Last modified: 30/01/2025 11:57

Corporate taxation

	Rate
Corporate income tax rate	27.90%1, 2, 3, 4
Branch income tax rate	27.90%1, 2, 3, 4

1. Corporate entities resident in Italy and permanent establishments (PE) of non-resident companies or entities are subject to corporate income tax (IRES 24%), and to Regional production tax (IRAP 3.9%).
2. The Regional production tax is a local tax on productive activities realized within the territory of any Italian Region. The standard rate is 3.9%, but higher Irap rates are applicable in some Italian Regions and to some categories of taxpayers, such as banks and financial institutions (4.65%) and insurance companies (5.90%).
3. Legislation provides shell companies with a 10.50% increase in the corporate income tax rate (IRES).
4. Non-resident companies and entities without any Italian PE that are gaining income from Italian sources are taxed only on their Italian income. Income from Real Estate properties is normally subject to corporate tax rates. Some kinds of financial income (e.g. dividends, interests) are normally subject to substitute tax at a flat rate of 26%. In the latter case, there is no need to file a tax return in Italy, unless you opt for filing a tax return. WHT varies according to the kind of income (e.g. royalties) but the rate is normally reduced or equal to zero, if the receiver is a resident of an EU Country or of a State that has a Double Tax Treaty in force with Italy. Real Estate properties are subject to IMU tax on the cadastral rental value at a rate that ranges from 0.4 per cent to 1.06 per cent, depending on the municipality. The main residence is usually exempted.
5. It is possible to have the 2025 corporate income tax rate (IRES Premiale) reduced to 20% for companies that allocate at least 80% of the profit generated in 2024 to reserve and that invest at least 30% of the profit in technologically advanced fixed assets.

Residence: Starting from 2024, companies and corporate entities are considered resident of Italy if, for the majority of the tax period, they have any of the following within the state’s territory: (i) The registered office. (ii) The place of effective management, where strategic decisions of the company are made. (iii) Their main place of ordinary management, where day-to-day management activities are carried out. On the other hand, the criterion for determining tax residence based on the place where the main business activity is carried out has been removed.

Basis: A resident company or corporate entity is taxable in Italy on their worldwide income attributable to their business. Non-resident companies are subject to IRES and IRAP only on their Italian-sourced income. Non-resident companies having a permanent establishment (PE) in Italy are subject to IRES and IRAP related to the taxable income generated from the Italian PE. In such cases, the PE is taxed according to the same rules that apply to resident companies. Profit attribution rules based on transfer pricing guidelines apply.

Taxable income: Under Italian tax law, all types of income deriving from companies and other business entities always qualify as business income. To determine the tax base for corporate income tax (IRES and IRAP) purposes the starting point is the profit or loss calculated for accounting purposes, as shown in the entity’s financial statements. Such an amount must be increased or decreased following the tax provisions governing the determination of the tax base for IRES and IRAP purposes, which provide for non-deductible costs and non-taxable revenues. Interest expenses are fully tax-deductible up to the amount of interest income. Thereafter, excess interest expenses are deductible at up to 30% of the gross EBITDA (interest deduction capacity) relevant for tax purposes. Excess interest expenses that are not covered by the 30% of the gross EBITDA can be carried forward. Also, the residual of the 30% of the gross EBITDA that is not used for interest expenses deduction can be carried forward.

Significant local taxes on income: IRAP. IRAP taxable base is calculated with different computation methods, depending on the nature of the business carried out by the taxpayer. For industrial and commercial companies, IRAP tax base is close to the gross margin resulting from the Company’s Profit and Loss Statement. There are some limits in the deduction of labour costs and Directors fees. Passive interests are not deductible.

Alternative minimum tax: Starting from financial year 2024, Italy has implemented the “Global Minimum Tax” (GMT) under Legislative Decree no. 209/2023, which has formally transposed the provisions of the EU Directive 2022/2523. This Directive transposes the OECD Beps Pillar2 measures.

