Tax rates in Italy

Company Tax

24%

Tax Rate For Foreign Companies

Resident companies are taxed on their worldwide revenue. Non-resident companies are taxed on their Italian-sourced income.
A foreign tax credit is available on the tax paid on foreign-source income.
A 30% withholding tax is levied on compensation paid to a non-resident company for the use of industrial, commercial and scientific equipment in Italy.

Capital Gains Taxation

Capital gains from asset sales are typically treated as ordinary income and taxed at the 24% corporate income tax rate, plus a 3.9% IRAP rate. However, capital gains from the sale of participations are generally exempt from IRAP (except for banks and financial institutions) and 95% exempt from corporate income tax if: (i) the participation is held for 12 to 13 months; (ii) it is classified as a financial fixed asset in the first financial statement after acquisition; (iii) the company is not a “low-tax jurisdiction” entity; and (iv) the company primarily engages in business activities, not holding real estate for non-business use. The last two conditions must be met for the past three years or the company’s life if shorter.

Nonresident companies' capital gains from participation sales are typically taxed at 26%. Some gains may be exempt under specific rules or tax treaties. From FY 2024, a 95% corporate income tax exemption is available for capital gains from sales of participations in EU/EEA member state companies that allow adequate information exchange with Italy, provided certain conditions are met.

Main Allowable Deductions and Tax Credits

Business expenses directly related to income generation are generally deductible: costs of setting up a business, commissions, depreciation and amortisation, staff bonuses and remuneration, royalties, advertising and entertainment expenses (capped; expenses related to gifts with a value of EUR 50 or less are entirely deductible). IMU is deductible for IRES purposes up to 100%. In calculating the taxable base for IRES, the following IRAP expenses can be subtracted: 10% of the IRAP paid in the year; an amount determined by the IRAP paid on the cost of employees, after taking into account relevant deductions.

Interest expense is fully tax-deductible up to the amount of interest income. Interest expense in excess is deductible at up to 30% of the gross EBITDA, and the part in excess of the yearly limitation is carried forward in the following five fiscal years. Specific rules apply to the deduction of bad debts. Travel expenses incurred within the municipality are tax-deductible up to 75% (however, VAT is fully deductible).

An "allowance for corporate equity” (ACE) is available, consisting of a deduction equal to the net increase in the equity employed, multiplied by a rate determined each year (1.3% in 2023). The deduction is available each year, provided the equity increase is not diminished. Nevertheless, the ACE allowance was repealed as of 2024.

Company car expenses can be deducted up to 20% for cars that are not assigned to employees or are granted to employees solely for business use, and 70% if they are destined to employees for both business and private purposes. Mobile and landline telephones expenses are deductible up to 80%.

Deductions are available for charitable contributions. Meals and lodging expenses incurred within the municipality are deductible up to 75% of the expense incurred.

Losses may be carried forward and offset against corporate taxable income; however, 20% of taxable income in any year cannot be offset by carried-forward losses and is subject to corporate tax. Losses incurred in the first three tax periods may be carried forward to be offset against 100% of taxable income if these losses are linked to a new business activity. The carryback of losses is not permitted.
Incentives are available as capital grants, easy-term loans, or tax credits. Some are granted automatically if requirements are met, while others require evaluation or negotiation.

Italian companies and branches of foreign companies can apply for the patent box regime, offering a 110% super tax deduction (210% overall) for R&D expenses on eligible intangible assets, starting from FY 2021. A tax credit for new investments in tangible and intangible assets is available through FY 2025, with varying rates based on the "Industry 4.0" plan. R&D, innovation, and design tax credits are available through FY 2025 or FY 2031, depending on the investment type, and can offset corporate tax liabilities in three annual installments.

In FY 2024, a temporary incentive allows a 120% corporate tax deduction for new hire labor costs, up to 130% for specific employee categories, if conditions are met. The 2024 budget law introduced a 50% exemption from IRES and IRAP for income from activities relocated to Italy from non-EU/EEA states, valid for the relocation year and the next five years. This incentive excludes activities conducted in Italy within the prior 24 months and includes a recapture mechanism if activities are moved abroad during or within five years after the incentive period (ten years for large enterprises).

Other Corporate Taxes

A municipal tax is generally applied at a rate between 1.06% and 0.76% (generally 0.86%) on company-owned real estate (IMU). Municipal taxes are also calculated on the IMU for a common tax (IUC - Imposta unica comunale) on service (TASI) and refuse (TARI).

A transfer tax is applicable to all transactions registered with the public register, generally taxed at a percentage of the value.

Stamp duty ranging from EUR 2 to EUR 100 is levied on legal and banking transactions, at varying rates. Stamp duty applies to the transfer of shares or other financial instruments issued by resident companies at 0.2% of the transaction value, or 0.1% if the sale is made on a stock exchange (so-called "Tobin Tax").

