Italy Corporate Tax - Guide for International Expansion

Are you considering expanding your business operations to Italy? Understanding the Italian corporate tax system is crucial for making informed decisions about your European expansion strategy.

Italy offers a strategic location in the heart of Europe with access to major markets, but navigating its corporate tax obligations requires careful planning. From registration requirements to payment procedures, getting familiar with Italy's tax landscape will help ensure your business operates smoothly and remains compliant.

Whether you're establishing a new subsidiary or expanding existing operations, having the right financial infrastructure is essential. Wise Business can help streamline your international payments and currency management, making it easier to handle tax obligations and day-to-day operations in euros.

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This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

Italy corporate tax rate in 2025

The standard corporate income tax rate in Italy is 24% for 2025, which applies to resident companies on their worldwide income. This rate has remained stable since recent tax reforms and is competitive within the European Union context.¹

Italian resident companies are subject to corporate income tax (IRES - Imposta sul Reddito delle Società) on their global profits, while non-resident companies are only taxed on Italian-source income.² Additionally, companies may be subject to the regional tax on productive activities (IRAP - Imposta Regionale sulle Attività Produttive), which typically ranges from 3.9% to 5.9% depending on the region and business activity.^{1 3}

Italy also participates in the OECD's Pillar Two global minimum tax framework. For large multinational groups with annual revenues exceeding €750 million, a qualified domestic minimum top-up tax (QDMTT) ensures an effective tax rate of at least 15% where applicable.⁴

Read more about Corporate Tax Planning best practices

How to pay corporate tax in Italy

Corporate tax payments in Italy are managed through the Italian Revenue Agency (Agenzia delle Entrate) using their online platform called "Fisconline" or through qualified intermediaries such as accountants or tax advisors. Most businesses are required to use electronic filing and payment methods.⁵

The corporate tax return (Modello REDDITI SC) must be filed by the last day of the tenth month following the end of the tax period. For calendar year companies, this means the deadline is typically October 31st..

Companies are also required to make advance tax payments (acconto) during the tax year. The first advance payment is due by June 30th (40% of the previous year's tax liability) and the second by November 30th (the remaining 60%). These advance payments help spread the tax burden throughout the year rather than requiring a large lump sum payment.⁶

Late payment penalties apply at a rate of 25% of the unpaid amount, though reduced rates may apply for short delays. For instance, the penalty is 0.83% per day for delays within 15 days. Additionally, administrative penalties for late filing range from a minimum of €250 to €1,000 if no tax liability is present, or 120% of the taxes due if a tax liability exists.⁶

Let's calculate the annual tax due for a company with €1.5 million turnover. Assuming a profit margin of 10%, the taxable profit would be €150,000. At Italy's standard corporate tax rate of 24%, the IRES tax owed would be:

€150,000 × 24% = €36,000

Additionally, assuming an average IRAP rate of 4.25%, the regional tax would be approximately:

€150,000 × 4.25% = €6,375

Total corporate tax liability: €36,000 + €6,375 = €42,375

When expanding your business to Italy, the right financial tools will make the process smoother. Using a platform like Wise Business makes it easy to expand internationally with local EUR account details. A multi-currency account allows businesses to pay for incorporation costs, registration fees, and government taxes in local currency without paying high exchange rate fees.

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Tax Compliance in Italy

Staying compliant with Italian corporate tax regulations requires careful attention to deadlines and filing requirements. Below are some key steps businesses should follow:

Register for Taxes Early

Companies must obtain their tax numbers as soon as they incorporate. Compliance involves multiple obligations, including corporate tax in Italy, VAT, social security contributions, and other local taxes.⁷

Corporate Annual Filing

• IRES taxpayers must e-file their corporate tax return each year.
• The return must be submitted online to the Revenue Agency no later than the last day of the 10th month following the end of the tax period (31 October for calendar-year companies).⁸
• Businesses can use the Revenue Agency’s free corporate tax return software (RedditiOnLine SC) to efficiently prepare and file their returns.

VAT Return Filing

• All taxpayers with a VAT number must file an annual VAT return, even if no taxable transactions occurred during the year.
• The return covers the input and output VAT balance for the full calendar year and determines any refund entitlements.
• The annual VAT return must typically be filed between 1 February and 30 April¹⁸ using official reporting tools provided by the Revenue Agency.

By adhering to these requirements and keeping track of important deadlines, companies can avoid penalties and ensure compliance with Italy’s minimum corporate tax rate and VAT obligations. Many firms also leverage the best corporate tax software to streamline filings and reduce administrative errors.

