IRES at 24%, IRAP at 3.9% and what a company really pays. We advise foreign businesses and relocating founders on structure, corporate residence, dividends and compliance.
The corporate tax rate in Italy is 24% (IRES), plus a regional business tax (IRAP) of 3.9% in most regions, so a typical Italian company carries a combined burden of roughly 27.9%. That is the short answer, and for most businesses it is the right one.
The longer answer matters more than the headline, because the Italy company tax rate is not what usually surprises foreign business owners. What surprises them is that IRAP is calculated on a base that ignores much of their interest and staff costs, that a foreign company can become Italian tax resident without anyone incorporating anything, and that the way profits are taken out of the company changes the real cost of the whole structure. This page covers all of it.
IRES (imposta sul reddito delle società) is Italy's corporate income tax. Article 77 of the Italian Income Tax Code (TUIR) sets the rate at a flat 24% on net taxable income. There are no progressive brackets: the corporate income tax rate in Italy is the same on the first euro of profit and the millionth.
It applies to Italian joint-stock companies (SpA), limited liability companies (Srl), partnerships limited by shares, cooperatives and commercial entities, and, importantly for foreign groups, to the Italian permanent establishments of non-resident companies.
The 10.5% surcharge on non-operating companies is a trap for property-holding vehicles with little turnover. Non-resident companies are taxed at 24% on Italian-source income that is not subject to final withholding, such as rent from an Italian property or the profits of an Italian permanent establishment; the applicable treaty then decides whether Italy may tax that income at all.
You may still find sources quoting an Italian corporate income tax rate of 20%. That was a genuine measure, but a one-year one. The 2025 Budget Law (Article 1, paragraphs 436 to 444 of Law 207/2024) cut IRES to 20% for the 2025 tax period only, for companies that retained at least 80% of their 2024 profit, reinvested part of it in qualifying "4.0" and "5.0" assets and increased headcount. It is claimed in the 2026 corporate tax return, which is why it is still being written about, but it does not apply to 2026 profits.
IRAP (Legislative Decree 446/1997) is the second layer, and the one foreign businesses consistently underestimate. It is a regional tax on the net value of production of an organised business, at a standard rate of 3.9% for industrial, commercial and service companies. Two features make IRAP something quite different from a second corporate tax.
The base is not profit. IRAP is calculated on the difference between production revenues and certain production costs taken from the statutory accounts. Interest expense is not deductible at all, and neither are many costs of non-permanent staff. A leveraged or people-heavy business can therefore pay IRAP on an amount larger than its taxable profit, and can owe IRAP in a year in which it makes an IRES loss.
The rate is regional. Regions may vary the rate by up to 0.92 points, and in Lazio, Abruzzo, Molise, Campania and Calabria a 0.92-point increase applies by law. Campania adds a further 0.15 points, for an ordinary rate of 4.97%. Where you put the company is a real, if modest, tax decision.
There is partial relief on the other side. A share of the IRAP paid is deductible from the IRES base, as is the cost of permanent employees for IRAP purposes. Small businesses benefit from a deduction where the IRAP base does not exceed roughly €181,000. And since 2022 sole traders and self-employed professionals are outside IRAP altogether: it now bites mainly on companies, partnerships and permanent establishments of non-residents.
Put the two taxes together and the picture becomes concrete.
That places Italy in the middle of the European pack: higher than Ireland or Hungary, broadly in line with France, Spain and the Netherlands, and below Germany once its local trade tax is counted. For most operating businesses the Italy business tax burden is not the deciding factor: the structuring around it is.
Italian taxable income starts from the profit in the statutory financial statements and is adjusted by the variations the TUIR requires: non-deductible or partly deductible costs, tax depreciation limits, provisions, losses brought forward. The reconciliation is performed in the RF section of the corporate tax return.
For companies preparing accounts under Italian GAAP (other than micro-enterprises) and IFRS adopters, the "reinforced derivation" principle of Article 83 TUIR applies: the classification and timing rules of the accounting standards are given tax effect, and substance prevails over form. From the 2025 financial year, micro-enterprises that opt for full or abbreviated financial statements are brought within the same principle. In practice the quality of your Italian bookkeeping directly determines your tax position, which is why we treat accounting and tax as one workstream.
