Italy taxes residents on worldwide income and non-residents on Italy-source income only. Italy operates an administrative assessment system: taxpayers file a return, but the tax administration (Agenzia delle Entrate) processes and can adjust the calculation, with most employees having wage withholding settle the bulk of their liability.
The Italian tax year is the calendar year. The individual filing deadline for the pre-filled return (730 form) is generally 30 September, with a later deadline (around 30 November) for the standard Redditi PF return used by taxpayers with more complex income sources - exact dates confirmed annually by the Agenzia delle Entrate.
Italy's headline corporate income tax (CIT) rate is 24%.
The headline personal income tax (PIT) rate is 43%.
The standard VAT/GST (or equivalent consumption tax) rate is 22%.
Following Legislative Decree No. 209/2023 (effective FY2024), an individual is an Italian tax resident if, for the greater part of the year (183 days, or 184 in a leap year), they meet at least one of three tests: registration with the Anagrafe (civil registry - now only a rebuttable presumption rather than absolute), domicile (redefined to center primarily on personal and family ties, with economic interests now secondary), or physical presence in Italy (a new independent test introduced by the 2023 reform). Meeting any one test for the required duration is sufficient; days of arrival and departure both count as full days.
A non-Italian entity has an Italian permanent establishment through a fixed place of business or a dependent agent habitually concluding contracts in Italy on the entity's behalf, following the OECD Model Treaty definition as applied under Italian domestic law and any applicable tax treaty.
An Italian company controlling a foreign entity must consolidate that entity's income into its own taxable base in proportion to its shareholding, regardless of actual distribution, where the foreign entity qualifies as a CFC. From 2024, a simplified test applies: an entity is a CFC where its effective tax rate is below 15% and more than one-third of its revenue is passive (dividends, interest, royalties, and similar). Where the foreign entity's financial statements are independently audited, the taxpayer may instead elect a three-year (auto-renewing) option to pay a 15% substitute tax on the CFC's net accounting profit in lieu of full CFC inclusion.
Italy no longer has a formal thin capitalization rule. Instead, net interest expense is deductible only up to 30% of gross operating margin (ROL - Risultato Operativo Lordo, Italy's EBITDA-equivalent measure), applying to related-party and third-party debt alike.
Italy does not use an elective check-the-box classification system; entity classification generally follows the entity's actual legal characteristics. Italy has implemented ATAD2-aligned anti-hybrid rules, with the Italian tax administration actively issuing guidance and penalty-protection documentation deadlines for hybrid mismatch arrangements (a deadline extension to 31 October 2025 was granted for 2020-2024 tax-year documentation, confirming this is an actively-enforced area).
An Italian resident individual holding foreign financial assets - including foreign bank accounts - at any point during the year must disclose them in the RW section (Quadro RW) of their annual income tax return, regardless of value, for monitoring purposes; a separate wealth tax (IVAFE, currently around 0.2% annually) applies to the value of foreign financial assets held by Italian residents. Non-disclosure penalties range from 3% to 15% of the undisclosed amount per year (doubled to 6%-30% for assets held in blacklisted jurisdictions). This is Italy's own domestic foreign-asset reporting regime, distinct from Italy's separate participation in CRS automatic exchange described under Treaty Network below.
Italy provides a participation exemption (PEX, regime della participation exemption) for capital gains under Article 87 of the Italian Income Tax Code (TUIR): a qualifying capital gain on a subsidiary held for a continuous minimum 12-month period, where the subsidiary carries on genuine commercial activity (a requirement the Italian Supreme Court has actively clarified in recent case law), is 95% exempt from Italian corporate tax. Dividends separately receive a 95% exemption from Italian corporate tax regardless of the holding period, reflecting Italy's broader policy of taxing corporate profits primarily once, at the distributing company level.
Italy has a real foreign tax credit regime available to both individuals and companies under Article 165 of the Italian Income Tax Code (TUIR) for foreign tax paid on foreign-source income also taxed in Italy, capped at the Italian tax otherwise due on that income, computed on a country-by-country and income-category basis.
Italy has signed roughly 100 double tax treaties (Agenzia delle Entrate, the Italian Revenue Agency) generally following the OECD Model Convention, covering all EU member states plus a broad range of other jurisdictions. The current, authoritative list of treaties in force is maintained by Italy's Ministry of Economy and Finance.