Taxation of dividends: Dividends received by Italian resident companies from Italian companies or from companies resident in countries other than tax havens (i.e. countries where the actual taxation rate is lower than 50% of the domestic taxation rate) are excluded from the IRES taxable base by 95% of their amount. Conversely, no exemption applies to dividends paid by subsidiaries that are resident in tax haven jurisdictions (unless those dividends derive from profits that were already taxed under the Italian controlled foreign company [CFC rules]).

Capital gains: Capital gains form part of a resident company’s taxable profits and are normally taxable for both IRES and IRAP purposes. Capital gains are taxable in the tax period in which they are realised. For IRES purposes, tax on capital gains can be spread in equal instalments over a maximum of five years. This treatment is allowed if the company owned the fixed assets for not less than three years. A specific participation exemption regime (PEX) is applicable. Under this regime, capital gains realised by Italian companies on sales of shareholdings are 95% exempt from IRES.

Losses: Tax losses can be carried forward for IRES purposes and used to offset income in the following tax periods without any time limitation. Tax losses can only be offset with taxable income for an amount not exceeding 80% of the taxable income. Therefore, corporations are required to pay IRES on at least 20% of taxable income. Note that losses arising in the first 3 years of activity can be offset with 100% of taxable income. There is no order of priority regarding the use of the losses referable to the first 3 tax periods (which can be used in full) rather than the losses formed in the subsequent tax periods.

Foreign tax relief: Where double taxation has been suffered, relief is given for most foreign taxes by the credit method.

Participation exemption: Under the participation exemption regime (PEX), capital gains realised by Italian companies on sales of shareholdings are 95% exempt from IRES. PEX applies if all of the following requisites are met: (i) the shareholding was held uninterruptedly for at least 12 months prior to the sale; (ii) the investment was classified under financial fixed assets in the financial statements relating to the first tax period of uninterrupted ownership; (iii) the subsidiary is carrying on commercial activity. Investments in companies mainly performing management of their real estate are not entitled to PEX benefits; (iv) the majority of the subsidiary’s income is not generated in a tax haven country or one with a privileged tax regime. The PEX benifits are extended to European Union or European Economic Area companies and entities without a permanent establishment in Italy, selling qualified participations that meet PEX requirements and are taxable in Italy.

Holding-company regime: There is no special regimes for holdings as all companies are entitled to the PEX regime and 95% exemption on dividend income.

Tax-based incentives: Companies and individual enterprises, wishing to invest in Italy, are eligible for several tax allowances, such as, the tax credit on research & development activities and the patent box regime. The allowance for corporate equity (so called ACE) applied only until financial year 2023. Moreover, businesses can count on a direct dialogue with the Revenue Agency thanks to several procedures, such as the advance tax ruling on new investments, the general taxpayer’s advance ruling, the advance tax agreements for enterprises and the cooperative compliance program. The Italian Law also provides tax incentives to attract human capital, such as the new resident regime for individuals or high-net-worth inviduals tax regime.

Group relief/fiscal unity: Companies belonging to the same group can elect the parent company as the entity liable for domestic tax consolidation. This regime allows the determination of a single IRES taxable base made by the algebraic sum of the taxable income and losses of each of the resident participating entities that opt for the regime. The tax consolidation does not operate for IRAP purposes. Tax consolidation can operate for VAT too.

Small company/alternative tax regimes: Small companies enjoy a simplified accounting regime.

Corporate taxation: compliance

Tax year: The tax year is equal to the accounting period and normally is equal to 12 months. Where a company adopts an accounting period that deviates from the calendar year (e.g. 1st July to 30th June), taxes are assessed accordingly. In particular cases, the financial year can be shorter or longer than 12 months but cannot exceed 18 months.

Consolidated returns: If the Group opts for the tax consolidation, each company must submit its tax return but an additional form must be submitted for tax consolidation purposes by the holding company.

