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Corporate Tax Rate in Italy

Corporate Tax in Italy

Updated on Monday 22nd February 2021

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corporate_tax_in_italy.jpgThe corporate tax is one of the main taxes charged to companies for their commercial activities in Italy. The rates for corporate tax decreased in the last years from 53.20% in 1996, to 37.25% in 2006 and it reached 24% in 2018. The corporate tax rate includes the IRES and IRAP, other components of the main tax, which generally have to be paid by most companies. However, several exemptions apply.  

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. You can find out extensive information on the corporate tax rate in Italy from our team of Italian lawyers.
 

What is the current corporate tax rate in Italy? 

 
Since 2018, the corporate tax rate in Italy has been maintained at the same levels. The rate at which corporate entities must pay the corporate tax is generally the same for most of the business 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 the corporate tax will apply as a tonnage tax. Below, you can find some of the basic highlights of this tax, which can be presented at length by our Italian lawyers
 
  • 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 the payment of the corporate tax rate in Italy?

 
The corporate tax is charged to corporate entities developing a commercial activity in Italy, from which they obtain profit. The tax is charged when the company develops its activity only in Italy, but also if it expands on foreign markets. The same applies to foreign companies operating in Italy, as they will be liable to the corporate tax for the income obtained from their activities carried out here. 
 
According to the Italian Revenue Agency, the obligation to pay the corporate tax rate in Italy is imposed to most of the legal entities prescribed by the national law. Thus, all companies operating as one of the following must register for and pay this tax: joint-stock companies, limited liability companies, partnerships limited by shares, European companies or European cooperatives. 
 
The obligation to pay the corporate tax rate in Italy is imposed to entities registered as non-profit organizations, as well as to trusts that are Italian tax residents or foreign tax residents. Corporate tax is also charged to entities registered as undertakings for collective investments, but there is an exemption on the payment of this tax for the latter entity in specific legal situations, that can be detailed by our team of Italian lawyers.  
 
One must also know that IRAP generally applies to those involved in production activities and thus, certain types of economic activities will be exempted from the payment of this tax. Here, the law prescribes an exemption for entities operating as pension funds or European economic interest groupings. 
 

Does Italy offers any special tax regimes?

 
As a general rule, all companies operating in Italy must follow the same tax regime. However, Italy has several free trade zones where certain basic corporate taxes do not apply, such as the value added tax, excise duty or the corporate tax. The tax exemptions vary based on the region, as the exemptions were created to sustain the development of a region. 
 
Special tax regimes can be found in Italy for micro and small enterprises. In the case of businesses registered as real estate investment companies listed on the stock exchange, the Italian law prescribes the possibility of being exempted from the payment of the IRES and IRAP in certain cases. 
 
The corporate tax rate in Italy can 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 a reduction on the corporate tax of 50%. You can address to our lawyers in Italy for legal assistance on the intellectual property regime and the tax advantages companies can obtain.  
 
Depending on the business activity you are interested in, our team of Italian lawyers can provide in-depth information on the advantages you can have when paying the corporate tax rate in Italy and you can also receive legal representation on other tax deductions or tax minimization procedures that can apply to your business. 
 
 

Regional tax for production in Italy 

 

The IRAP is a regional tax for productive activities and it is calculated on the added value of the production, minus the costs for the production, obtained by the company in Italy. The rate for this tax may vary from region to region, but the standard rate is 3.9% and it can be increased by approximately 1% (0.95%, more exactly). The corporate tax rate in Italy is calculated on the net total income of the companies during one business year and it is an important source for the public budget 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. Foreign entrepreneurs interested in the corporate tax rate in Italy may find out more about the taxation in this country from our law firm in Italy. Our Italian lawyers will help them with information and also provide them with legal services.