Intercompany Loans, Interest and Royalties in an Italian Subsidiary (2026)

A foreign parent may fund an Italian SRL with share capital or a shareholder loan. A separate licence is relevant only where the parent owns intellectual property that the SRL actually uses; royalties compensate for that use, not for financing the subsidiary. A shareholder loan may rank behind other creditors, interest deductions face a limit linked to the company's operating result, and royalties may attract withholding on their taxable amount.

This guide describes the position applicable on 27 October 2026, for the finance director or founder of a foreign parent that owns, or is about to incorporate, an Italian società a responsabilità limitata (SRL). It covers shareholder loans in the Civil Code, the interest limit in article 96 TUIR and its successor, the withholding on interest and royalties, the EU exemption, and the transfer pricing constraint behind all of it.

The short answer

Equity has no contractual loan interest or scheduled repayment. A later profit distribution can attract dividend withholding, as explained in our guide to claiming reduced Italian dividend withholding; a return of paid-in capital or qualifying capital reserves can be treated differently and must be analysed separately.

Debt provides a repayment claim, but three limits matter. The Civil Code can subordinate a qualifying shareholder loan to ordinary creditors under article 2467. The tax code limits deductions for net interest by reference to 30% of the company's tax-adjusted gross operating result (ROL; article 96 TUIR). Interest paid to a non-resident parent ordinarily bears 26% Italian withholding unless a qualifying exemption or treaty applies.

For covered royalties, article 25(4) sets a 30% withholding rate on the taxable amount, not invariably 30% of gross. The applicable base, an EU exemption or a treaty can alter what is withheld. The royalty must also reflect the value received by the Italian company under the arm's-length rule.

Funding the SRL: equity and debt; licensing separately

Channel	Italian-company treatment	Foreign-parent treatment	Main question
Share capital or contribution	No loan interest deduction; a return of capital or reserves requires its own legal and tax analysis	Profit distributions can bear dividend withholding; returns of qualifying capital reserves can differ	How much funding should be equity rather than repayable debt?
Shareholder loan	Interest subject to the article 96 limit and arm's-length rule	Ordinary 26% Italian withholding unless exemption or treaty relief applies	Can the claim be repaid under article 2467?
Covered royalty	Expense subject to the arm's-length rule	Domestic 30% withholding on the taxable amount, unless exemption or treaty relief applies	What right is licensed, and what is its taxable base?

Shareholder loans: article 2467 and the subordination trap

The Civil Code does not prohibit a parent from lending to its subsidiary. What it does is change the ranking of that loan in a crisis. Article 2467 provides that "il rimborso dei finanziamenti dei soci a favore della società è postergato rispetto alla soddisfazione degli altri creditori" — the repayment of shareholder loans is subordinated to the satisfaction of the other creditors.

The second paragraph defines the loans caught: those made "in qualsiasi forma effettuati" — in any form, including interest-free advances — at a time when indebtedness was excessively unbalanced against net equity, considering the company's activity, or when a capital contribution would have been reasonable. This is a fact-specific test, not a fixed debt-to-equity ratio or a presumption based on the initial share capital.

Three consequences follow for a foreign group.

Timing requires two assessments.

The statutory description looks at the financial position when the funds were advanced. But subsequent events also matter: Cassation order 21422/2022 explains that if the conditions responsible for subordination cease, the shareholder's repayment claim can become enforceable again. Later profitability alone does not prove that the debt/equity imbalance has been resolved; assess the actual finances before agreeing a repayment.

The rule can reach beyond the direct parent.

Article 2497-quinquies extends article 2467 to loans by a person exercising direzione e coordinamento (direction and coordination) over the SRL, or by another entity subject to that direction and coordination. Article 2497-sexies presumes, subject to contrary evidence, that direction and coordination is exercised by the entity obliged to consolidate the company's accounts or controlling it under article 2359. A sister-company loan is not automatically covered just because the entities share a brand; establish the statutory relationship and assess the loan conditions.

Subordination affects priority, not the loan's existence.

The loan remains a debt on its contractual terms, including interest if agreed; repayment is postponed while the relevant conditions persist. The former article 2467 sentence about recovery of repayments made in the year before a bankruptcy declaration was repealed effective 15 July 2022. Recovery is not abolished: article 164(2)-(3) of the Crisis and Insolvency Code addresses qualifying shareholder and direction-and-coordination loan repayments made after the application followed by judicial liquidation or in the preceding year. That lookback concerns the repayment date, not when the money was lent.

Equity, capital increases and the conversion route

An SRL increases its capital under article 2481-bis. For a cash subscription, at least 25% of subscribed share capital and the whole share premium are paid at subscription; if the sole shareholder subscribes the increase, its cash contribution must be paid in full then. Within thirty days of subscription, the directors file the certificate confirming execution of the increase with the Business Register.