Filing and payment: Annual tax returns must be filed electronically by the end of the ninth month after the end of the financial year (e.g. 30th September of the following year in case the financial year is a solar year, ending on the 31st of December). For IRES and IRAP purposes, the tax law provides for advance payments and settlement payments. As a general rule, the advance payments are equal to the tax liability of the previous tax period and are due during the tax period to which they refer (40% within the 6th month, 60% within the eleventh month).

Penalties: The late submission of a tax return, within 90 days off the deadline, is subject to some penalties but if the taxpayer spontaneously pays them in advance the penalty is almost negligible (can be reduced to 25 euro). After 90 days the tax return is considered as omitted. Failure to file a tax return results in a penalty ranging from 120% to 240% of the taxes due. Minimum penalties (ranging from EUR 250 to EUR 1,000) are applicable if no tax liability emerged in the return. A tax return showing either a taxable income lower than the one assessed or a tax credit higher than those owed to the taxpayer (i.e. an unfaithful tax return) results in a penalty ranging from 90% to 180% of the higher taxes ultimately due. Omitted and/or late payments of taxes, of whatever kind and nature, result in a penalty equal to 30% of the unpaid/late paid tax. However, in cases where the delay is within 15 days, the penalty is equal to 1% per day; if the delay is between 15 and 90 days, the penalty is equal to 15%.

Rulings: Both resident and non-resident taxpayers (directly or using their elective representatives in Italy) are entitled to forward a query to the Italian Revenue Agency. In an advance ruling a taxpayer writes an interpretation of the tax law and illustrates a proposed solution to the case before implementing it. So, the ultimate purpose is to seek clarifications on the interpretation of a rule being objectively uncertain. The opinion expressed by the Revenue Agency in an advance ruling is not binding on the taxpayer. However, it is binding on the Revenue Agency, which cannot issue assessments or impose fines or penalties that would be in contrast with the opinion expressed in the advance ruling.

Taxation of individuals

Taxable income	Rate	Amount due on middle income
If composed solely of income from real estate (land + buildings) up to 500.00	0%	0
If composed solely of retirement income up to 8 174.00 + income from land up to 185.92 + income from a main residence and associated fixtures	0%	0
up to EUR 28 000.00	23%	23% of total amount (= 6 440.00)
above EUR 28 001.00 up to EUR 50 000.00	35%	6 440.00 + 35% of the portion exceeding 28 000.00
above EUR 50 000.00	43%	14 140.00 + 43% of the portion exceeding 50 000.00

Residence: A person is considered to be resident in Italy for income tax purposes if, for the majority of the year (at least 183 days a year, 184 for leap years): 1) they are entered in the National Registry of the Resident Population in Italy (formal approach); or 2) they have their place of residence or habitual abode in Italy (substantial approach). The new Italian provisions on Individal tax residency have modified the connecting factors for the purposes of determining the tax residence of individuals, replacing the civil law criterion of domicile (principal seat of affairs and interests of a person) with a substantive and tax-specific definition of domicile understood as the place where the person’s personal and family relations are primarily developed. As a result, there is an established specific hierarchy among the connection criteria, giving precedence to personal and family relationships over economic and employment-related interests.

Basis: Resident individuals are taxed on their worldwide income, regardless the Country of source. Certain expenses (oneri deducibili – ‘deductible expenses’) may reduce the total taxable income, such as social security and welfare contributions or donations to non-profit organisations. Gross tax is calculated by applying the rates per bracket to total income, net of deductible expenses. The personal income tax payable by the taxpayer is calculated by subtracting further deductions provided for by the law, such as a forfait deductions for spouses, children and other dependent family members and/or deductions for certain types of expenses incurred during the year (such as health and education expenses, interest on mortgage loans, etc.). Any tax credits due should also be deducted. Deductions are generally applied up to the amount of the tax due. In some cases there are limitation to tax refunds.

Taxable income: Personal income tax (IRPEF) is a tax payable by individuals if they earn any kind of income classified in the following categories of income: 1) income from real estate, i.e. buildings and land; 2) capital income; 3) income from employment (including income from subordinate employment and retirement income); 4) income from self-employed work; 5) business income; 6) other income (as listed under Article 67 of the Consolidated Income Tax Act (IT) ). All individuals, regardless the fact they reside in Italy or not, are liable to pay personal income tax if they earn income belonging to the categories above, as defined by the law.

