Italy Corporate Tax 2026: Dividends & Capital Gains – What Changes

In Italy, outcomes are driven by structure and substance. Location matters. Sector exposure matters. Documentation matters.

For investors, family offices, private equity sponsors, industrial groups, and foreign-controlled Italian subsidiaries, 2026 is not a year of rate shock, but it is a year that rewards careful planning and audit-defensible positions.

Corporate income tax rate in 2026

Italy’s national corporate income tax (IRES – Imposta sul reddito delle società) remains set at 24% in 2026.

The tax applies to Italian limited liability companies (S.r.l.), joint-stock companies (S.p.A.), and to Italian permanent establishments (stabile organizzazione) of non-resident entities.

Alongside IRES, Italy continues to levy the regional production tax (IRAP). The standard IRAP rate is 3.9%, but higher rates apply to banks and insurance companies, and regional variations remain a material factor in effective tax modelling.

Regional impact: Milan, Rome, Bologna, Puglia

Although often treated as a secondary tax, IRAP is regional in nature and can materially affect after-tax results. For groups with multiple Italian locations, the regional footprint is not a theoretical issue—it is a modelling variable.

• Milan (Lombardy) is frequently modelled close to the standard IRAP rate for industrial, commercial, and technology-driven activities.
• Rome (Lazio) may present higher IRAP exposure depending on sector-specific regional adjustments.
• Bologna (Emilia-Romagna) is often viewed as relatively stable for manufacturing, engineering, and industrial operations.
• Puglia can result in higher IRAP outcomes for operational footprints, particularly where incentives are not available or where sector classifications are unfavourable.

Scope of taxation

Italian tax residency defines the perimeter of taxation.

Italian resident companies are subject to tax on worldwide income, subject to treaty relief and applicable exemptions.

Non-resident entities are taxed only on Italian-source income and on profits attributable to an Italian permanent establishment. In practice, permanent establishment risk is one of the most frequent sources of unexpected Italian tax exposure.

Risk typically arises where foreign groups operate in Italy with:

• Italian-based staff authorised to negotiate or conclude contracts
• Dedicated premises, warehouses, or operational facilities
• A sustained operational presence rather than short-term activity

Key corporate tax pressure points for 2026

Financial sector tightening

Banks, financial intermediaries, and insurance companies continue to face increased tax pressure under the 2026 budget framework. This includes heightened IRAP exposure and sector-specific measures that materially affect effective tax rates.

From 2026, the regional tax burden applicable to banks and regulated financial intermediaries increases by two percentage points. In parallel, a temporary limitation on interest expense deductibility applies to financial entities (excluding insurance companies) for fiscal years 2026 through 2029.

These measures directly affect leverage-sensitive business models, treasury optimisation strategies, and intragroup financing arrangements, particularly for cross-border financial groups operating through Italian platforms.

Dividends and capital gains: tighter participation thresholds

Italy preserves the 95% participation exemption regime for dividends and capital gains, but access is now explicitly conditioned.

From 2026, the exemption applies only where the recipient company holds:

• At least 5% of the share capital, or
• A participation with a tax value of at least €500,000

These thresholds also apply to non-resident EU/EEA corporate shareholders seeking to benefit from the reduced 1.2% dividend withholding tax rate.

Structures relying on minority holdings, fragmented share ownership, or historical participations below the revised thresholds require reassessment. Legacy dividend and exit models based on pre-2026 assumptions may no longer be reliable without restructuring or consolidation.

Financial Transaction Tax (Tobin Tax)

From 1 January 2026, Italy doubles the rates of its Financial Transaction Tax.

• 0.2% on transactions executed on regulated markets
• 0.4% on over-the-counter transactions

While often overlooked, the Tobin Tax becomes material for groups with frequent equity transactions, internal reorganisations involving listed shares, or treasury operations exposed to Italian securities.

Asset revaluation and shareholder assignments

Italy continues to allow balance sheet optimisation through substitute tax regimes, but at higher entry costs.

• The substitute tax rate for revaluing the tax cost of shareholdings increases to 21%
• An optional 8% substitute tax regime applies to the assignment of non-business assets to shareholders

These regimes remain relevant for pre-exit planning, succession structuring, and simplification of legacy asset holdings, provided valuation support and economic rationale are robust.

Innovation and incentive framework

Italy remains an incentive-driven jurisdiction, but benefits are increasingly documentation-driven.

Industry 4.0 and 5.0 enhanced depreciation (2026–2028)

A new enhanced depreciation regime applies to qualifying investments aligned with Industry 4.0 and 5.0 objectives between 2026 and 2028.

Eligible assets benefit from increased depreciation percentages, accelerating tax recognition of capital expenditure related to automation, digitalisation, energy efficiency, and sustainability.

Tax credits applicable to the Single Special Economic Zone and Simplified Logistics Zones are extended through 2028, reinforcing Italy’s regional investment policy.

Patent Box – cost-based super-deduction

Italy applies a cost-based Patent Box regime allowing an additional 110% deduction of qualifying R&D expenses linked to eligible intellectual property. The benefit remains significant where technical scope, cost tracking, and governance are audit-ready.

R&D and innovation tax credits

Research, innovation, and design activities continue to benefit from tax credits, subject to annual caps and strict evidentiary requirements. In practice, audit readiness often determines whether a benefit is sustainable or disputed.

Transizione 5.0 timing

Although formally framed around earlier investment windows, procurement timing and project execution mean that qualifying investments can still influence 2026 tax outcomes when structured correctly.

Indirect taxes and administrative levies

The implementation of the plastic tax is deferred to 1 January 2027, and the sugar tax is postponed further.

From 2026, a new €2 administrative levy applies to goods with a value up to €150 entering the EU from third countries. For high-volume, low-value import models, this levy becomes a cumulative cost factor.

Outlook for 2026 and beyond

Italy enters 2026 with headline rate stability, but effective taxation evolves through participation thresholds, sector-specific measures, regional taxation, transaction costs, and targeted incentives.

Groups aligning legal structure, operational substance, and documentation remain best positioned to preserve after-tax returns and manage audit risk.

Damalion supports international entrepreneurs and investors to register their company in Italy. Please contact your Damalion expert now.