Corporate Taxation in Italy

CORPORATE TAX ADMINISTRATION

Tax Period

The ordinary tax period is equal to 12 months, and alignment with the calendar year is not required. In certain cases, the duration of the taxable period can be different from 12 months (e.g., newly established companies may be allowed to have taxable periods of up to 18 months; during mergers & acquisitions; liquidation, etc.).

Tax Returns

From 2024, as a general rule, IRES and IRAP returns must be filed by the end of the 9th month following the tax year's end. Previously, the deadline was the end of the 11th month following the tax year's end. The ordinary filing deadline for the WHT agent return is October 31 of the following year.

Payment of Taxes

For IRES and IRAP purposes, the tax law requires both advance payments and settlement payments. As a general rule, the advance payments are equal to the net tax liability for the previous tax period and are due during the tax period to which they refer. The advance payments due are 100% in 2 installments: - 40% (or 50% if subject to ISA) by the end of the sixth month following the tax year's end; - 60% (or 50% if subject to ISA) by the end of November. Tax payments should be made through a specific form, electronically filed to the tax authorities called F24, directly from the company or through a professional accountant (CPA).

Offsetting of Taxes

Payables and receivables (not claimed for refund) resulting from a return regarding different taxes (such as IRES and VAT) are allowed for offsetting within the yearly limit of €2 million. Furthermore, if it exceeds €5,000, the company needs to request a "conformity mark" affixed by a qualified professional, and the F24 form needs to be filed by the CPA.

Administrative Penalties

Failure to file a tax return results in a penalty limited to 10% plus interests if the company pays within 30 days of communication by the tax authorities. Otherwise, the penalty is 30%. It is possible to pay with reduced penalties if the company pays before communication.

ISA (Synthetic Index of Tax Reliability)

Business taxpayers need to file the ISA if the yearly turnover does not exceed €5,164,569. It is an economic and statistical methodology to determine the level of tax reliability.

Tax Controversy and Dispute Resolutions

In the case the tax authority challenges the return or the payment made, and the taxpayer decides not to accept the challenge, they might ask for a Tax Court. The tax defender might be the accountant until the second instance or a lawyer for all instances.

CORPORATION TAX RATES

In Italy, there are two taxes on profits. The first, called IRES (Corporate Income Tax), is applied at a rate of 24% to all fiscal profits of the company. The second, which might be canceled in the future, called IRAP (Regional Tax on Productive Activities), applies at a rate of 3.9% to the value of production in the broad sense. Not deductible from IRAP are passive interests, interests on financial leasing, director’s fees, and IMU (property tax).

DIVIDEND TAXATION

Dividends to shareholders are taxed at a rate of 26%; if the shareholder is a limited company, such as an SRL or SPA, taxation is calculated only on 5% of its amount.

CORPORATE DEDUCTIONS

Depreciation and amortization are allowed for all fixed assets used in the company's business, except land, for tax purposes (IRES). Not all expenses are deductible from IRAP, as mentioned before. There are maximum limits to the depreciation rates for fixed tangible assets. Amortization of goodwill derived from an asset deal and amortization of trademarks are deductible for an amount not exceeding 1/18 of the cost in any year.

Super Deduction for New Hires

From the fiscal year 2024, companies hiring permanent employees will benefit under certain conditions from a 20% increase in personnel cost deductions.

Welfare and Union Agreement

There are two different kinds of tax exemption: the first, according to the law, predicts that all workers might have €1,000 (up to €2,000 if they have dependent children) per year for personal expenses about fuel, energy, heating costs, etc.; the second group, depending on the union agreement, covers expenses for school and university education (no limits), health insurance (limit €3,614 per year), and supplementary pension (limit €5,164 per year).

Finance Leasing

For fixed tangible assets, at least half of the depreciation period as set forth in the Ministerial Decree, and for real estate, at least 12 years.

Interest Expenses

There is a deduction limit corresponding to 30% of the gross operating margin. Dividends from investments in other companies are taxed within the limit of 5% of their amount (i.e., the tax rate is effectively 1.3%).

Bad Debts

Generally, a 0.5% deduction is allowed for commercial credits yearly. However, for small receivable payments up to €2,500, a deduction is permitted for the total amount. Also deductible are receivable payments towards bankruptcy and agreed-upon companies.

