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. 73 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 four 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 Note: the ACE deduction (Allowance for Corporate Equity) was repealed from FY 2024 and is no longer available.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%, confirmed by the Agenzia delle Entrate. Each Italian region can raise or lower the rate by up to 0.92 percentage points.

IRAP regional rate examples (calendar year 2025):

Regional rates sourced from secondary sources and subject to change. Verify against individual regional decrees before relying on these figures for planning purposes.

A practical planning point: 10% of the IRAP attributable to labor costs is deductible for IRES purposes (PwC Tax Summaries Italy). 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 2025)

WHT rates for dividends paid by an Italian SRL. Tax year 2025. Rates depend on shareholder type, residency, and applicable tax treaty. Not personal tax advice.

EU Parent-Subsidiary Directive: 0% Exemption

An EU or EEA 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). To apply the 0% exemption, the EU parent submits Form E to the Agenzia delle Entrate, Centro Operativo di Pescara. EU and EEA corporate shareholders that do not meet the minimum holding conditions for the directive exemption face an effective rate of approximately 1.2%, calculated as 26% applied to 5% of the dividend amount under the PEX mechanism.

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 holding at least 25% of the voting stock of the Italian SRL 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. Both rates are confirmed by PwC WHT tables. 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 (PwC Tax Summaries Italy, note 7). The claim must be submitted within 48 months, a deadline confirmed by the Agenzia delle Entrate on its EU Parent-Subsidiary regime guidance page. EU recipients use Form E for this claim. 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 (PwC Tax Summaries Italy, confirmed).

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 introduced PEX threshold restrictions (a minimum 5% participation or EUR 500,000 cost basis) for dividends from FY 2026. These restrictions were repealed retroactively from 1 January 2026 by a Government Law Decree issued in March 2026 (Clifford Chance briefing, 31 March 2026).
• For FY 2026, the 95% PEX exclusion applies without minimum participation or cost thresholds, subject to confirmation of the Law Decree's parliamentary conversion.

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 in 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 four 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 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. Maintain the average employee headcount from FY 2024 throughout all of FY 2025.
4. Make at least one new hire in FY 2025.

If an SRL meets all four conditions, it applies the 20% rate instead of the standard 24% to its FY 2025 taxable income. Recapture provisions apply if the conditions are not maintained through the end of the year. No extension of this reduced rate to FY 2026 has been confirmed as of the date of this page.

Qualifying for the IRES premiale requires meeting all four 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, as confirmed by PwC Tax Summaries Italy. 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.