How San Marino's economy lived on its difference from Italy

How San Marino earned from its difference with Italy

For a century and a half, a large part of what San Marino has sold is the fact of being a separate state inside Italy. The first economic treaty with the new Kingdom of Italy, signed in 1865, created a Sammarinese lira equal to the Italian one and legal tender in both countries. A postal agreement of March 1877 let the republic issue stamps of its own, carrying the Three Towers, and it issued its first commemorative stamps in 1894. Britannica still lists fine printing, particularly of postage stamps, as a consistent source of revenue, and Wikipedia describes the stamps as mostly sold to philatelists.

The treaties with Italy set the terms on which that difference could be used. Under the Turin convention of 1862 San Marino gave up growing tobacco and opening gambling houses that could compete with Italian monopolies, and in return its goods passed through Italian ports free of duty. The government's own history calls that exemption the guarantee of Titano's economic survival. The convention of friendship and good neighbourliness signed in 1939 created a customs union with Italy and restricted tobacco cultivation, gambling and radio broadcasting on the territory. The politics article follows the treaties as treaties. For the economy, each of them drew a line between what Titano could sell to Italians and what it could not.

The land itself stopped paying a long time ago. Britannica records that centuries of quarrying exhausted Monte Titano's stone and ended the craft that depended on it, so the territory now has no mineral resources, and all of its electricity comes over the grid from Italy. Wikipedia adds natural gas and most food and water to what arrives from the same neighbour. The traditional economy was food crops, sheep and stone. Farming now turns on grain, vines and orchards, with cattle and pigs, and Wikipedia calls its contribution to output marginal. Wine and cheese are the products it names.

Emigration was the older answer to hard times. Towards the end of the nineteenth century a rising birth rate and a widening gap between farming and industry sent Sammarinese to seasonal work in Tuscany, Rome, Genoa and Trieste, and then whole families to the United States, Argentina and Uruguay. That movement lasted into the 1970s.

How banking came to carry San Marino's economy

The government's published history dates the change to the decades from the 1960s to the 1990s, which it describes as an economic expansion driven by a fast-growing banking sector and a competitive commercial system. For those decades, in its own words, the republic drew capital and productive activity thanks to favourable taxation. The highway from Rimini opened in 1965, and the same history places the turn to mass tourism, and the move from a rural economy to one of services, commerce and tourism, in the years after it.

Taxes on labour and capital income were lower than in Italy, and Wikipedia connects that gap directly to the strict requirements for obtaining Sammarinese citizenship. A personal income tax was introduced in 1984. Companies could be registered anonymously and bank accounts were covered by secrecy. By 2008 deposits in the republic's banks had reached almost €14 billion.

The state's own books were in good order at the same point. Wikipedia's account of the years before the great recession has the central government running a budget surplus and carrying no national debt.

The first commitments to change the model came in 2002 and 2004. In 2002 San Marino signed an agreement with the OECD on transparency in banking and taxation, meant to help combat tax evasion. In 2004 it signed an agreement with the EU on the taxation of savings income, applying measures equivalent to an EU directive to interest paid in San Marino to residents of member states.

What the end of banking secrecy cost San Marino

The global recession of 2007 and 2008 hit the republic hardest in finance and banking. Output fell by 40% between 2008 and 2019. Unemployment, close to zero in 2007, rose to around 5 to 8% in the years that followed. Deposits fell to €5.2 billion over the same period. A liquidity crisis followed, and Wikipedia points to the absence of a lender of last resort as the thing that made it worse, since San Marino is not part of the European Union. The government bailed out several banks, among them Cassa di Risparmio.

The transparency measures came in the same years. The government's history dates the turn from 2008, under pressure from changes in global finance and from OECD and European standards, and records that San Marino gave up banking secrecy and adopted strict rules against money laundering. Anonymous companies were abolished in 2010 and banking secrecy in 2017. Italy took San Marino off its blacklist of tax havens in 2014, and Ecofin took it off the EU's list in 2017. The savings agreement with the EU was rewritten by a protocol in force from 1 June 2016 to apply the OECD standard for automatic exchange of financial account information.

The sources do not separate the two causes. Wikipedia attributes the contraction to the recession. The government's history describes the transparency path as courageous and laborious. Neither puts a figure on how much of the roughly €8.8 billion that left the banks between 2008 and 2019 went because of the crisis and how much because the secrecy it had come for was gone.

