Taxes on corporate income
Italian corporate entities and non-resident companies, only on Italian source income, are subject to a corporate income tax , Ires, and to a regional production tax, Irap. Sole traders, individual entrepreneurs and partnerships can, optionally, adopt Iri, the tax on entrepreneurial income, instead of Irpef.
Corporate entities, such as capital companies, trusts, mutual companies, are subject in Italy to a 24% corporate income tax (Ires).
Non-resident companies are taxed only on Italian-source income. The income earned by companies not resident in Italy for tax purposes through a permanent establishment is considered as Italian source income and is therefore subject to Ires.
The tax on entrepreneurial income is an optional tax on both business incomes and self-employment incomes, introduced by Stability Law 2017.
This tax is applicable to incomes reinvested in the business by sole traders, individual entrepreneurs and partnerships using ordinary state accounts.
The Iri rate is 24% and profits are taxed on a cash basis.
Under this regime, entrepreneurs and partners pay the progressive income tax (Irpef) only in relation to the funds taken out of the business.
Irap - Regional production tax
The regional production tax (Irap) is a local tax on productive activities realized within a regional territory. The standard rate is 3.9%, but higher Irap rates are, for example, applicable to banks and financial institutions (4.65%) and insurance companies (5.90%).
Regional authorities have the right to increase or decrease the Irap rates within the limit of 0,92%.