This is the single most consequential point on this page, and the one most often missed by relocating entrepreneurs.
From the 2024 tax year, Italy rewrote its corporate residence rules. Under Article 73(3) TUIR, as amended by Legislative Decree 209/2023, a company is Italian tax resident if, for the greater part of the tax period (at least 183 days, or 184 in a leap year), it has in Italy any one of the following.
The three tests are alternatives. Any one of them, met for more than half the year, makes the company Italian, and an Italian company is taxed on its worldwide income, with IRES and IRAP, filing obligations and withholding duties.
The Revenue Agency's Circular No. 20/E of 4 November 2024 fleshed out the two new tests. Effective management looks at decisions with genuine managerial content: decisions taken by shareholders as shareholders, and their supervision of management, do not count. Ordinary management looks at where the company actually runs from day to day, assessed on the enterprise as a whole, so that residence is not confused with a permanent establishment.
If the company becomes Italian, the corporate tax bill can dwarf the personal saving that the lump sum tax for high-net-worth individuals was designed to deliver. The same risk applies, in a milder form, to anyone relocating under the inbound workers regime who continues to direct a business abroad.
Dual residence is not a safe harbour. Where two States both claim a company, the applicable treaty decides, and the wording matters. The 2017 OECD Model leaves the case to agreement between the two tax administrations, a process measured in years. Most of Italy's existing treaties still follow the earlier wording, which gives precedence to the place of effective management: precisely the test your move to Italy shifts. For most of our clients, the treaty does not solve the problem; it confirms it.
The answer is not to avoid moving. It is to decide, before the move, where board meetings are held and minuted, who signs what, where the bank mandates sit and which decisions genuinely belong to the foreign management team, and then to run the company that way. Designed at the outset this is straightforward. Reconstructed after an assessment, it rarely is.
Alongside the ordinary tests sits a rebuttable presumption of Italian residence, known in Italian practice as esterovestizione. Under Article 73(5-bis) TUIR, a foreign company that holds a controlling participation in an Italian company is presumed to be Italian resident if, alternatively, it is itself controlled, even indirectly, by persons resident in Italy, or it is administered by a board composed mainly of Italian residents.
Control is assessed under Article 2359 of the Civil Code and, for individuals, the votes of a spouse, relatives to the third degree and in-laws to the second degree are counted too. The presumption reaches through chains of foreign sub-holdings, and does not apply where the foreign company holds no controlling stake in an Italian entity.
What defeats the presumption is substance: premises, staff, directors who actually decide, operational autonomy, real activity. A foreign subsidiary with a real, even modest, organisation capable of carrying out its corporate purpose is not esterovestita. Where the facts are genuinely uncertain, a ruling on the point can give certainty before the structure is tested.
A non-resident company can also be taxed in Italy through a permanent establishment. Article 162 TUIR follows the OECD model closely: a fixed place of business (a branch, office, factory or workshop) through which the enterprise operates, or a dependent agent habitually concluding contracts in Italy in its name.
A permanent establishment is taxed on the income attributable to it, at 24% IRES plus IRAP, and must keep separate Italian accounts. The modern risk is rarely the classic branch: it is the home-working sales manager, the Italy-based executive with signing authority, or the group employee whose role has quietly outgrown "market research". Where an Italian presence is intended, the choice between a branch and an Srl should be made deliberately rather than discovered in an assessment.
Corporation tax is only half the calculation. What matters to a shareholder is the total cost of earning a euro in Italy and receiving it personally.
Dividends paid to Italian resident individuals holding shares outside a business are subject to a final 26% withholding tax (Article 27 of Presidential Decree 600/1973), whether or not the holding is qualified. Combined with 24% IRES, the overall burden on distributed profits is close to 44%.
Between companies the position is very different: dividends received by an Italian company from another Italian company are 95% excluded from its taxable income, so only 5% is taxed at 24%, an effective 1.2%, with no withholding.