The state carried the bill. Supporting the real economy and rescuing the banks came, in Wikipedia's words, at a high price for the soundness of public finances. The official estimate put government debt at 32% of output in 2020, and the IMF, counting a broader set of the government's liabilities, put it at 86%. San Marino issues no public debt securities traded on markets, but Fitch rates it. The rating was cut from AA to A in 2009 and to BBB in 2016, and Wikipedia's revision of September 2026 gives it as BB+.

How far San Marino's output has recovered

The IMF's Article IV consultation, concluded on 24 November 2025, describes an economy that has grown every year since the pandemic, fastest at first. Real output grew 14.4% in 2021 and 7.9% in 2022, then 0.4% in 2023. The Fund estimated 1.0% for 2024 and projected 1.2% for 2025. Nominal output reached €1,929.7 million in 2024 on its figures.

The Fund credits services, sustained since the pandemic by tourism and domestic consumption, and says that weak foreign demand for goods held manufacturing back. Employment was at record levels and wages were rising fast. Inflation had settled at 2%.

The Fund was more cautious about the banks. The share of loans not being repaid fell from 59.0% in 2021 to 16.9% in 2024, after the authorities enforced calendar provisioning and an asset management company recovered more than expected. Regulatory capital rose to 18.2% of risk-weighted assets in 2024. The Fund's directors welcomed the gradual replacement of perpetual bonds in the state-owned bank and the removal of ownership restrictions that had stood in the way of recapitalisation. They also named what is left: large holdings of assets that earn nothing, high operating costs, extensive branch networks and tight capital in some banks.

Output per person stood at $59,871 in 2023 in the World Bank series the site's record uses, and at $78,810 at purchasing power parity. The IMF's own table gives $59,415 for the same year. Wikipedia puts the 2025 figure at almost $62,000.

What San Marino makes and where it sells

Manufacturing and finance together account for more than half of output, by Wikipedia's account. The factories make ceramics, clothing, fabrics, furniture, paints, spirits, tiles and wine, and Britannica adds electronics, cosmetics and jewellery. Ceramic and wrought-iron work and modern and reproduction furniture are the craft trades Britannica names as traditional.

The trade figures run large against the size of the economy. The IMF counted exports of goods and services at 181% of output in 2024 and imports at 151.1%, which left a current account surplus of 18.4% of output. Italy took around 88% of exports and supplied 78% of imports in 2017, according to Wikipedia, with France and Germany next among the partners.

Everything from outside that customs area arrives by way of Italy. The conventions forbid direct import, so goods from third countries travel through Italian territory to reach the republic. San Marino's customs union with the European Union dates from an agreement of 1991, and a decision of the joint Cooperation Committee of 27 July 1993 set out how import duties collected by the Community on San Marino's behalf are paid over to the Sammarinese exchequer. A 2013 agreement gave San Marino a forty-year concession over areas of the airport at Rimini for a terminal with its own customs border. By August 2023 the Sammarinese authorities still had no presence there.

The number of companies is growing and changing mix. The statistics office counted 5,316 active businesses on 31 March 2025, 101 more than a year before. Finance and insurance grew by 28.2% and health and social care by 13.3%, while manufacturing lost 20 firms. In 2022 the three sectors with most registered companies were retail with 756, wholesale with 753 and services with 752.

The same office counted 53,670 vehicles on the register on 31 March 2025, against 34,059 residents on the same date. Of the 800 new vehicles registered by that date, 235 were electric or hybrid.

How San Marino taxes income and imports

The schedule Wikipedia gave in 2026 sets the general corporate income tax, the Imposta Generale sui Redditi, at 17%. A new business pays 8.5% for its first five years if it hires one employee within six months and a second within 24 months. Start-ups in the republic's innovation programmes pay nothing for three years, 4% for the next four and 8% for the five after that. Wikipedia sets the 17% rate beside 23% in Italy and an EU average of 21.3%, and states that businesses and wealthy Italians have based themselves in San Marino for the difference.