A parent may seek to capitalise an existing loan by subscribing a cash capital increase and setting off the subscription price against the SRL's debt to that parent. This is not automatically a contribution of a claim against a third-party debtor under article 2464(5). The Milan Notarial Council's guidance, Massima 125, distinguishes the two: legal set-off requires its own conditions; a claim that is established and quantifiable but not yet due can instead require the company's consent for consensual set-off. The notary must check the loan terms, the accounting evidence, any article 2467 subordination and the chosen mechanism. A completed set-off extinguishes the loan claim to that extent; it is not a cash repayment.

Losses can affect timing. Article 2482-bis requires directors to call the shareholders without delay when losses reduce capital by more than one third; if the loss has not fallen below one third by the end of the following financial year, the shareholders must be called to approve the accounts and reduce the capital proportionately. Article 2482-ter requires action if such a loss also brings capital below the ordinary minimum identified in article 2463(2), item 4, with simultaneous restoration or transformation among the statutory options. But article 2463 also permits an SRL with capital below €10,000, down to €1, subject to its conditions. A professional must assess the applicable capital-loss route rather than assume €10,000 is the only lawful capital level.

Interest deductibility: the 30% of ROL limit

The rule is in article 96 TUIR, and it applies whatever the lender: a bank, the parent, or a sister company. Net interest is deductible in two steps.

First, qualifying interest and similar finance charges — including the portion capitalised in the cost of goods under article 110(1)(b) — are deductible against qualifying interest income of the year and available unused interest income carried forward under article 96(6). Second, the net excess is deductible within 30% of ROL: the article 96(4) difference between value and costs of production in lines A and B of the article 2425 income statement, excluding item 10(a) and (b) depreciation and amortisation and finance lease payments, with tax adjustments. The 2027 corresponding rules are in new-TUIR article 105(1)-(4).

Item	Amount
Interest income of the year	€10,000
Interest expense on the parent loan	€200,000
ROL	€500,000
30% of ROL	€150,000
Deductible interest	€160,000 (€10,000 + €150,000)
Interest disallowed and carried forward	€40,000

For this illustration, assume the €200,000 is otherwise deductible, arm's length, and there are no available earlier-year carryforwards. Interest disallowed by the article 96 formula can be deducted in later periods where its paragraph 5 leaves room. The provision sets no fixed expiry, but preservation of a carried balance is not unconditional: old-TUIR article 84(3-quater) applies its paragraphs 3–3-ter to excess interest carryforwards, including restrictions when ownership and the activity change. From 2027 the corresponding rule is new-TUIR article 93(6), as amended in September 2026. The five-year carryforward in article 96(7) applies only to the capacity remaining after the statutory net-interest calculation and any carried-forward interest; current-period capacity is used before older carried capacity. It is not simply 30% of ROL less every interest expense charged. New-TUIR article 105(5) and (7) continue those rules from 2027.

Two details matter in practice.

The limit is calculated on net qualifying interest, so taxable interest income from loans to other group companies can increase the capacity available for qualifying expense. ROL is a tax-adjusted figure rather than the accounting operating result: the rules exclude specified depreciation, amortisation and finance lease costs. For an asset-heavy company, the difference can be significant.

An absolute limit applies before the percentage one. Article 96(15) preserves the priority of the absolute non-deductibility rules in article 90(2) and article 110(7) TUIR. The second of those is the transfer pricing rule: if the interest rate on a parent loan exceeds the arm's length rate, the excess is disallowed outright, and the 30% test then applies to what remains.

What changed in 2025 and 2026, and what changes in 2027

For an ordinary trading or service SRL, the 30% ROL rule remains in place in 2026. Law 199/2025, article 1(133)-(136) separately restricts the deduction of interest for specified financial intermediaries, excluding the categories in article 96(13), to 96%, 97%, 98% and 99% in successive periods following those in progress on 31 December 2025 through 2028. Insurers, insurance-group parents, fund managers and investment firms listed in article 96(13) retain their separate 96% rule. Article 96(12) excludes financial intermediaries and insurers from the ordinary 30% ROL mechanism. These sector-specific limits are not the rule for an ordinary SRL.

From 1 January 2027, article 377 of Legislative Decree 117/2026 applies the new consolidated income tax code. Old-TUIR article 96 becomes new-TUIR article 105, retaining the ordinary 30% ROL mechanics. Article 105(16)-(19) then consolidates the separate 2026 budget-law provisions for the relevant financial intermediaries. The old numbers apply to the 27 October 2026 position described here.

Withholding tax on interest paid to the parent

Interest from an ordinary parent loan paid by an Italian resident company to a non-resident is generally Italian-source capital income under old-TUIR article 23(1)(b) (new-TUIR article 25(1)(b) from 2027). The bank/postal-deposit exclusion is different. Article 26(5) of Presidential Decree 600/1973 makes the Italian company the withholding agent and the deduction at source final (a titolo d'imposta) for a nonresident recipient.

The text of article 26(5) still reads 12.50%, because the rate was changed by later decrees rather than by rewriting the article. The rate in force is 26%: article 3(1) of Decree-Law 66/2014 provides that "le ritenute e le imposte sostitutive sugli interessi, premi e ogni altro provento di cui all'articolo 44" of the TUIR are set at 26%.

