. In fact, in San Marino, companies pay 17% income tax, losses can be recovered and there are no other local levies on companies. What is more, the dividends received by a resident company from another resident company do not go to form the tax base. The dividends received by a resident company from a non-resident company represent business income and go to form the tax base. The possibility exists of applying the taxation procedure of income produced abroad reduced by 2% in the event of the dividends being subject to documented taxation at source. Cost deductions are also allowed: generally speaking, companies can deduct the costs sustained during the course of the business year, in accordance with the principle of pertinence. As regards reserves and provisions, companies can annually allot to a special credit risk fund an amount totaling 5% of the nominal receivables entered in the financial statements at the end of the business year.

The law also envisages a system for bringing forward losses: up to 90% of the losses of a period can be recovered from a tax viewpoint within the following three-year period. As regards tax withholdings, generally speaking interest paid by San Marino companies to non-resident companies, excepting those paid to financial companies and banks abroad, are not subject to withholding tax because they are non-deductible. Interest on bank deposits and current accounts is subject to an 11% withholding rate, by way of taxation for non-residents and by way of advance payment with respect to resident joint-stock companies – the European Community and the Republic of San Marino have signed an agreement establishing measures equivalent to those of the directive 2003/48/EC on the taxation of income from savings (15% - 20% - 35%). The dividends paid by a resident company are not subject to withholdings at source. The recipient resident in San Marino is exempt from taxation. The dividends received by a non-resident are subject to taxation according to the laws of the country of residence. The royalties paid to a foreign recipient are subject to a withholding of 10-20% of their gross amount. As regards taxes on imports, the reference law is Law no. 40 dated 22 December 1972, amended by Law no. 134 dated 22 December 1993.

There is no V.A.T. in San Marino, but there is a tax on the import of goods and services related to imports. This is a single-phase tax which applies to the total value of the goods imported into San Marino. The ordinary tax rate is 17%, but special rates exist for some types of goods (decree no. 108 dated 2 October 1997 and subsequent amendments, and decrees no. 135 dated 27 October 2003 and no. 100 dated 20 July 2004, on capital goods imports). Any exporting of the goods outside San Marino entitles to the recovery of the single-phase tax paid at the time of importing (according to specific procedures). 

Quality of life

In San Marino, the expression “quality of life” immediately brings to mind the general situation of well-being enjoyed by the people of San Marino thanks to the fact that they are able to benefit from a series of political, economic and social advantages which enable them to fairly easily develop their human potential and live a relatively serene and satisfactory life. Of course, the excellent quality of life in San Marino is also the positive result of the major social indicators, such as, for example, security, social equality, political freedom, physical health, access to education, which are all extremely positive within the country.