Capital gains: Capital gains deriving from the sale of assets are subject to tax. Tax exemption applies to capital gains realized (i) through the sale of real estate properties purchased or built for more than five years, (ii) acquired by succession and (iii) used as a main residence. The capital gains earned by the sale of non-qualified shareholdings and qualified shareholdings are taxed by applying a flat tax rate of 26%.

Deductions and allowances: The Italian tax law allows for certain expenses to be deducted from a taxpayer’s gross income, while tax credits can be used as an offset against a taxpayer’s tax liability. Provided that the conditions requested by the law are met, the main deductions from gross taxable income, if they have not been directly deducted from each kind of income, are the following: mandatory social security contributions; social security contributions paid for domestic employees: up to EUR 1 549.37. Contributions paid to the specific complementary pension funds are deductible, up to EUR 5 164.57 (see Employment expenses above). Voluntary social security contributions that are paid to the mandatory pension scheme and alimony paid to previous spouses are deductible. Furthermore, other expenses may be deducted in computing tax due, such as interest on loans for the purchase of the first home, health and instruction expenses and certain donations. These deductions provide a tax advantage to the taxpayers who bear the corsts during the year, however the reduction in the tax payable is reduced for higher income. There is some forfeit tax deduction for dependent spouses and dependent children or other dependent relatives.

Foreign tax relief: In case of double taxation of the same income (between Italy and a foreign country), if some conditions are met, the individual can claim foreign tax relief for the taxes paid abroad. The relief can be claimed only when the foreign taxes are paid in a ‘final way’, by filing the Italian tax return. The foreign tax relief is calculated using a specific formula.

Taxation of individuals: compliance

Tax year: The tax year for individuals in Italy is the calendar year.

Filing and payment: Natural persons file a tax return using the form UNICO/PF or the simplified form 730, depending on the type of income. Employees and retirees who only have income from employment or pension and few other sources of income may submit form 730. Spouses may submit form 730 jointly. All other persons and taxpayers who are not residents of Italy for tax purposes during the tax year and/or during the year of the filing of the tax return submit form UNICO/PF. A tax return must be submitted every year, by 30 September, directly online or with the aid of a Fiscal Support Centre (CAF) or a qualified professional, or with tax deducted at source for the 730 form(i.e. by the employer).

Penalties: Penalties apply for late filing, failure to file Tax return, and also for omitted or late payments.

Rulings: See under ‘Corporation taxation’.

Withholding taxes

Type of Payment	Resident recipients		Non-resident recipients
	Company	Individual	Company	Individual
Dividends	0%	0/26%2	26%	26%
Interest	0/26% 1	26%	26%	26%
Royalties	0%	20%3	30%	30%

1. The current applicable rate depends on the nature of the recipient. Applicable rates are as follows: 0% applies on loan agreements and ordinary notes when the recipient is a corporation; 26% rate in all other cases.
2. Non-residents are always subject to a 26% WHT.
3. The domestic rate applies to 75% of the gross amount of the royalty paid; however, treaty ceilings apply to the gross amount of the royalty paid.

Branch remittance tax: There is not such tax

Anti-avoidance legislation

Transfer pricing: Income derived from operations with non-resident corporations that directly or indirectly control the Italian entity, are controlled by the Italian entity, or are controlled by the same corporation controlling the Italian entity have to be valued on the basis of the arm’s-length nature of the goods transferred, services rendered, and services and goods received if an increase in taxable income is derived there from. The taxpayer may, on a voluntary basis, prepare a TP documentation set, based on a format provided by the tax administration. If the taxpayers prepare the mentioned set, and indicate in their tax return the possession of the set (“flags TP Docs”), then they can enjoy penalty protection for TP purposes. Furthermore, the possession and exhibition in due time of proper TP docs, leads to a substantial inversion of the burden of proof with the tax authority.

