Italy

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

• Approval of corporate income tax (IRES) provisions.
• Introduction of modification to value-added tax (VAT) and other indirect taxes.

• New incentives for corporations.

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 corporate income tax (IRES) provisions

A number of different provisions on IRES have been introduced.

Below are the main measures applicable applicable as of FY 2026:

• The regime for the 95% partial tax exemption of dividends and capital gains on shareholdings now applies provided that the participation is either (i) at least 5% of the share capital, or (ii) has a tax value of at least EUR 500,000. 
• To benefit from the 1.20% withholding tax on Italian-source dividends, the above shareholding requirements must be met by EU and EEC non-resident companies and entities.
• The option to tax in instalments capital gains realised on fixed assets, non-current assets and so-called "non-PEX" shareholdings has been repealed.
• The prohibition on offsetting tax credits applies where the taxpayer's overdue debts exceed EUR 50,000.

Other measures are the following.

• The 2026 access threshold to the cooperative compliance regime is reduced to EUR 500 million in turnover or revenues.
• The Ministry of Economic and Finance has issued tax decrees providing operational guidelines on the global minimum tax matters, including obligations relating to declaration and payment.
• From the tax period following the one in progress as at 31 December 2024, the rules on discrepancies between accounting and tax values arising from changes in accounting standards also apply to tax-neutral extraordinary transactions carried out between entities adopting the same accounting standards.
• As of 1 December 2025 "non-significant accounting errors" are tax-relevant for entities required to have their annual financial statements audited, provided the correction takes place: (i) before approval of the financial statements of the subsequent year; and (ii) prior to formal notification of audits, inspections, checks, or other assessment activities. For IRAP purposes, the net production value must not be negative in either the correction tax period or the period in which the items should have been recognised. For "significant accounting errors", an amended tax return is required.
• In the case of unilateral suspension by a foreign State of a double taxation treaty entered into with Italy, the suspension also takes effect in Italy’s legal system through a notice in the Official Gazette of the Italian Republic; during such a period, the withholding taxes provided for by Italian tax law apply.

Introduction of value-added tax (VAT) and other taxes modifications

Please find here below the main developments as as of FY 2026:

• The Italian Tax Authorities may issue directly a tax assessment in the event of an omitted annual VAT return

• New rules have been introduced for determining the VAT taxable base for barter transactions

• Tobin tax rates have been doubled on financial transactions (0.4% for non-listed, 0.2% for listed, 0.04% for high-frequency).

The effectiveness of the "Plastic tax" and "Sugar tax" has been postponed to 1 January 2027.

Amendments on Carbon Border Adjustment Mechanism have been introduced.

New incentives for corporations

An increase in the tax relevant cost of investments in capital goods (so-called new hyper-depreciation) has been introduced. The incentive applies to investments carried out from 1 January 2026 to 30 September 2028, provided that the eligible assets are produced in a Member State of the European Union or in a State that is part of the European Economic Area.

The tax credit for investments in the Single Special Economic Zone (ZES unica) of Southern Italy has been extended for the years 2026, 2027 and 2028.