Italy

The major recent changes in the Italian tax rules that occurred in the last 12 months are the following:

• Approval of several corporate income tax (CIT) provisions.

• Enhancement of Tax Control Framework (TCF) and cooperative compliance regime.

• Introduction of value-added tax (VAT) and other taxes modifications.
• Approval of different regulations in the area of tax credits and incentives.

Please note that Italy tax updates are generally expected to occur between November and December in connection with the Budget Law and approval of related implementing laws.

Approval of several CIT provisions

The deadlines for filing corporate income tax (IRES) and regional production tax (IRAP) returns is by the end of the tenth month following the fiscal year-end (i.e. 31 October for calendar year). 

The 2024 Budget Law and other Legislative Decrees, implementing the Review of the Italian Tax System, introduced a number of different provisions on CIT matters. Below are the main measures:

• From fiscal year (FY) 2024 onward, the notional interest deduction (NID; also allowance for corporate equity or ACE) is repealed, allowing the use of any surplus credits from previous periods until exhausted. The regulation of the Super-ACE credit was modified and limitations on selling credits introduced by Legislative Decree No. 34/2024.
• For FY 2024, companies hiring permanent employees will benefit, under certain conditions, from a 20% increase in the personnel cost deduction.
• As of FY 2024, controlled foreign company (CFC) simplifications are introduced. 
• Capital gains realised by European Union (EU) or European Economic Area (EEA) companies and entities, without a permanent establishment (PE) in Italy, with respect to the sale of qualified participations, having participation exemption regime (PEX) requirements, where taxable also in Italy, from 1 January 2024 are subject to taxation on only 5% of their amount.
• From 1 July 2024, the off-setting of tax credit is prevented in case of expired roles or executive tax assessments exceeding 100,000 euros (EUR).
• Pending approval from the European Commission, a proposed 50% reduction in IRES and IRAP is allowed for business and professional income transferred to Italy from a non-EU/EEA country for at least six fiscal years.
• Option for Italian Generally Accepted Accounting Principles (GAAP) adopters in ordinary accounting to adjust inventories to the actual inventory situation for the tax period in progress at 30 September 2023.
• New tax residence definitions for corporations have been introduced.
• Institution of the advanced biannual agreement (i.e. ‘concordato preventivo biennale’) by Article 7 of Decree Law no. 13/2024. This arrangement is reserved for (i) taxpayers applying the Synthetic Index of Tax Reliability (so-called ISA) and (ii) taxpayers under the flat-rate regime provided by Law no. 190/2014 (so-called ’forfettari'). This consists of the proposal by the Italian Revenue Agency of a forecast, for the following two-year period, of the income from business activity for IRES and IRAP purposes, in order to establish the taxes due in advance.
• Global minimum tax rules have been introduced.

Enhancement of Tax Control Framework (TCF) and cooperative compliance regime

Additional certainty is granted to taxpayers under the cooperative compliance regime regarding transparency with the tax authorities. In particular: (i) assessment terms are significantly reduced and (ii) rewards are enhanced with regards to the penalty regime. Entities that are not eligible can apply for an optional regime, provided that a certified TCF is in place.

A Code of Conduct is introduced to define and regulate mutual commitments between the tax authorities and taxpayers.

New administrative penalties regime

Starting from 1 September 2024, a new regime of administrative penalties has been introduced on tax violations. In general terms, taxpayers should benefit from a reduction of penalties, and self-disclosure procedures are encouraged.

Introduction of VAT modifications and other taxes provision modifications

The following provisions have been introduced, among others: 

• Increase in the VAT rate from 5% to 10% for child products and female hygiene protection and to 22% for child seats to be installed in motor vehicles.
• Payment of VAT in case of the elimination of stock for entities adopting Italian GAAP.
• Tax on sweetened soft drinks (‘sugar tax') is postponed to 1 July 2025, and tax on the consumption of single use manufactured goods (‘plastic tax‘) is postponed to 1 July 2026.

Tax credits and incentives

The following provisions have been approved, among others:

• From 1 January 2024, the maximum amount of de minimis aid per single undertaking is increased to EUR 300,000 over three years (instead of the EUR 200,000 applicable until FY 2023).
• A new tax credit is introduced for taxpayers that invest in the so-called Transition 5.0, with a maximum annual amount of EUR 9 million for each tax period 2024-2025.
• An obligation is introduced for companies with legal headquarters in Italy or having legal headquarters abroad with a PE in Italy to arrange catastrophic risk insurance by 31 December 2024. Non-compliance may lead to adverse consequences concerning requests for public incentives.