Introduction to Corporate Tax in Italy
The corporate tax system of Italy supports business growth through a range of incentives tailored to key sectors and small enterprises. It offers tax deductions, credits, and preferential regimes that promote investment, drive innovation, and foster economic development.
Understanding corporate tax is crucial for businesses operating in Italy, as it significantly impacts profitability, compliance, and strategic planning. If you’re wondering what is corporate tax rate in Italy, the standard corporate income tax (IRES) rate is 24%.
There is also an additional regional production tax (IRAP), which is typically 3.9%. The standard rate is 3.9%, but higher Irap rates are, for example, applicable to banks and financial institutions (4.65%) and insurance companies (5.90%).
With Commenda’s support, businesses can streamline their tax compliance processes, ensuring they meet Italy’s tax requirements efficiently while optimizing their tax position.
This blog will cover the corporate tax rate in Italy, key regulations, available deductions, and strategies for optimizing tax positions. We’ll also explore the filing process and common compliance requirements for businesses operating in Italy.
What Is the Corporate Tax Rate in Italy?
Italy operates a progressive corporate tax system with various tax incentives and reductions available based on the nature, size, and structure of a business. In addition to the standard corporate tax rate in Italy of 24%, the Italian tax system also provides several preferential rates and schemes.
Different rates apply based on company type or size. This table summarizes the corporate income tax rate in Italy for various entity types:
| Entity | Tax Rate |
| General Corporate Income Tax (IRES) | 24% |
| Regional Production Tax (IRAP) | 3.9% (standard), varies by region |
| Reduced IRES (Reinvestment Incentive – FY 2025) | 20% |
| Startups / SMEs (ENC) | 24% (no reduced rate) |
| Cooperatives / Credit Institutions | 24% IRES + 3.9% IRAP |
| Foreign Income (with Double Tax Treaties) | 24% (with foreign tax credit relief) |
| Reshoring Income (repatriated EU/non-EU production) | 50% IRES Exemption |
Breakdown of Corporate Income Tax Component
Corporate taxation in Italy is a multifaceted system that encompasses federal, local, and municipal taxes, along with various surcharges and special tax regimes. Companies operating in Italy are subject to a general corporate income tax (CIT) at a standard rate.
The corporation tax in Italy is designed to encourage growth in specific sectors and foster innovation. Following is a breakdown:
Federal Corporate Income Tax (IRES)
The Imposta sul Reddito delle Società (IRES) is Italy’s primary corporate income tax:
- Rate: 24% on net taxable income.
- Scope: Applies to all Italian resident entities on worldwide income.
- Non-resident companies: Taxed only on Italian-source income.
Regional Production Tax (IRAP)
The Imposta Regionale sulle Attività Produttive (IRAP) is levied by Italy’s regions. The following are the details associated with IRAP:
- Base rate: 3.9% (adjustable by ±0.92% depending on the region).
- Labor cost deductions:
- Fully deductible for employees under permanent contracts.
- Limited deduction for temporary employees (only INAIL contributions).
Global Minimum Tax (Pillar Two Rules)
As of fiscal years beginning 31 December 2023, Italy has implemented the OECD Pillar Two Rules:
- Qualified Domestic Minimum Top-Up Tax (QDMTT): Ensures an effective tax rate of 15% for large MNEs.
- Income Inclusion Rule (IIR): Requires Italian parent entities to include low-taxed income from foreign subsidiaries.
Special Sectoral Regimes
Italy also provides targeted regimes for businesses in specific sectors, promoting economic activity where strategic advantages exist. The following are the details:
Tonnage Tax Regime
The tonnage tax regime supports the international shipping industry by offering an alternative method of taxation based on ship capacity rather than net profit:
- Applicability: Shipping companies operating internationally.
- Tax Base: Presumptive daily income calculated per NT (Net Tonnage).
- 0-1,000 NT: EUR 0.0090/NT
- 1,001-10,000 NT: EUR 0.0070/NT
- 10,001-25,000 NT: EUR 0.0040/NT
- Above 25,001 NT: EUR 0.0020/NT
- Tax: Subject to IRES only. No IRAP or deductions.
- Lock-in Period: 10 years (renewable).
Substitutive Tax on Reorganizations
Corporate reorganizations can be tax-neutral, but companies can elect to revalue assets and pay a substitute tax for tax recognition. The following are the details:
- Applies to: Mergers, de-mergers, asset contributions.
- Treatment: Tax-neutral unless a step-up in asset values is elected.
- Rate: Substitutive tax applicable for step-up election.
Municipal and Local Levies
While not as prominent as IRES and IRAP, municipalities may impose administrative fees or minor levies based on the type of business activity or industry sector. These are usually fixed costs rather than income-based.