Companies deemed to be "non-operating" are subject to a tax on a deemed minimum income at a rate of 34.5%. Non-operating status includes companies: with low turnover and inventory increase rates, with insufficient revenues, that are unprofitable or declare tax losses for 5 consecutive fiscal tax years.

A regional tax on productive activities (IRAP) of 3.9% is levied on the net value of production in each Italian region by resident companies and permanent establishments (PEs) of foreign companies. The rate may vary by up to 0.92% across regions. IRAP is on average 4.65% for banks and financial institutions and 5.9% for insurance companies.

A 30% withholding tax is levied on compensation paid to a non-resident company for the use of industrial, commercial and scientific equipment in Italy.

A Digital services tax (DST) was introduced in 2020. It is levied on taxpayers that, at a group level, have annual global turnover over EUR 750 million in the previous calendar year and annual revenue from digital services rendered in Italy of over EUR 5.5 million in the previous calendar year, irrespective of their tax residency. The rate is 3% of gross revenue net of VAT or indirect taxes. Companies subject to the tax must maintain monthly records of relevant transactions.

Social security contributions depend on the activity performed by the company, the number of employees, and the employee's position. For employers, the contribution is generally around 30%.

Italian shipping companies that are tax residents, as well as non-resident shipping companies that operate in Italy through a permanent establishment, may meet the requirements to opt for the tonnage tax regime.

Other Domestic Resources

Italian Revenue Agency

Tax Rate

Allowable Deductions and Tax Credits

Provided that the conditions requested by law are met, the main deductions from gross taxable income, if they have not been deducted from each kind of income, are the following:

- Employee’s mandatory social security contributions are fully deductible
- Social security contributions paid for domestic employees: up to EUR 1,549.37
- Medical expenses for disabled individuals are fully deductible
- Contributions paid to the specific complementary pension funds are deductible, up to EUR 5,164.57
- Voluntary social security contributions paid to the mandatory pension scheme

Individuals can fully deduct from taxable income the alimony paid to a separate or divorced spouse resulting from a court judgment. Contributions to certain religious entities can be deductible from the taxable income up to EUR 1,032.91 per taxpayer.
Other deductions include maintenance allowance, university expenses, medical expenses, dependent elderly or disabled persons, etc.

In determining taxable income, Italy has adopted a system of tax credits (i.e. up to EUR 1,955 for employment income, up to EUR 1,265 for self-employment, up to EUR 800 for dependant spouse, up to EUR 1,200 for each child below three years, or EUR 950 for each child above three years, EUR 750 for other dependants, etc.).
Other credits include: medical expenses (19% of the amount in excess of EUR 129.11), interest on real estate mortgage loans (19%, capped at EUR 4,000), life and accident insurance (up to EUR 530 or 1,291.14 depending on the type), annual rental fees paid for the principal abode (for incomes below EUR 30,987.41).

In addition to the classic system of tax deductions provided for by the Italian Tax Code, Law no. 21/2020 and the Italian Budget Law for FY 2021 introduced an extra mechanism for reducing taxes, consisting of the recognition of a sum by way of additional treatment. The sum does not contribute to the formation of income and therefore constitutes a net amount, and is equal to EUR 1,200 per year (FY 2024) in the case of incomes not exceeding EUR 15,000. For annual income between EUR 15,001 and 28,000, the amount of the additional treatment needs to be prorated on the basis of the Italian net income tax.

Special Expatriate Tax Regime

Non-residents are only taxed on income and gains arising in Italy, compared to worldwide income and gains for residents.

Under the “Neo-domiciled tax regime”, individuals who migrate their tax residency to Italy (if they did not have an Italian tax residency for at least nine years over ten fiscal years preceding the transfer) are allowed to opt for their non-Italian sourced income to be taxed in with a flat substitutive tax, at a fixed amount of EUR 100,000.
Resident individuals are taxed 26% on interest (12.5% on Italian treasury bonds or similar bonds), dividends and capital gains on non-qualified participations. Non-resident individuals resident in a “white list” country are not taxed on capital gains related to non-qualified participations, and gains realized by non-residents on the disposal of shares listed on a stock market are exempt. Otherwise, non-residents are taxed at the 26% flat rate on dividends, capital gains related to participations and interest.

Individuals transferring their tax residency to Italy may elect to pay a flat substitutive tax of EUR 100,000. This tax covers foreign income, excluding capital gains on qualified participation in the first five years, foreign real estate, financial investments, and exempts from financial monitoring obligations. Family members can also elect for a flat tax of EUR 25,000 on non-Italian income. Eligibility requires non-Italian tax residency for at least nine of the ten years before the transfer.