Car Costs

If the business does not involve cars (e.g., car sellers, taxi services, sales agents, etc.), the cost of cars is deductible up to a limit of 20% of their amount. For cars granted to employees for both business and private purposes, the deduction limit is 70%. In the latter case, a fringe benefit must be taxed with payroll.

Taxes and Duties

All taxes and duties, such as stamp duties, registration, IMU (real estate property tax), are deductible to IRES corporate income in the year of payment.

Losses

In case of losses (negative tax profit), they can be carried forward for IRES purposes under the limit of 80% of taxable income. New companies might carry forward 100% of losses for the first three years.

Tax Credits and Incentives

There are many tax credits and incentives, such as foreign tax credit (double taxation), tax credits for investments in new capital assets (tangible and intangible, real estate excluded), R&D tax credit, advertising campaign tax credit, personnel training, etc.

IVA – VALUE ADDED TAX

It applies to the supply of goods and services carried out in Italy by companies, entrepreneurs, professionals, artists, etc. The Italian standard IVA rate is 22%. Reduced rates are provided for specific goods and services, such as food & drink, restaurants, and hotels, etc.

Annual IVA return

Must be filed by April 30 of the following year. Furthermore, there are periodic returns (LIPE) to be filed with the tax authority.

IVA does not apply to:

cross-border sales of goods. In this case, two hypotheses occur. The first one occurs when goods are moving into the European Union (intra-community), and the second is export or import across the EU border. In the first case, companies (seller and buyer) need to file to the tax agent (Agenzia delle Entrate) the forms called “modello Intra,” which contains all information about the transaction. Medical services, financial interests, stock agreements, etc. has exemption of IVA. For exported or imported goods, the Custom Agency manages and collects duties and IVA.

Electronic Invoicing Obligation

Electronic invoices should be converted into XML format in accordance with technical specifications, signed with a qualified signature, and sent to the counterpart through the Italian tax authorities (SDI code). Electronic invoicing is also mandatory for business-to-consumer (B2C) transactions where the supplier has the obligation to issue an invoice. For retail sales, there is an obligation to send periodically the fees electronically to the tax authorities.

IVA Payments

Every month or quarterly, depending on yearly turnover (€800,000 for the supply of goods or €500,000 if provision of services only), all obliged entities must balance the VAT debit or credit and – in the case of a debit – pay the difference between VAT on sales and VAT on purchases through the F24 model by the 16th day of the following month or the second month following the quarter.

Limited IVA Deductions

The EU VAT directive provides tax neutrality. However, there are some purchases for which VAT is not deductible in part or in full. For example, VAT on car expenses is generally deductible under the limit of 40%; VAT on restaurant invoices is not deductible, etc. In these cases, VAT added to the costs of supply might be deductible if in accordance with the law.

OTHER TAXES

The Italian taxation system provides other indirect taxes such as:

Registration Tax

Specific deeds and contracts must be filed with the local registration tax office either upon signature or if specific circumstances occur, and the relevant tax must be paid. Generally, no proportional registration tax is due in the case of transactions subject to VAT.

Registration Tax on Property Lease

Leases of residential, commercial, and industrial buildings or portions thereof generally are exempt from IVA with no right to deduction and subject to a registration tax at 2%. In some cases, the lender might opt for IVA application, and in this case, the registration tax is only 1% plus IVA, of course. Notarial deeds for the purchase of property are subject to a registration tax of 8% (in alternative to IVA) plus cadastral and mortgage tax of 3%. For business buildings, such as fixed assets, VAT does not apply to the invoice (reverse charge).

Miscellaneous

Book endorsment fees expected for SRL, SPA, etc., must to be paid yearly; Business register registration fee at Camera di Commercio, must be paid yearly too from all entrepreneurs; Stamp duties taxes – apply to a certain list of deeds or documents provided for by relevant law provision. IMU – real estate tax – local tax levied on the owner or financial leasing users of buildings or buildable lands to be paid on June 16 and December 16 every year. TARI – a waste tax levied on the owner or user of immovable properties.

Segui il link e prenota ora la tua consulenza

 https://www.studio-brandi.it/blank-3