Interest restriction: Generally, interest expense is fully tax deductible up to the amount of interest income. Thereafter, excess interest expense is deductible at up to 30% of the gross EBITDA (interest deduction capacity) relevant for tax purposes). Gross operating margin is defined as the difference between operating revenues and expenses excluding depreciation of tangible and intangible assets and charges for leased assets based on their tax value.

Controlled foreign companies: An Italian company that controls, either directly or indirectly, a foreign enterprise, company, or other entity is required to consolidate the taxable income arising in proportion to the percentage of shareholding held, irrespective of whether the profits have been distributed or not, if the effective tax rate of the controlled foreign enterprise is lower than 15% and more than 1/3 of the controlled foreign enterprise derives from passive income. Income from CFC is taxed separately from the other taxable income of the business at the standard IRES rate. Foreign taxes paid by the CFC are recoverable by way of a corresponding tax credit. If special requisites applies, CFC rules do not apply if the controlled foreign enterprise carries out an effective economic activity through the use of personnel, equipment, assets and premises, and the controlling company can give evidence of them.

Hybrid mismatches: The Italian Tax Authorities through the Legislative Decree 142/2018 (the ‘ATAD Decree’) implement the EU’s anti-tax avoidance directives (ATAD) through domestic Italian legislation and that also considers the OECD BEPS report(s) on Action 2 (the OECD Report). A new penalty protection for hybrid mismatch arrangements has been introduced with article 61 of Legislative Decree No. 209 of December 27, 2023. The Implementing Rules enact an optional regime that grants a protection from administrative penalties in case of violations regarding the Italian anti-hybrid mismatch legislation. The requisites that the documentation granting to penalty prtection must have are described in Decree 6 December 2024.

Disclosure requirements: CbC reporting for qualifying enterprises. Advance tax rulings may be subject to the spontaneous exchange of information The Italian Tax Authorities with resolution n. 78 of 31 December 2021, ruled on the disclosure obligation for the purposes of DAC 6 of transfer pricing adjustments in favor of related parties located in jurisdictions that do not impose any income tax or impose a tax close to zero or are considered uncooperative by the EU or the OECD. These are the transactions referred to in the distinctive elements (Hallmark).

Exit taxes: Italian tax legislation provides in an exit tax regime for companies and entrepreneurs.

General anti-avoidance rule: Italian tax legislation provides a general anti-avoidance rule.

Digital services tax and Other significant anti-avoidance legislation: The digital services tax is charged to the extent of 3% on the amount of taxable revenues of large web companies providing digital services, including those related to online advertising, e-commerce platforms and streaming services.

Value-added tax/Goods and services tax

Type of tax: As Italy is a EU member State, Vat (Value added tax – or Iva – Imposta sul Valore Aggiunto, in Italian language) applies. VAT is a consumption tax that applies to the supply of goods and services carried out in Italy by entrepreneurs, professionals, or artists and on importations carried out by anyone. In some cases, also Intra-Community acquisitions are subject to Vat. In Italy the standard Vat rate is 22% and reduced rates are provided for several supplies of goods and services, such as 4% for listed food, drinks and agricultural products or 10% for electric power supplies for listed uses and listed drugs. Specific supplies of goods and services expressly listed in Presidential Decree n. 633/72 are exempt from Vat, for example education, insurance services, specific financial services, supply, leasing of particular immovable property.

Standard rate: 22%

Reduced rates: 0% – 4% – 5% – 10%

Registration: VAT registration is mandatory in Italy for persons engaging in the following activities: 1) business or agricultural activity; 2) or an artistic or professional activity on a regular basis. Registration involves the acquisition of a VAT number; this is an 11-digit code that must be displayed on every invoice or other commercial document issued or received in the course of business.

