Italy Corporate Tax Rate - Legal Advice for Foreign Investors
Corporate Tax in ItalyUpdated on Thursday 13th May 2021
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Paying IRES in Italy
Companies that are running businesses in the energy field are required to pay an IRES different 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 had tax losses in their previous financial years. Companies that operate in fields such as finance or insurance have to pay a corporate tax calculated at a different rate.
What is the current corporate tax rate in Italy?
- the standard corporate tax rate in Italy is of 24% (known as IRES);
- to this, companies will also need to pay the IRAP, charged at the rate of 3.9% and which represents a regional corporate tax that can vary based on the region where the company operates;
- however, regional administrations can increase or decrease the standard IRAP by +/- 0.92%;
- companies involved in mergers or de-mergers will not pay the corporate tax while being in this process, but they will pay what is known as the substitutive tax, charged at rates ranging from 12% to 16% from the company’s financial value;
- the substitutive tax is 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?
Does Italy offer any special tax regimes?
Regional tax for production in Italy
A company that has the main part of its business in Italy or that is managed from this country has to pay taxes for the Italian authorities. This is considered a resident company that is required to pay the corporate tax rate in Italy calculated on its income obtained at a global level, while companies that are not residents in Italy have to pay only for their income from Italy. The corporate tax is 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 the Italian laws.
Making investments 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 the Italian Trade Agency.