Company Formation & Tax in Italy
A major EU market with a two-part corporate tax — the SRL, IRES and IRAP, VAT, and the e-invoicing regime every business must use.
Italy is the EU's third-largest economy and a substantial consumer and manufacturing market. Its corporate tax has two components — national IRES and regional IRAP — and its VAT system is fully digital, with mandatory e-invoicing for essentially all businesses.
Choosing an entity
The standard vehicle is the SRL (società a responsabilità limitata), the private limited company; a simplified low-capital form (SRLS) exists, and capital can start very low, though adequate funding for the activity is expected. Larger and listed businesses use the SPA (società per azioni, minimum €50,000). Incorporation is via a notary, and the tax authority (Agenzia delle Entrate) issues a VAT number (partita IVA) and tax code, typically within a week or two.
Corporate tax and VAT
| Tax | Rate |
|---|---|
| IRES — national corporate income tax | 24% |
| IRAP — regional production tax (standard) | ≈ 3.9% (regions adjust ±0.92%) |
| Combined effective | ≈ 27.9% |
| VAT (IVA, standard) | 22% |
Italian companies pay IRES (corporate income tax) at a flat 24% plus IRAP, a regional production tax at a standard 3.9% (regions can adjust within limits, and higher rates apply to banks, financial and insurance entities) — a combined effective rate of around 27.9%. VAT (IVA) is 22% standard, with reduced rates of 10%, 5% and 4%; there is no registration threshold, and electronic invoicing via the SdI platform is mandatory for VAT-registered businesses.
Reliefs and Pillar Two
Italy's participation exemption can exempt 95% of qualifying dividends and capital gains from IRES where conditions are met (including a minimum holding), making it usable for holding structures. Italy has implemented the OECD Pillar Two rules, including a qualified domestic minimum top-up tax ensuring an effective 15% rate for large multinational groups — relevant only to very large groups, not typical SMEs.
Frequently asked questions
What is the corporate tax rate in Italy?
IRES at 24% plus regional IRAP at around 3.9% — a combined effective rate of roughly 27.9%.
What is the most common company type?
The SRL (società a responsabilità limitata), the private limited company; a simplified SRLS variant exists for low-capital startups.
What is the Italian VAT rate?
22% standard, with reduced rates of 10%, 5% and 4%; e-invoicing via the SdI platform is mandatory.
Is there a VAT registration threshold?
No — any taxable business activity requires a partita IVA (VAT number).
Official sources
- Agenzia delle Entrate (Italian Revenue Agency)
- InfoCamere — Italian business registry
- Corporate tax — IRES and IRAP; e-invoicing via the Sistema di Interscambio (SdI)
This guide is general information prepared by ARM Management and is current as at June 2026. It is not legal or tax advice; IRAP varies by region and rules change. Confirm against the Agenzia delle Entrate, or with an advisor, before acting.
Set up in Italy the right way.
ARM Management advises international companies on Italian entity formation, IRES/IRAP positioning and VAT compliance, alongside wider EU structuring. Begin with a confidential conversation.