For a foreign parent or shareholder, the Italy withholding tax on dividends works in tiers.
The 1.20% rate for EU and EEA companies is one of the most valuable and least-known reliefs in the Italian system. Treaty and directive relief is not automatic: it depends on documentation obtained before payment and on the recipient being the beneficial owner. Recovering an over-withheld 26% afterwards is possible but slow, so this is planned in advance, not repaired later.
Gains realised by an Italian company on the sale of shareholdings are 95% exempt under the participation exemption of Article 87 TUIR, for an effective tax of 1.2%, provided four conditions are met.
The commercial-activity requirement is where property-rich companies come unstuck, and it is one of the reasons the structure chosen at the start of an Italian investment shapes the tax outcome at the end. We look at both ends before recommending either.
The right answer to "what will company tax in Italy cost me?" depends first on what you set up. An Srl is the default for a real operating business and for anyone who may eventually sell. A branch suits a testing phase or an activity that extends the foreign business. Working as a sole trader with an Italian VAT number takes you out of the corporate system entirely, possibly under the 5% or 15% flat-rate regime for smaller turnover.
For founders relocating to Italy the choice interacts directly with their personal position, and occasionally the best answer is the one that looks least efficient in isolation. We size it against the whole picture rather than the company alone, and can also handle the incorporation itself.
The Italian corporate calendar is unforgiving of the unprepared. Italy also operates mandatory electronic invoicing through the Sistema di Interscambio for virtually all domestic transactions and increasingly for cross-border ones: getting the set-up right at the start avoids months of friction. We handle the full cycle through our tax return service.
Groups with consolidated revenues of at least €750 million fall within Italy's implementation of the OECD Pillar Two rules (Legislative Decree 209/2023), which secure a 15% effective rate in each jurisdiction through an income inclusion rule, an undertaxed profits rule and a domestic minimum top-up tax. Because Italy's 24% sits well above 15%, the practical issue is rarely the top-up itself: it is the computation, the data and the reporting. If your group is near the threshold, the work starts before you cross it.
We advise international businesses and their owners on the Italian side of cross-border structures.
Avv. Marco Mesina, a member of the Milan Bar (Ordine degli Avvocati di Milano) and formerly of Deloitte and Withers, advises on everything from choosing between a branch and an Srl, to defending a foreign company's residence position, to coordinating a founder's personal regime with the tax position of the company they run. Corporate tax in Italy is rarely won or lost on the rate. It is won on how the structure is built, and on being able to show it.
24% corporate income tax (IRES), plus regional business tax (IRAP) at a standard 3.9%, for a combined rate of about 27.9% for an ordinary trading company. Rates differ for banks, insurers and energy businesses.
No. The reduced 20% rate applied only to the 2025 tax period, for companies that retained and reinvested profits and increased headcount. It has not been extended to 2026, so the rate is 24%.
Possibly, yes. IRAP is charged on the net value of production, not on profit, and interest and much staff cost are not deductible from it. A company can owe IRAP in a year in which it reports an IRES loss.
It can. Since 2024 a company is Italian resident if its place of effective management or its principal ordinary management is in Italy for more than half the year, wherever it is incorporated. This should be assessed before you move.
26% as standard, 1.20% for companies resident and taxed in the EU or EEA, and nil where the EU Parent-Subsidiary Directive applies. Treaty rates apply outside the EU, with documentation obtained before payment.
26% final withholding for individuals, whatever the size of the holding. Between Italian companies only 5% of the dividend is taxed, an effective 1.2%.
Both are taxed on Italian profits at the same rates. A branch can be simpler at first and may allow losses to be used abroad; an Srl gives limited liability, a cleaner exit and full treaty access.
Avv. Marco Mesina
Founder, Move to Dolce Vita · Avvocato, Milan Bar (Ordine degli Avvocati di Milano)
Marco is an Italian tax lawyer who advises individuals and families relocating to Italy on tax regimes, residency, citizenship, real estate and succession planning. Before founding Move to Dolce Vita he worked at Watson Farley & Williams, Withers and Deloitte in Milan.