Italy's corporate taxation system includes various direct and indirect taxes, with IRES, IRAP, and VAT being the most significant taxes for companies operating in the country. Understanding the various tax rates, tax brackets, and legislation is crucial for corporations doing business in Italy.
Corporate Income Tax
Corporate Income Tax (CIT) in Italy is known as IRES (Imposta sul Reddito delle Società). It is a direct tax levied on the net income of companies operating in Italy. The Presidential Decree No. 917 of December 22, 1986, commonly known as the Consolidated Income Tax Act (TUIR), governs the corporate income tax.
Domestic Companies:
Domestic companies in Italy are taxed on their worldwide income. As of January 1, 2021, the standard IRES rate is 24%.
Foreign Companies:
Foreign companies with a permanent establishment in Italy are subject to IRES only on the income attributable to the Italian permanent establishment. The standard IRES rate of 24% applies.
Regional Business Tax
In addition to IRES, companies operating in Italy are subject to a Regional Business Tax known as IRAP (Imposta Regionale sulle Attività Produttive). IRAP is levied on the net value of production generated in each region. The standard IRAP rate is 3.9%; however, regions have the authority to increase or decrease the rate by up to 0.92 percentage points.
Value Added Tax (VAT)
VAT (Imposta sul Valore Aggiunto) is an indirect tax in Italy, applicable to the sale of goods and services. The Legislative Decree No. 633 of October 26, 1972, governs VAT in Italy. VAT is levied on every stage of the supply chain, from production to consumption. There are three VAT rates in Italy:
- Standard rate: 22% (applied to most goods and services)
- Reduced rate: 10% (applied to certain food products, utilities, and some services)
- Super-reduced rate: 4% (applied to essential goods such as bread, milk, and certain pharmaceuticals)
Import Duties
Import duties in Italy are governed by the European Union (EU) customs legislation. As a member of the EU, Italy follows the EU's Common Customs Tariff (CCT) for imports from non-EU countries. Import duties vary depending on the product and its classification under the Combined Nomenclature (CN) code. Rates can range from 0% to 17% or higher, depending on the type of goods.
Export Duties
Italy, as an EU member, does not impose export duties on goods exported to other EU countries. For exports to non-EU countries, Italy follows the EU's export regulations, which generally do not impose export duties except in specific cases, such as the export of certain agricultural or cultural goods.
Related Information
