SRL Taxation and Dividends in Italy

How an Italian SRL Is Taxed: IRES and IRAP

An Italian SRL is subject to two corporate-level taxes on its business income: IRES, a flat national corporate income tax, and IRAP, a regional tax on productive activity. Together they create a combined standard rate of approximately 27.9%, before deductions and credits.

IRES: Corporate Income Tax

An Italian SRL pays IRES (corporate income tax) at a flat 24% on its worldwide net taxable income under Art. 77 of the TUIR (D.P.R. 917/1986). A temporary reduced rate of 20% applies for FY 2025 only under Law No. 207/2024 if five profit-retention, investment and employment conditions are met (see the IRES Premiale section below).

The IRES taxable base starts from accounting profit and is adjusted by the TUIR. Key adjustments include: net interest expense capped at 30% of EBITDA (Art. 96 TUIR); a 95% exclusion for qualifying inter-company dividends under the participation exemption (PEX); and an indefinite loss carryforward capped at 80% of taxable income per year. Note: the ACE deduction (Allowance for Corporate Equity) has been repealed and is no longer available. Shell companies (societa di comodo) face a higher combined rate of 34.5% (24% standard plus a 10.5% surtax on imputed minimum income).

IRAP: Regional Activities Tax

IRAP is a tax on the net production value generated by business activity in Italy. All Italian SRLs pay IRAP regardless of size, under Legislative Decree 446/1997. The standard rate is 3.9%, as published by the Agenzia delle Entrate. Regions may vary the rate by up to 0.92 percentage points, and regions under health-deficit recovery plans apply further automatic increases, so 2026 ordinary rates range from 2.68% (Autonomous Province of Trento) to 4.97% (Campania and Molise).

IRAP regional rate examples (ordinary rates, calendar year 2026):

Ordinary rates as published by the Ministry of Economy and Finance, Department of Finance. Regions may also apply sector-specific rates.

A practical planning point: IRAP is partly deductible for IRES purposes. The IRAP attributable to labour costs that are not already deducted from the IRAP base is deductible, and 10% of total IRAP is deductible where the IRAP base includes non-deductible interest expense. For SRLs with significant payroll, this partial deductibility reduces the effective combined tax burden somewhat below 27.9%.

Dividend Withholding Tax: What Shareholders Receive

When an Italian SRL distributes profits, it must withhold a tax on dividends at source before paying shareholders. The standard rate is 26%, but EU rules and bilateral tax treaties reduce this for many non-resident shareholders.

Italian SRL: dividend withholding tax by recipient type (tax year 2026)

WHT rates for dividends paid by an Italian SRL. Tax year 2026. Rates depend on shareholder type, residency, and applicable tax treaty. Not personal tax advice.

EU Parent-Subsidiary Directive: 0% Exemption

An EU parent company holding at least 10% of the Italian SRL for at least 12 consecutive months can claim full exemption from Italian dividend withholding under the EU Parent-Subsidiary Directive. Italy implemented this directive through D.Lgs. 136/1993 (originally implementing Dir. 90/435/EEC) and D.Lgs. 49/2007 (implementing the 2003 amendment). Companies resident in EU or EEA white-list states that do not qualify for the directive exemption are subject to a final withholding tax of 1.20% (Art. 27(3-ter) D.P.R. 600/1973).

US-Italy Tax Treaty Rates

The US-Italy Double Tax Treaty significantly reduces Italian dividend withholding for US shareholders. Under Art. 10 of the treaty, a US corporate shareholder that has held at least 25% of the voting stock of the Italian SRL for the 12 months ending on the date the dividend is declared qualifies for a reduced WHT rate of 5%. All other US shareholders, including individuals and corporate holders below the 25% threshold, qualify for a 15% rate. US shareholders should confirm their eligibility through a qualified tax adviser and ensure the treaty claim is properly filed.