Personal income tax runs in three bands in the same schedule: 9% on income up to €10,000, 13% between €10,001 and €25,000, and 35% above that. The tax dates from 1984 and was reformed in 2013 to raise more revenue. Dividends paid to individuals are taxed at 5% at source, interest at 13% and royalties paid to non-residents at 20%. Dividends received by non-resident companies are 95% exempt after twelve months' holding, and investment in capital goods or property can cut taxable income by up to 90%.

There is no value added tax. San Marino levies a single-stage import tax, the imposta monofase, at a standard 17% of the import cost of goods. It is charged once, at the point of import, and never on services. Under the customs union with the EU it is treated as equivalent to VAT.

That arrangement is the one the IMF has asked about. Its directors welcomed a recently approved income tax reform and said a well-designed VAT would reduce distortions and make integration with the EU single market easier. They also asked for more efficient public spending, slower growth in public wages and a pension system that can be sustained over the long term.

Who works in San Marino's economy

The statistics office counted a labour force of 25,001 on 31 March 2025, 453 more than a year before. Employees numbered 22,766, up 2.2%, with information and communication services adding 91, business services 74 and manufacturing 39. Unemployment stood at 4.00% on the broad measure and at 2.24% on the strict one, with 663 people out of work, 372 of them in the strict sense.

The same count put the resident population at 34,059 and the population present, which includes those staying on permits, at 35,482. Sammarinese citizens made up 79.6% of those present and Italian citizens 16.1%.

Britannica describes the state as trying to keep unemployment down by finding work for those private firms do not hire, and lists free medical care, family allowances and help with home ownership among the benefits for citizens who pay social security contributions. The wage guarantee fund, the Cassa Integrazione Guadagni, paid out €4.52 million in 2024, €1.2 million more than in 2023.

Tourism employed a steady 3,500 people from 2014 to 2018, according to Wikipedia's article on the sector: about 700 in hotels, around 100 in travel agencies and reservation services, and 2,500 in the rest of the trade.

What visitors spend on Monte Titano

The statistics office counted 2,110,236 visitors in 2025, up 1.97% on the year before. Wikipedia's figure for tourism's share of output is over 22%, from a year, 2014, when about 2 million came. Most visitors are Italians on holiday on the Romagna coast who spend half a day in the republic, or a night at most. In the first quarter of 2025 San Marino had 271,716 visitors and 31,261 overnight stays, and 65.2% of those who stayed were Italian. In 2025 Italy supplied 52.64% of hotel arrivals and Germany 8.10%.

Beds numbered 2,193 in 2025, 5.6% more than in 2024 after a hotel added rooms and five bed and breakfasts opened. The tourist tax raised €404,289 the same year. Payments on the San Marino Card give a measure of spending in the historic centre. Hotels and restaurants took €19.7 million through it in 2025, 38.42% more than in 2019, and shops €59.7 million, so card spending in the centre came close to €80 million.

Collectors are a market of their own. San Marino may put its own designs on the national side of euro coins, which the Italian mint in Rome strikes in small numbers that Wikipedia says are sought after by coin collectors. The conventions leave it the right to issue gold coins in scudi, and Wikipedia's revision of September 2026 gives one gold scudo a legal value of €37.50. All ten post offices sell stamps and collectable coins, and the tourist office sells officially cancelled souvenir stamps for passports, though the border itself has no formalities to stamp them.

What the association agreement asks of San Marino

The euro arrived through Italy. An agreement of 29 November 2000, signed by Italy on behalf of the Community, gave San Marino the euro as its official currency from 1 January 1999, and the republic replaced the lira in 2002. A monetary agreement signed directly with the EU came into force on 1 September 2012 and brought the Union's rules on euro notes and coins, counterfeiting included, into San Marino's territory. The customs union agreement of 1991 came fully into force on 1 April 2002.

The association agreement goes further. On 16 July 2026 the Council of the EU authorised its signature and provisional application. It brings San Marino and Andorra into what the Council calls a homogeneous extended internal market, under equal conditions of competition and the same rules as the rest of the Union. Financial services are included on different terms: access is to come in stages, and only after an audit of the two countries' regulation and supervision, with a role for the European Supervisory Authorities.

The IMF expects the agreement to help. Its board said in November 2025 that faster implementation could lift growth and attract foreign investment, and asked for the regulatory framework to be upgraded to match it. The government's history puts the case in its own terms: exclusion from the single market had become a limit on growth, and the republic has accepted a large part of European law in exchange for the four freedoms of movement.