Corporate Tax Filing Requirements in Italy
To comply with the corporate tax system in Italy, businesses must follow specific procedures, deadlines, and payment methods. Below is a guide outlining key steps for filing corporate taxes in Italy:
Filing Deadlines
To comply with the Italian tax system, it’s essential to submit corporate tax returns on time to avoid penalties. The key deadlines are as follows:
- RES (Corporate Income Tax) and IRAP Returns: Must be filed by the end of the tenth month following the tax year-end (i.e., 31 October for calendar-year entities).
- Withholding Tax (WHT) Agent Return: Must be filed by 31 October of the year following the tax year.
Required Documents
When preparing your tax return, you need to gather all necessary documents to ensure accurate filing. The required documents vary depending on the type of return:
- Form 730: This is the official form used for the personal income tax return for employees, retirees, and individuals with income from pensions, or specific sources.
- Form Redditi PF: This is the official form for individuals with more complex income sources or non-residents who cannot file Form 730.
- Pre-Completed Tax Return: For taxpayers filing Form 730, a pre-completed version of the return is available, which automatically includes certain information.
Financial Documents:
The following are the financial documents required:
- Income Statements: Reflecting the income earned during the tax year.
- Proof of Deductions: Documentation supporting allowable deductions such as healthcare expenses, insurance premiums, and other eligible costs.
- Invoices & Contracts: Any relevant invoices, contracts, or receipts to back up your claimed deductions, exemptions, or credits.
Supporting Documents for Non-Residents:
If filing Redditi PF by post, ensure the return is sent by registered post with appropriate identification information.
Payment Methods
Italy offers multiple methods for making corporate tax payments. You should select the one that suits your business needs:
- F24 Form: This is the primary form for paying both IRES and WHT. Simply log in to your home banking service and go to the section for the F24 form.
- Payments can also be made by bank transfer or direct debit if preferred. Ensure that you complete the F24 form correctly to avoid errors and penalties.
Digital Platforms
In Italy, corporate tax returns, such as the Redditi SC (corporate income tax return), are filed through the Agenzia delle Entrate (Revenue Agency) online portal. Taxpayers must access the portal using secure authentication methods, including:
- SPID (Sistema Pubblico di Identità Digitale)
- CIE (Carta d’Identità Elettronica)
- CNS (Carta Nazionale dei Servizi)
Penalties
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.
Tax Year and Payment Deadlines in Italy
The company tax filing year Italy generally follows the calendar year (January 1st to December 31st). Income taxes in Italy are paid using the self-assessment method, with the following key deadlines:
- First Advance Payment: Due by 30 June of the current year. This is 40% of the previous year’s income tax balance.
- Second Advance Payment: Due by 30 November of the current year. This is 60% of the previous year’s income tax balance.
- Final Payment: The remaining balance is due by 30 June of the following year.
These are the corporate tax payment deadlines Italy, and businesses must adhere to them to avoid penalties.
Withholding Taxes and Corporate Taxation in Italy
Italy applies a 26% standard withholding tax (WHT) on yields from loans and securities paid to both Italian and non-Italian investors. This rate may be reduced under applicable DTTs, EU Directives, or domestic tax regimes, provided the beneficial owner qualifies. Interest on government bonds is taxed at a reduced rate of 12.5%.
Corporate Tax Incentives, Deductions, and Exemptions
Italy offers several corporate tax incentives, deductions, and exemptions aimed at encouraging investment, innovation, and regional development. Some of the key incentives available are focused on corporate tax incentives Italy. Here are some of the main incentives available:
- Foreign Tax Credit: Companies can claim a tax credit for foreign-source income, limited to the lower of foreign taxes paid or the IRES liability on that income.
- Reshoring Exemption: A 50% exemption for repatriated income applies for five years, under conditions aimed at preventing abuse.
- Tax Credit for Tangible ‘4.0’ Assets: Investments in “Industry 4.0” tangible assets can qualify for tax credits of 20% for investments up to €2.5 million. For investments between €2.5 million and €10 million, the tax credit is 10%, and for investments between €10 million and €20 million, the tax credit is 5%.
- Tax Credit for Intangible ‘4.0’ Assets: Investments in intangible assets (e.g., cloud computing) get a 20% tax credit for 2023. This rate will decrease to 10% by 2025, with the credit capped at €1 million annually.
- R&D Tax Credit: A 10% tax credit on R&D expenses, with a maximum of €5 million annually for eligible activities like industrial and experimental research.
- Technological and Digital Innovation Tax Credit: Companies can claim 15% on eligible innovation and ecological transition investments. This is reduced to 5% by 2025, with a cap of €2 million annually.
- Patent Box Regime: Offers a 110% deduction on R&D costs linked to patents, trademarks, and other intangible assets, available for five years.
- Tax Credit for Southern Italy SEZ Investments: Companies investing in Southern Italy’s Special Economic Zones can claim up to 40% of eligible investments.