Non-Resident Refund Mechanism

A non-resident shareholder who pays tax in their home country on the same dividend has the right to claim a partial refund of Italian WHT. The refund covers up to 11/26 of the Italian withholding tax withheld, upon providing proof that the dividend income was taxed abroad. The claim must be submitted within 48 months of the date the tax was withheld. This is a planning opportunity often overlooked by foreign shareholders bearing double taxation.

Inter-Company Dividends and the Participation Exemption (PEX)

When an Italian SRL receives dividends from another company (a subsidiary, for example), those dividends are treated differently from dividends paid out to the SRL's shareholders. The participation exemption (PEX) allows the Italian company to exclude 95% of qualifying inter-company dividend income from its IRES taxable base. Only the remaining 5% is included in taxable income.

Key points for the current position:

• 95% of qualifying dividends received is excluded from IRES income; 5% is taxable.
• For capital gains PEX, the shareholding must be held uninterruptedly for at least 12 months.
• The 2026 Budget Law (Law 199/2025, Art. 1, paras 51-55) introduced PEX threshold restrictions (a minimum 5% participation or a tax value of at least EUR 500,000) for distributions resolved from 1 January 2026. Decree-Law 38/2026 (Art. 11(4)), in force since 28 March 2026 and converted with amendments by Law 88 of 22 May 2026, repealed those restrictions with effect from 1 January 2026.
• For FY 2026, the 95% PEX exclusion applies without minimum participation or tax-value thresholds.

This PEX treatment applies to dividends received by the Italian SRL from its own subsidiaries. It does not change how dividends paid by the SRL to its own shareholders are taxed.

IRES Premiale: Can Your SRL Pay 20% Tax for FY 2025?

Law No. 207/2024 (Art. 1, paras 436-444) introduced a temporary reduced IRES rate of 20% for FY 2025 only. The reduction is called "IRES premiale" and is sometimes described as a "mini-IRES." All five of the following conditions must be satisfied simultaneously:

1. Retain at least 80% of FY 2024 net earnings in a designated special reserve.
2. Make qualifying capital investment (new Industry 4.0 and 5.0 assets, between 1 January 2025 and the FY 2025 return deadline) of at least the higher of: 30% of those retained earnings, or 24% of total 2023 earnings, with a minimum investment of EUR 20,000.
3. Do not reduce the workforce: full-time-equivalent employees at the end of FY 2025 must be at least the average of the preceding 36 months.
4. Make new permanent hires in FY 2025 equal to at least 1% of the average permanent staff employed in FY 2024, and in any case at least one.
5. Make no use of cassa integrazione (wage-integration schemes) in FY 2024 or FY 2025, except ordinary integration under Art. 11(1)(a) D.Lgs. 148/2015.

If an SRL meets all five conditions, it applies the 20% rate instead of the standard 24% to its FY 2025 taxable income. The benefit is recaptured if the reserved profit is distributed by the end of the second tax year after the one in progress at 31 December 2024 (FY 2026 for a calendar-year SRL), or if the qualifying assets are sold, put to non-business use or moved abroad before the end of the fifth tax year after the investment. Law 199/2025 (the 2026 Budget Law) contains no extension of the reduced rate to FY 2026.

Qualifying for the IRES premiale requires meeting all five conditions and maintaining supporting documentation throughout the year. Our accountants can assess eligibility. See our accounting services.

Filing Calendar for a Calendar-Year SRL

An Italian SRL operating on a calendar year follows a fixed annual cycle for its IRES and IRAP obligations. All tax payments are made electronically via the F24 form.

The two advance payments together cover 100% of the prior-year net tax liability; taxpayers subject to the ISA reliability indices pay two equal 50% instalments instead of 40% and 60% (Art. 58 D.L. 124/2019). The IRES and IRAP returns must be filed by the end of the tenth month after the close of the financial year (31 October for a calendar-year SRL). The balance payment for the current year (saldo) falls due together with the first advance installment at 30 June of the following year.

For a detailed look at ongoing SRL compliance obligations, including accounting deadlines and financial statement filing, see the guide on annual compliance obligations for your SRL.