In this page: Corporate Taxes | Accounting Rules | Consumption Taxes | Individual Taxes | Double Taxation Treaties | Sources of Fiscal Information
Corporate tax (IRES - Imposta sul Reddito delle Società) | 24% |
Regional Tax (IRAP - Regional tax on productive activities) | 3.9% for general companies, 4.65% for banks and financial institutions and 5.9% for insurance companies (average rates, vary region by region). Regional authorities have the right to increase or decrease the Irap rates within the limit of 0.92%. |
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.
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.
The patent box regime and R&D credit scheme grant tax credits subject to qualifying provisions to companies that invest in R&D. The tax exemption is up to 10% of the expenditure (capped at EUR 5 million) and can be granted to the permanent establishments of foreign companies if the latter are based in countries with which Italy has concluded a tax treaty and which exchange tax information with the company.
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.
Italy | OECD | United States | Germany | |
---|---|---|---|---|
Number of Payments of Taxes per Year | 14.0 | 10.1 | 10.6 | 9.0 |
Time Taken For Administrative Formalities (Hours) | 238.0 | 163.6 | 175.0 | 218.0 |
Total Share of Taxes (% of Profit) | 59.1 | 41.6 | 36.6 | 48.8 |
Source: The World Bank - Doing Business, Latest data available.
EUR 0 - 15,000 | 23% |
EUR 15,001 - 28,000 | 25% |
EUR 28,001 - 50,000 | 35% |
EUR 50,001 and over | 43% |
Municipality Tax | 0 to 0.9% |
Regional Tax | 1.23% to 3.33% |
Self-Employed Resident Individuals | Flat tax of 15% on up to EUR 85,000 of business and professional gross income, without being subject to additional regional and municipal taxes (conditions apply) A reduced flat tax of 5% applies for new activities (conditions apply) |
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 2023) 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.
Self-employed individuals with a structured organisation and non-resident taxpayers exercising business activity in Italy throughout a permanent establishment or a partnership are also subject to IRAP (whose flat rate can go up to 3.9%).
Directors operating in the financial sector are subject to an additional 10% tax levied on the variable compensation exceeding the fixed remuneration on bonuses of stock options and variable payments.
Resident individuals are taxed on interest at a flat rate of 26% (12.5% for interest on Italian treasury bonds). Capital gains derived by an individual on the disposal of Italian immovable property normally are taxed as miscellaneous income, but are exempt from tax if the individual held the property for more than five years. Gains arising from the sale of a principal residence are not subject to tax.
Withholding taxes may be reduced under an international tax treaty.
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Latest Update: November 2023