Italy Corporate Tax Rate - Legal Advice for Foreign Investors (2024)

Thecorporate taxis one of themain taxescharged to companies for theircommercial activities in Italy. Therates for corporate taxdecreased in the last years from 53.20% in 1996, to 37.25% in 2006 and it reached 24% in 2018.Thecorporate tax rateincludes theIRES and IRAP, other components of themain tax, which generally have to be paid by most companies. However, several exemptions apply. You can find out extensive information on thecorporate tax rate in Italyfromour team of Italian lawyers.

Paying IRES in Italy

Companies that are running businesses in the energy field are required topay an IRESdifferent than the one applicable to most of the companies operating in other business sectors, and this also applies to legal entities that are “dormant” or that hadtax lossesin their previous financial years. Companies that operate in fields such as finance or insurance have to pay acorporate tax calculated at a different rate.

What is the current corporate tax rate in Italy?

Since 2018, thecorporate tax rate in Italyhas been maintained at the same levels. The rate at which corporate entities mustpay the corporate taxis generally the same for most of thebusiness sectors in Italy, but one should know that there are specific rates for entities operating in the financial sectors, but also for those working in the shipping industry, where thecorporate taxwill apply as atonnage tax. Below, you can find some of the basic highlights of thistax, which can be presented at length byour Italian lawyers:

• the standardcorporate tax rate in Italyis of 24% (known as IRES);
• to this, companies will also need topay the IRAP, charged at the rate of 3.9% and which represents aregional corporate taxthat can vary based on the region where the company operates;
• however, regional administrations can increase or decrease thestandard IRAPby +/- 0.92%;
• companies involved inmergersor de-mergerswill not pay the corporate taxwhile being in this process, but they will pay what is known as thesubstitutive tax, charged at rates ranging from 12% to 16% from the company’s financial value;
• thesubstitutive taxis charged on a progressive system – the 12% is charged for a corporate value of maximum EUR 5 million, while the 16% is charged when the company accounts for more than EUR 10 million.

What entities are liable to pay the corporate tax rate in Italy?

Thecorporate taxis charged to corporate entities developing acommercial activity in Italy, from which they obtain profit. Thetax is chargedwhen the company develops its activity only inItaly, but also if it expands on foreign markets. The same applies toforeign companies operating in Italy, as they will be liable to thecorporate taxfor the income obtained from their activities carried out here.

According to theItalian Revenue Agency, the obligation to pay thecorporate tax rate in Italyis imposed to most of the legal entities prescribed by the national law. Thus, all companies operating as one of the following must register for andpay this tax: joint-stock companies, limited liability companies, partnerships limited by shares, European companies or European cooperatives.

The obligation to pay thecorporate tax rate in Italyis imposed to entities registered as non-profit organizations, as well as totruststhat areItalian tax residentsor foreign tax residents.Corporate taxis also charged to entities registered as undertakings for collective investments, but there is an exemption on thepayment of this taxfor the latter entity in specific legal situations, that can be detailed byour team of Italian lawyers.

One must also know thatIRAPgenerally applies to those involved in production activities and thus, certain types of economic activities will be exempted from thepayment of this tax. Here, the law prescribes an exemption for entities operating as pension funds or European economic interest groupings. Details about theItaly corporate tax ratecan be discussed with ourItalian lawyers.

Those who want tobuy a house in Italycan benefit from legal advice offered by our lawyers regarding the necessary documentation in this transaction. Property registration in Italy is done with the Land Registry, but until that moment, our specialists will be able to draw up the sale-purchase contract and check the documents of the chosen property. It is much more advisable to discuss all the legal aspects with us to benefit from an uncomplicated process.

Does Italy offer any special tax regimes?

As a general rule, allcompanies operating in Italymust follow the sametax regime. However,Italyhas several free trade zones where certain basiccorporate taxesdo not apply, such as thevalue added tax, excise duty or thecorporate tax. Thetax exemptionsvary based on the region, as the exemptions were created to sustain the development of a region.Special tax regimescan be found in Italy for micro and small enterprises. In the case of businesses registered asreal estateinvestment companies listed on the stock exchange, theItalian lawprescribes the possibility of beingexempted from the payment of the IRES and IRAPin certain cases.

Italy corporate tax ratecan also be diminished in the case of companies that are involved in intellectual property investments. Here, through the patent box regime, they can benefit from areduction on the corporate tax of 50%. You can address to ourlawyers in Italyforlegal assistance on the intellectual property regime and the tax advantages companies can obtain.

Depending on the business activity you are interested in, ourteam of Italian lawyerscan provide in-depth information on the advantages you can have whenpaying the corporate tax rate in Italyand you can also receive legal representation on othertax deductionsortax minimization proceduresthat can apply to your business.

