How corporate tax works in Italy
Italy’s standard corporate income tax is IRES at 24%, and most businesses also face IRAP at 3.9%. The base and exact treatment can differ by sector, but the headline point is that Italy has two layers of company tax, not one.
The FY 2025 IRES reduction to 20% was a one-year incentive for qualifying reinvested profits, not the ordinary 2026 corporate rate. For 2026 planning, the default rate remains 24% unless a specific incentive or regime applies.
Foreign companies with an Italian permanent establishment are taxed broadly like resident companies. Italy also has participation exemption rules, withholding tax on some dividends and interest, and specific 2026 changes affecting banks, financial intermediaries and insurers.
Tax rates at a glance
- Corporate income tax
- 24%IRES
- IRAP
- 3.9%
- Financial sector IRAP
- higher
- Digital services tax
- 3%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
FoundersHolding companiesRegional operatorsInvestorsMultinationals
Watch out for
- Italy is not just an IRES story. IRAP, VAT, payroll social security and withholding taxes can be material for real operating companies.
- The 2026 Budget Law increased IRAP for banks, financial intermediaries and insurers, so sector-specific modelling matters.
- The 95% participation exemption for dividends and capital gains now hinges on a 5% shareholding threshold or a EUR 500,000 tax-value threshold in many cases.
- For some EU and EEA non-resident companies, the domestic dividend withholding tax can drop to 1.2% if the shareholding conditions are met.
Frequently asked questions
What is the corporate tax rate in Italy?
The ordinary corporate income tax rate is 24% IRES, and most companies also pay 3.9% IRAP.
Is there a lower IRES rate for 2026?
Not as the standard rule. The 20% IRES rate was a one-year incentive for FY 2025 for qualifying reinvested profits.
Do foreign companies pay Italian corporate tax?
Yes, if they have an Italian permanent establishment or Italian-source profits. The PE is generally taxed similarly to an Italian resident company.