Corporate Income Tax in Italy: What Your Company Really Pays in 2026

Last reviewed: November 2026 · Reviewed by Stéphane Gombauld, tax expert, technologist and digital nomad

You run an Italian SRL, or you are weighing one against freelancing with a VAT number. This guide gives you the 2026 corporate rates, how IRES and IRAP are calculated, what happens when profits reach your pocket, and which structure fits your situation.

Italy corporate income tax in 2026: the key figures

Is this guide for you?

Read on if you…

• own or plan to set up an SRL or SpA in Italy;
• are a freelancer earning enough to ask whether a company would cost less;
• run a foreign company and spend much of the year in Italy.

Probably not your case if you…

• are an employee or forfettario freelancer with no plans to incorporate: start with the tax landscape overview of Italy;
• only hold listed Italian shares as a private investor: see capital gains tax in Italy.

Who pays corporate tax in Italy?

IRES applies to companies and other entities resident in Italy on their worldwide income. Non-resident companies pay it only on Italian-source income, mainly the profits of an Italian permanent establishment (a branch, office or other fixed place of business).

When is a company Italian resident?

Since 2024, article 73 of the TUIR (the Consolidated Income Tax Act) uses three alternative tests, each met for most of the tax year:

1. its legal seat is in Italy;
2. its place of effective management is in Italy, meaning where strategic decisions are actually taken;
3. its principal ordinary management is in Italy, meaning where the day-to-day running happens.

Here's the catch for founders who move. An Estonian or UK company you run from your flat in Turin can be Italian resident under tests 2 or 3, and taxed on all its profits. If you are relocating, read how to obtain tax residency in Italy first.

How are IRES and IRAP calculated?

IRES: 24% on accounting profit, adjusted

You start from the accounts and apply the TUIR adjustments. Some costs are capped: cars at 20%, phones at 80%, meals and hotels at 75%. The detail is in business expenses in Italy.

Other rules that matter in 2026:

• Losses carry forward without time limit. After the first three years of activity, they can only offset 80% of each year's income.
• Interest is deductible up to interest income plus 30% of ROL, a tax version of EBITDA. The excess carries forward.
• New hires can trigger an extra deduction of 20% of the cost of additional permanent staff.

IRAP: 3.9% on the value of production

IRAP is not a tax on profit in the strict sense. It taxes the net value of production: roughly revenue minus operating costs, before interest. The cost of permanent employees is deductible from the base, so a profitable company with staff on open-ended contracts pays IRAP close to 3.9% of its operating profit. Individuals, including sole traders and professionals, have been out of IRAP since 2022.

Holding companies: the participation exemption

An Italian company receiving dividends from a subsidiary includes only 5% of them in its taxable income. That is an effective rate of 1.2%. Gains on selling a shareholding are 95% exempt if four conditions hold: you held it for at least 12 months, it was a fixed financial asset, the subsidiary runs a real business, and it is not resident in a low-tax country. This is the PEX regime of article 87 TUIR.

What do you pay when the profit reaches you?

Corporate tax is only half the story. Dividends paid to an Italian-resident individual are taxed at a final 26%, withheld by the company. No further IRPEF is due.

Honestly? For a solo consultant who spends everything, a company rarely beats the forfettario. It pays off when you leave profits in the company to grow. Note that the impatriate regime cuts tax on work income, not on dividends: see tax incentives for expats and digital nomads in Italy.

Non-resident shareholders suffer 26% withholding too, reduced to 1.2% for companies in the EU and EEA, to 0% for EU parent companies holding at least 10% for a year, or to the treaty rate. See international tax treaties of Italy.

Which business structure fits what you do?

Management and permanent establishment warning. Tax follows the people taking decisions. A sole director living in Italy, or an Italian team signing contracts, can create Italian residence or a permanent establishment. The reverse holds for an Italian SRL run from abroad. Compare entities in legal forms of business in Italy and get the setup checked at Heavnn business setup.

How do you file and pay Italian corporate tax?

1. Register the company with the business register through the ComUnica filing, which also gives you a VAT number.
2. Approve the financial statements within 120 days of year-end (180 in some cases).
3. Pay the balance and first advance by 30 June, the second advance by 30 November (calendar-year companies).
4. File the Redditi SC return and the IRAP return by the end of the tenth month: 31 October.

Controlled foreign company rules (article 167 TUIR) tax in Italy the profits of a low-taxed, mostly passive foreign subsidiary you control. Late or wrong returns trigger penalties covered in tax fraud regulations in Italy.

Common mistakes (and what they cost)

• Running a foreign company from Italy → the company becomes Italian resident, with IRES, IRAP, interest and penalties of at least 70% of the unpaid tax for every open year.
• Forgetting IRAP in your budget → a 24% plan becomes 27.9% or more, and the advances due in June and November catch you short.
• Incorporating too early → at modest profits a company costs more than the forfettario once you add 26% on dividends and accountant fees.
• Assuming losses offset everything → after year three, only 80% of income can be sheltered, so a profitable year still pays tax.

Frequently asked questions

What is the corporate tax rate in Italy in 2026?

The standard IRES rate is 24% of taxable income. Most companies also pay IRAP, a regional tax of 3.9% on the net value of production, which regions can vary by up to 0.92 points. Combined, a typical company pays about 27.9% of profit. Banks and insurers pay higher IRAP rates.

How are dividends taxed in Italy?

Dividends paid by an Italian company to an Italian-resident individual bear a final 26% withholding, with no further tax. Dividends received by an Italian company are 95% exempt, so only 1.2% is effectively paid. Non-resident shareholders suffer 26%, reduced to 1.2% for EU and EEA companies, to 0% for qualifying EU parents, or to the treaty rate.

What is IRAP and who pays it?

IRAP is the regional tax on productive activities. It is charged at 3.9% on the net value of production, roughly operating profit before interest, with permanent staff costs deductible. Companies, partnerships and public bodies pay it. Individual sole traders and freelance professionals have been exempt since 2022.

Is an SRL better than freelancing in Italy?

Usually not at modest profits. A forfettario freelancer pays 15%, or 5% in the first five years, on 78% of fees up to EUR 85,000. An SRL pays about 27.9%, then 26% on distributed profit, plus higher running costs. A company makes sense when profits are high, you reinvest them, or you need limited liability.

Can a non-resident own an Italian SRL?

Yes. Foreigners can own and direct an Italian SRL, subject to reciprocity rules for some non-EU nationals. You will need an Italian tax code and usually an Italian certified email address. Remember that where the company is managed matters: if all decisions are taken abroad, another country may claim the company as resident.

Related guides

• Legal forms of business in Italy: SRL, SpA, partnerships
• Business expenses in Italy: what your company can deduct
• International tax treaties of Italy
• Tax landscape overview of Italy
• Corporate income taxes in Portugal
• Corporate income tax in Spain
• All country tax guides

Sources

• Agenzia delle Entrate – Italian Revenue Agency
• Normattiva – TUIR, Presidential Decree 917/1986 (articles 73, 77, 87, 96, 167)
• Ministry of Economy and Finance – Department of Finance
• Registro Imprese – Italian business register
• OECD – Global anti-base erosion (Pillar Two) rules
• PwC Worldwide Tax Summaries – Italy, Corporate: Taxes on corporate income

This guide is general information, not personalised tax advice. See how we research and review.