Filing and payment: Taxpayers subject to VAT must submit the accounting data summarizing their periodic VAT returns (Article 21-bis of Decree-Law No 78/2010). This requirement does not apply to taxpayers who are not required to submit the annual VAT return or make periodic VAT payments, provided that the exemption conditions continue to be met throughout the year. The completed Report on periodic VAT returns (Comunicazione delle liquidazioni periodiche IVA) must be submitted quarterly. This form must be sent online, either directly by the taxpayer or through an authorised agent, by the last day of the second month following each quarter. For more information, please see the section Periodic VAT returns (Liquidazioni periodiche Iva). Those with VAT numbers must calculate and pay VAT every month or, in some cases, every quarter, using the F24 form, which must be filled in and submitted online. Most taxpayers must submit monthly returns. By the 16th day of each month, taxpayers must calculate the difference between their output VAT – i.e. VAT on sales made – and input VAT – i.e. VAT on purchases, which they intend to reclaim – in the previous months. After calculating the balance of VAT due, they must use the online F24 form to pay VAT. Taxpayers with an annual turnover of less than EUR 500 000 for supplies of services or EUR 800 000 for other activities, or belonging to certain categories, can choose to submit quarterly VAT returns.

Social security contributions

The annual contribution calculated on the gross employee remuneration. Currently there is no ceiling unless the worker has paid social security contribution before 1993. The contribution is divided between the employer and employee and can vary according to the economic sector. On average the following rates apply:

	Employer	Employee
	Rate (%)	Rate (%)
Social security contributions	30%	10%

Self-employed

Self-employed individuals are in principle subject to social security contributions on a quarterly base. The rate varies according to the activity and ranges from 26,42% up to 27,00%.

Other taxes

Capital duty: No

Immovable property taxes: The real estate tax is levied on the ownership of immovable properties (buildings, rural land, farmlands), except for immovable properties owned as primary private properties. The standard tax rate is 0.76%. Depending on the municipality and the status of the taxpayer, the tax rate can be increased or decreased. The taxable base is generally determined based on the so-called ‘cadastral value’ (i.e. capitalisation of the deemed standard income that is expected to be derived from the real estate).

Transfer tax: Tobin tax is payable at a rate equal to 0.2% of the transaction value. Reduced to 0.1% for transfers concluded on regulated markets or multilateral trading facilities.

Stamp duty: Stamp duty taxes (Imposta di Bollo) apply on a certain list of deeds or documents provided for by the relevant law provision (e.g. checks, bills of exchange, statements of account, certificates, books of account, deeds of transfer of quotas, and, in some specific cases identified by the Law, invoices).

Net wealth/worth tax: No

Inheritance/gift taxes: Inheritance/gift taxes: Inheritance and gift tax is due according to the relationship between the donor/decedent and the donee/heir. According to the kind of relationship between the recipient and the decedent/donor an exemption threshold applies. In particular, the following rates and thresholds apply: • with the 4% rate, on the amount exceeding 1 million euro of the total net value of the assets transferred to the spouse and to each relative (children or parents) in a straight line. • with the rate of 6%, on the amount exceeding 100,000.00 euros of the total net value of the assets transferred to each brother and/or sister. • with the rate of 6%, without any deduction, on the total net value of the assets transferred in favor of the other relatives up to the fourth degree and of the relatives in a straight line, as well as of the relatives in the collateral line up to the third degree. • with the rate of 8%, without any deduction, on the total net value of the assets transferred in favor of all other subjects.

Other: The Italian wealth tax on real estate properties (Imposta sul valore degli immobile situati all’estero or IVIE) owned outside of Italy by an individual who qualifies as a resident for Italian tax purposes has been introduced in Italy. The wealth tax due is proportionate to the percentage owned and the size of the property. The IVIE of 1.06% applies on the value of the real estate (i.e. the purchase cost of the real estate property resulting from the purchase act or the market value in force where the real estate is located).

Tax treaties

Italy has a very extensive tax treaty network (around 100 DTTs on income currently in force and 8 DTTs on Inheritance and Estates), a very active tax treaty policy and also participates to the OECD Multilateral Instrument.