International Expansion to Italy

Italy presents a solid ground for business expansion. It intricately combines a strong economy with access to the European single market. The country’s GDP is nearly USD 2.4 trillion, making it the 8th largest economy in the world.⁹ There’s a population of around 59 million, which reflects a good domestic market.¹⁰ Purchasing power per capita stands at €18,905, about 16% above the European average, which signals healthy consumer demand.¹¹

Italy also benefits from trade strength. In 2024, exports reached USD 674.87 billion, led by machinery, pharmaceuticals, and vehicles. The country maintains a stable trade surplus and strong links with Germany, the United States, and France.¹² Real GDP growth is projected to remain positive, driven by investments supported by the EU Recovery and Resilience Facility spending.

As an EU member, Italy provides direct access to over 450 million consumers across 27 member states. This creates a strategic advantage for companies looking to scale within Europe. Italy is also a member of the G7, aligning its policies with those of other global economic leaders such as the US, UK, and Japan.¹³

The labor market is another strength. Unemployment remains moderate at 6.7%, and average labor costs are lower than the EU average (€30.9 compared to €33.5).¹⁴ Italy is home to top-ranked universities, supplying businesses with a skilled talent pool. Moreover, recent reforms grant 50% income tax relief for top talent relocating to Italy, making it easier to attract specialists.¹³

For businesses expanding into Italy, corporate tax is a crucial consideration. The country applies a standard framework for corporate income tax, and while the rules are straightforward, navigating them often requires careful corporate tax calculation. Many companies work with a corporate tax solicitor to ensure compliance and optimize reliefs.

You can start a business in Italy by following the steps listed below:

1. Conduct market research.
2. Build a business plan with forecasts.
3. Select your business name and location.
4. Choose a legal structure.
5. Register with the local Chamber of Commerce.
6. Apply for an Italian tax number with the Revenue Agency.
7. Open a local bank account.
8. Maintain accurate records and track activities.

For more insights on setting up your financial operations, check out Wise’s guide on starting a business in Italy as a foreigner. It walks you through opening a business account and provides tips for managing payments efficiently.

Read more about the corporate tax in United States

Incorporation of Business in Italy

To incorporate a business in Italy, you must follow specific steps with the local Chamber of Commerce. The process requires:^{15 16}

• A unique company name.
• Selection of entity type.
• Registered office address in Italy.
• At least one director and, in some cases, a statutory auditor.
• Company bylaws, known as the Atto Costitutivo and Statuto.
• Shareholders and minimum capital requirements, depending on entity type.
• Registration with the Italian Revenue Agency for tax identification.

Once registered, businesses must also be aware of Italy’s corporate tax return due dates and tax payment dates to avoid penalties. Many foreign companies use professional corporate tax services to handle filings and optimize reliefs under the corporate tax rate in the Italian framework.

Business Entities in Italy

Several business structures are available to foreign and local investors. The most common are:¹⁷

• Società a responsabilità limitata (Srl): A private limited liability company. This is the most common entity for small and medium enterprises. Shareholders’ liability is limited to their investment. Minimum share capital is €1 for a simplified Srl, or €10,000 for a standard Srl.
• Società per azioni (SpA): A joint-stock company. This structure is often chosen by larger businesses or those seeking external investment. Minimum share capital is €50,000, and at least one shareholder is required.
• Branch office: A foreign company may open a branch in Italy. The branch is not a separate legal entity and remains part of the parent company. Registration with the Chamber of Commerce and the Italian Revenue Agency is mandatory.
• Representative office: This entity cannot engage in commercial activities but can carry out promotion, market research, or liaison work. It has no separate legal personality.

Each type of entity has different management, reporting, and taxation obligations. An Srl is often preferred for its flexibility, while an SpA is used when planning to list on a stock exchange or attract significant investment.

Choosing the correct entity is key to business success in Italy. It ensures proper compliance, smooth operations, and accurate corporate tax handling.

International corporate tax best practices

Managing corporate tax obligations across multiple jurisdictions requires a strategic approach that balances compliance with efficiency. Here are key practices that can help international businesses navigate complex tax landscapes effectively.

Maintain robust compliance frameworks across all operating jurisdictions. This includes staying current with local tax law changes, filing requirements, and payment deadlines. Each country has unique rules and penalties for non-compliance, making it essential to establish reliable local partnerships with qualified tax advisors and accounting professionals.