Regional tax for production in Italy

TheIRAPis aregional taxfor productive activities and it is calculated on the added value of the production, minus the costs for the production, obtained by thecompany in Italy. Therate for this taxmay vary from region to region, but thestandard rate is 3.9%and it can be increased by approximately 1% (0.95%, more exactly).TheItaly corporate tax rateis calculated on the net total income of the companies during one business year and it is an important source for thepublic budget in Italy.

A company that has the main part of itsbusiness in Italyor that is managed from this country has topay taxesfor theItalian authorities. This is considered a resident company that is required topay the corporatetaxrate in Italycalculated on its income obtained at a global level, while companies that are notresidents in Italyhave to pay only for theirincome from Italy. Thecorporate taxis owed also for capital gains that are considered ordinary income. There are some exemptions applied to capital gains obtained from sale of participations – 95% of this income is exempt if some conditions are fulfilled, according to theItalian laws.

Making investments in Italy

There is no doubt about the idea of​​investing in Italyand business development in this country. The business environment in Italy is highly valued by international investors, so the Italian government continues to improve this climate and provide as many benefits as possible to those who want to develop their operations in this country.

Besides the experienced workforce that any foreign investor can benefit from, the incentives dedicated to foreign entrepreneurs, the excellent infrastructure, the ease with which acompany can be set up, the taxation system and economic stability are essential advantages for the business environment in Italy. Here are some interesting statistics about the economy and business direction in Italy:

• In terms of total FDIs for Italy in 2019, the country registered around USD 446 billion.
• The same year registered nearly USD 7 billion in matters of the total value of greenfield investments in Italy.
• The manufacturing sector continues to absorb a large percent of the total FDIs, being the most prolific one in Italy.
• The 2020 Doing Business report issued by the World Bank ranked Italy 58th out of 190 worldwide economies for simplified business and more.
• Italy offers the biggest market within the European Union countries, allowing foreign investors to develop their profitable operations.
• The Netherlands, France, Luxembourg, Germany, and UK represent the key investors in Italy.
• There are more than 12,700 companies established with foreign capital, according to theItalian Trade Agency.

Choosing our tax experts in Italy

The tax regime needs to be completely understood when having a business in Italy. This is a matter where you can benefit from professional services offered by ourItalian lawyerswith experience in the taxation field. Plus, thetax registration of companies in Italycan be professionally managed by our specialists in the field, so make sure you address your inquiries to our experts.

FAQ about corporate tax in Italy

1. What is the corporate tax in Italy?

Thecorporate tax in Italyis set at 24% and it is known as IRES. This is an important tax in Italy that must be paid by certain entities registered in this country.

2. What companies must pay corporate tax in Italy?

Companies with commercial activities in Italy must pay thecorporate tax rate, regardless of if they are domestic or established with foreign capital.

3. How is the corporate tax in Italy composed?

IRES and IRAP form the corporate tax in Italy. IRES is the corporate income tax while IRAP is the regional production tax.

4. Do non-profit organizations in Italy pay the corporate tax?

Yes, non-profit organizations need to align with the requirements of thecorporate income tax in Italy. This is atax obligationthat can be entirely explained by one of ourlawyers in Italy.

5. Do branches and subsidiaries in Italy pay IRES?

Yes, foreign entities with branches and subsidiaries must pay theItaly corporate tax rate. The Company Act in Italy and the Fiscal Code comprise information about the taxation of enterprises in this country.

6. Are there any corporate tax exemptions in Italy?

Yes, companies activating in special economic zones in Italy and the ones dealing with intellectual property investments are subject to tax exemptions or lower tax rates. You can discuss further details on this topic with ourItalian lawyers.

7. What is the tonnage tax and how it involves IRES in Italy?

The tonnage tax is imposed on shipping companies with operations and permanent establishments in Italy. The tax is based on the net tonnage of the qualifying ships allocated to the effective shipping days. Then, IRES applies to the tonnage income. More about these aspects can be explained by our Italian advisors.

8. How is the IRAP applied in Italy?

IRAP applies to productive activities in Italy, determined on the added value of the manufacture, minus the costs. The standard IRAP rate is 3.9% but it varies depending on the regions where thecompanies are registered in Italy.

9. Do small and micro enterprises benefit from corporate tax advantages in Italy?

Yes, small businesses in Italy are subject to special taxation regimes, and these can be verified with our specialists in the field at the time of company registration.

10. Are companies activating as pension funds in Italy subject to Italy corporate tax?

No, thecorporate taxis not imposed on pension funds entities registered in Italy.

Foreign entrepreneurs interested in thecorporate tax rate in Italymay find out more about thetaxationin this country fromour law firm in Italy. Pleasecontact usfor complete legal services and find out how we can help you.