Reduced Corporate Income Tax in Italy

In which cases companies in Italy can benefit of reduced Corporate Tax IRES at 20% rate

Corporate Income Tax IRES in Italy at reduced rate of 20%

For the year 2025 in Italy there is the possibility of benefiting of the corporate tax IRES at 20%, this possibility applies to companies:

- that set aside at least 80% of the profits made in the financial year ending on 31 December 2024;

- that invest the profits in technologically advanced capital goods, as provided for by the regulations on “Transitions 4.0 and 5.0”, in the presence of the following conditions:

a) at least 30% of the profits are set aside;

b) of which, no less than 24% of the profits of the financial year ending on 31 December 2023;

c) in any case the amount of profits has to be not less than € 20,000;

d) the technological capital capital goods must be new goods, intended for production facilities located in Italy;

e) the investment of profits must generate an increase in employment of work units of at least 1% compared to the average of the previous three-year period, with new permanent hires;

f) the applicant company must not have benefited of the Redundancy Fund (Cassa Integrazione) in the financial year ending on 31 December 2024, except in extraordinary situations related to transitory events.

Cases of revocation of the reduced IRES rate at 20%

The 20% IRES relief may be revoked in the following cases:

- if the early distribution of the set-aside profits occurs: if the set-aside portion of the profit is distributed within the second financial year following the one ending on 31 December 2024;

- if the sale or disposal of assets occurs: if the purchased capital goods are sold, used for other purposes or transferred abroad within the fifth subsequent tax period;

- if the company is liquidated: the relief does not apply to companies in ordinary liquidation or those subject to bankruptcy proceedings, in the tax period following the one in progress on 31 December 2024.

Companies excluded from the benefit of the IRES reduced to 20%

Some types of companies are not eligible for the relief, including:

- companies in ordinary liquidation;

- entities that determine income through flat-rate regimes;

- companies participating in the national or global consolidation (it is the business income tax regime, which, as an alternative to the ordinary regime applicable to the individual company, it is determined as the algebraic sum of the taxable income earned by each of the consolidated companies of a group; business groups thus have the option of choosing to subject to taxation the economic result produced by the individual companies that make up the group of companies), for which the amount on which to apply the 20% rate is determined by the parent company.

Non-commercial entities and other specific entities can benefit of reduced rate of 20% only on the portion of business income of their activity.