Leverage double taxation treaties to minimize tax burdens. Italy has an extensive network of double taxation agreements with over 90 countries, which can help prevent the same income from being taxed twice. Understanding these treaties and properly claiming treaty benefits can significantly reduce overall tax costs for multinational operations.

Implement transfer pricing documentation and policies that comply with OECD guidelines. With the global focus on Base Erosion and Profit Shifting (BEPS) initiatives, maintaining arm's length pricing for intercompany transactions is crucial. Proper documentation helps demonstrate compliance and reduces the risk of tax authority challenges.

Consider the impact of the OECD's Pillar Two global minimum tax rules. Large multinational groups should assess their effective tax rates in each jurisdiction and implement appropriate planning strategies to manage the 15% minimum tax threshold while maintaining operational efficiency.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to Italy efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.

• Get paid like a local: Use local account details for 8+ major currencies to easily receive payments from customers or investors.

• Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.

• Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.

• Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.

Wise is designed to support every step of your journey, from paying your first registration fee to receiving international payments and managing your global treasury.

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FAQs - Corporate tax in Italy

Who is liable for corporate tax in Italy?

All companies resident in Italy for tax purposes are liable for corporate income tax (IRES) on their worldwide income. A company is considered tax resident if it has its legal seat, place of effective management, or main business activity in Italy. Non-resident companies are only subject to Italian corporate tax on income derived from Italian sources, such as through a permanent establishment or specific types of Italian-source income.

Are there any tax incentives for businesses in Italy?

Yes, Italy offers several tax incentives to encourage business investment and innovation. The "Patent Box" regime provides a 110% deduction on R&D costs linked to patents, trademarks, and other intangible assets. There are tax credits for investments in "Industry 4.0" tangible assets (20% for investments up to €2.5 million), R&D activities (10% tax credit with a maximum of €5 million annually), and technological innovation (15% on eligible investments). Companies investing in Southern Italy's Special Economic Zones can claim up to 40% of eligible investments as tax credits.

What is the tax treatment of dividends in Italy?

Dividends distributed by Italian companies to resident corporate shareholders are generally subject to a participation exemption regime. If certain conditions are met (including holding the participation from the first day of the twelfth month preceding the sale and classifying it among financial fixed assets), 95% of dividend income is exempt from corporate tax. Dividends paid to non-resident companies are subject to 26% withholding tax, though this can be reduced to 1.20% for EU countries and EEA "white-listed" countries, or eliminated under the EU Parent-Subsidiary Directive for qualifying shareholders.

What is the process for registering for corporate tax in Italy?

Companies must register with the Italian Revenue Agency (Agenzia delle Entrate) and obtain a tax identification number (Codice Fiscale) before commencing business activities. This registration typically occurs as part of the company incorporation process through the Business Registry (Registro delle Imprese). Corporate tax returns (Modello REDDITI SC) must be filed by the end of the tenth month following the tax year-end (October 31st for calendar-year entities), and companies must begin making advance tax payments.

What are the common pitfalls to avoid regarding corporate tax in Italy?

Many businesses underestimate the complexity of IRAP (regional tax) calculations, which have different deduction rules from IRES. Transfer pricing documentation is frequently inadequate for intercompany transactions, particularly given Italy's adherence to OECD guidelines. Companies often fail to properly implement the controlled foreign company (CFC) rules or claim available tax incentives like R&D credits and Industry 4.0 benefits.

Sources used in this article:

1. Taxing.it: Italian Taxes for Corporations
2. Chambers Practice Guides: Corporate Tax 2025 - Italy
3. Agenzia Entrate: Taxes on Corporate Income
4. Taxathand: Decree Issued on Pillar Two
5. Agenzia Entrate: Corporate Income Tax Return Filing Deadline
6. PwC Tax Summaries: Italy Corporate Tax Administration
7. Italian Business Lawyers: Tax Obligations and Compliance
8. Agenzia Entrate: When the Corporate Income Tax Return Must Be Filed
9. World Bank: GDP Italy
10. IMF: Italy Country Profile
11. NielsenIQ: Average Purchasing Power of Europeans in 2022
12. Trading Economics: Italy Exports by Country
13. Hawksford: Starting a Business in Italy
14. Eurostat: Hourly Labour Costs
15. Italian Business Register
16. Impresa in un Giorno: Setting up a Business
17. Invest in Italy: Setting up a Company
18. VAT Returns in Italy

Sources last checked 07/09/2025