International Tax Treaties and Double Taxation Avoidance
Italy has Double Taxation Avoidance Agreements (DTAAs) with countries worldwide to prevent businesses and individuals from being taxed twice on the same income. These treaties are designed to promote cross-border trade and investment.
Key Features of Italy’s DTAAs
The Key Features of Italy’s Double Taxation Avoidance Agreements (DTAAs) refer to the provisions included in these treaties that help businesses and individuals avoid being taxed twice on the same income.
These agreements are essential tools for international businesses, particularly when supported by professional corporate tax compliance services Italy offers to ensure proper application and adherence. The following are the main points:
Refund Claim Process
If a non-resident taxpayer has paid more tax than required under the treaty, they can claim a refund for all or part of the tax paid by following a specific process. The Italian Revenue Agency provides four forms to facilitate these claims:
These forms are not mandatory but are provided by the Revenue Agency to help non-residents understand what information is needed.
Claim Deadline
The claim for a refund must be submitted within 48 months from the date the tax was paid or withheld at source. The claim should be sent to the following address:
Agenzia delle Entrate
Centro Operativo di Pescara
Via Rio Sparto, 21
65129 Pescara, Italia
Fax: 08552145
Email: cop.pescara.rimborsinonresidenti@agenziaentrate.it
How Commenda Supports Corporate Tax Compliance in Italy
Managing corporate tax compliance in Italy can be a complex and time-consuming process, especially for businesses that are unfamiliar with the local tax laws and regulations.
Commenda offers comprehensive services to help businesses manage their corporate tax rate in Italy, including registration, filing, advisory, compliance monitoring, and incentive optimization. This is how Commenda can help:
- Tax Registration: We handle all required registrations, including obtaining an Italian tax identification number (NIF) and ensuring proper registration with tax authorities.
- Tax Filing: We manage the filing of corporate income tax, VAT, and other necessary returns, ensuring timely and accurate submissions.
- Advisory Services: Our experts provide tailored tax planning and structuring advice, helping businesses reduce their tax liabilities and maximize available incentives like R&D credits.
- Compliance Monitoring: We ensure ongoing compliance by tracking deadlines and monitoring changes in Itallian tax laws to avoid penalties.
- Incentive Optimization: We help businesses identify and optimize tax credits and incentives, such as R&D credits and regional tax benefits, to reduce tax exposure.
Know about corporate tax compliance services in Italy now! Book a free demo to see how Commenda helps with managing the taxes in Italy for you!
Common FAQs About Corporate Tax in Italy
Q. What is the current corporate tax rate in Italy?
Italy’s standard corporate income tax (IRES) rate is 24%. However, a reduced rate of 15% is available for newly established companies operating in certain industries or regions.
Q. How is corporate income tax calculated in Italy?
Corporate income tax (IRES) in Italy is calculated based on the company’s net taxable profits after deducting allowable expenses, depreciation, provisions, and losses.
Q. Are there different corporate tax rates for small businesses in Italy?
Yes, small businesses can benefit from lower tax rates. For example, Legal persons investing in innovative startups and SMEs can benefit from a 30% tax reduction of the IRES (corporate income tax).
Q. When are corporate tax returns due in Italy?
For companies following the calendar year, corporate tax returns are due by 30 September of the year following the fiscal year. Companies with non-calendar fiscal years must file within 9 months of the fiscal year-end.
Q. What are the penalties for late corporate tax filing in Italy?
Late filing can result in penalties starting at a percentage of the tax due, with increases for deliberate non-compliance or fraudulent activity.
Q. What incentives or deductions are available for companies in Italy?
Italy offers several generous incentives, including:
- R&D Tax Credit: 20% of eligible expenses, with higher rates for activities in Southern Italy.
- Patent Box Regime: 110% deduction on IP-related costs, including patents and trademarks.
- Tax Credits: For digital and ecological innovation, and for companies investing in Southern Italy or creating employment in targeted sectors.
Q. Is there a minimum corporate tax in Italy?
There is no fixed minimum corporate tax, but companies must pay IRES on taxable profits. Smaller companies may not be required to make advance payments if their taxable profits fall below a certain threshold.
Q. Are foreign companies taxed differently in Italy?
Foreign companies are taxed on income sourced within Italy, including profits from permanent establishments, real estate, or royalties from Italian intellectual property. Italian subsidiaries of foreign companies are taxed on their worldwide income.
Q. What services does Commenda provide for corporate tax compliance in Italy?
Commenda supports companies with:
- Tax and VAT registration with Italian authorities.
- Preparation and electronic filing of CIT, VAT, and withholding tax returns.
- Advisory on tax-efficient structures, treaty benefits, and transfer pricing.
- Ongoing compliance monitoring to ensure deadlines, instalments, and filings are never missed.
