The new corporate income tax – IRES
At the end of the year 2003 the IRPEG, together with the DIT incentives, was abolished. As of 1
January 2004 a new corporate income tax, IRES, was introduced with a statutory tax rate of 33%.
The 2008 Budgetary Law has cut the tax rate from 33% to 27.5%.
The 2004 reform of corporate taxation provides for a general system of capital gains exemption with
no deductibility of the corresponding capital losses. Starting from 2008, the exemption is granted on 95%,
of the total amount of capital gains.
Furthermore, the imputation method previously used to eliminate dividend double taxation has been
replaced with the exemption method (dividends are exempted for up to 95% for taxpayers subject to IRES
and up to 60% for taxpayers subject to IRPEF).
For taxpayers subject to IRPEF dividends arising from non-qualified participations are taxed
separately at a rate of 20%. Starting from 2008 dividends arising from qualified participations are exempt
for up to 50.28% (previously the exemption was 60%).
In the same year, ‘thin capitalization’ rules has been abolished as well as some depreciation allowances
and anticipated depreciation and new rules has been introduced in order to limit the deduction of interest
full deduction of interest expenses up to the value of interest revenues;
possibility to deduct the interest expenses exceeding the amount of interest revenues up to 30%
of Gross Operating Profit;
possibility to increase with the unused portion of Gross Operating Profit of a given tax period, the
Gross Operating Profit of the subsequent tax periods (starting from 2010).
As of 1st July 2014, for taxpayers subject to IRPEF the tax rate applied to dividends arising from nonqualified participations was increased from 20% to 26%.
Starting from 2004 group consolidation for tax purpose has been introduced, both at the domestic
level and worldwide, on condition that the parent company controls at least 50% of the subsidiary. At
domestic level the option for tax consolidation is bilateral and can be exercised by some or all the
companies belonging to the group; the consolidated tax base is given by the algebraic sum of the taxable
incomes of the consolidated companies regardless of the percentage of shareholding held by the parent
company. The minimum period for tax consolidation is 3 years and the option can be renewed for a period
of the same length. The option for worldwide consolidation can be exercised only by the parent company
of the highest level and requires consolidation of all companies belonging to the group. The option cannot
be exercised if one of the subsidiaries is resident in a tax haven or benefits from a privileged tax regime.
The consolidated tax base is given by the algebraic sum of the percentage of taxable income of each
consolidated company corresponding to the shareholding held by the parent company. The minimum
period for tax consolidation is 5 years and the option can be renewed for a period of 3 years.