Italy

Corporate - Significant developments

Last reviewed - 05 February 2024

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) modifications and other taxes provision 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 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:

  • The deadlines for filing corporate income tax (IRES) and regional production tax (IRAP) returns are anticipated at the last day of the ninth month following the close of the tax period (i.e. 30 September for those closing the fiscal year on 31 December).
  • From fiscal year (FY) 2024 onward, the notional interest deduction (NID; also allowance for corporate equity or ACE) is repealed, allowing the use of any surplus credits from previous periods until exhausted.
  • 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.

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 no eligible can apply for an options regime, provided that a certified TCF is in place.

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 the consumption of single use manufactured goods (‘plastic tax‘) and on sweetened soft drinks (‘sugar tax), previously planned for 1 January 2024, is postponed to 1 July 2024.

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).
  • 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.