Against that 26% there are two routes to a lower rate.

The EU interest and royalties exemption

Article 26-quater of Presidential Decree 600/1973 exempts qualifying interest and royalties paid to companies in another EU Member State under Italy's implementation of Directive 2003/49/EC. It is not automatic for all EU parents. The Italian payer must have an eligible legal form, be Italian tax resident and subject to IRES without an exemption regime. The recipient must have a listed EU legal form, be tax-resident in an EU Member State and not deemed resident outside the EU under a treaty with a third country, and be subject to a listed or equivalent tax; the particular payment must be subject to a listed tax without a particular exemption under article 26-quater(4)(b). The Revenue Agency's Circular 47/E, §2.3.1 does not require a quantitative assessment of tax imposed. The recipient must be the beneficial owner (final recipient rather than agent, nominee or trustee). Even if the formal tests are met, Directive article 5 preserves domestic or treaty anti-abuse provisions and permits denial where a principal motive is tax evasion, avoidance or abuse.

The structural link in article 26-quater(2) must also be proved. Either payer directly holds at least 25% of voting rights in recipient, recipient directly holds that percentage in payer, or a qualifying EU third company directly holds that percentage in both. The relevant shareholding must have been continuous for at least one year; for the Italian company, the voting rights are those in the ordinary meeting identified by articles 2364, 2364-bis and 2479-bis of the Civil Code. These voting-rights and one-year tests describe Italy's implementation, not a universal holding-period rule in every Member State. An indirect chain through an unrelated intermediary is not enough merely because the ultimate owner is in the EU.

Under article 26-quater(6), the payer needs a residence attestation from the recipient's tax authority, and a separate recipient declaration establishing the holding, tax and beneficial-ownership requirements, by the payment date. The documentation is effective for one year from issue while the requirements continue to be met; paragraph 7 requires retention through the assessment period and until any outstanding assessment is resolved. The Revenue Agency's Form F is the dedicated EU interest-and-royalties form. Missing timely documentation means the payer cannot simply assume exemption at source; a refund application may be available with completed evidence.

The exemption is capped for both interest and royalties: article 26-quater(5) limits it to valore normale (normal value) under old-TUIR article 110(2), whose corresponding rule from 2027 is new-TUIR article 119(4). Any excess is outside this EU exemption; domestic withholding or a lower rate under a treaty may still apply if its separate conditions are met. Old article 110(7), the separate transfer-pricing rule, corresponds to new article 119(8).

Article 26-quater(8-bis) also provides a narrow 5% rule for specified bond-funded interest when the paragraph 4(c) beneficial-ownership condition fails, subject to further listing and guarantee conditions. It is not a general alternative whenever another EU-exemption requirement fails, nor is it the default for a shareholder loan.

Treaties

Where an applicable treaty provides relief — including when EU-exemption requirements are not met — its interest or royalty article, any protocol, beneficial-ownership requirements and the parent's residence must be checked. No single treaty rate is assumed here. Under the Revenue Agency's approved forms, Form B concerns interest and Form C royalties; a payer may apply eligible treaty relief at source under its own responsibility, or the recipient may seek a refund where too much was withheld. The Revenue Agency's treaty-refund instructions state a 48-month claim window from withholding. Confirm the applicable treaty before determining any rate.

Royalties: a 30% rate, with a taxable-base distinction

A royalty for the use of a copyright work, patent, trademark, secret formula or know-how paid by an Italian resident company can be Italian-source income under old-TUIR article 23(2)(c) (new-TUIR article 25(3)(c) from 2027). This is not the rule for every service fee: classify the payment before selecting a withholding provision.

Under article 25(4) of Presidential Decree 600/1973, covered intangible royalties paid to non-residents face a 30% final withholding on the taxable portion. The parallel 30% charge for use of industrial, commercial or scientific equipment situated in Italy applies to the full payment. Payments to the recipient's Italian permanent establishment are excluded from that provision. The Revenue Agency's Circular 47/E, section 6.4 explains a different base for royalties for specified intangible rights acquired for consideration under old-TUIR article 71(1): 75% of the gross payment. There, 30% × 75% gives an effective 22.5% of gross; if that reduction is unavailable, do not assume 22.5%. Establish the right's category, how it was acquired and whether the taxable-base rule applies. The corresponding new-TUIR provision from 2027 is article 80(1).

A US or UK parent does not qualify for the EU interest-and-royalties exemption merely by receiving a licence fee; an applicable treaty might provide another result. For a qualifying EU recipient, article 26-quater(5)'s arm's-length cap applies to interest and royalties alike, not a stricter statutory test for royalties. A turnover-based licence fee still needs evidence of the IP used, the benefit to the SRL and a supportable price. Any excess must be analysed separately for Italian withholding, potential treaty relief and transfer pricing.

The transfer pricing overlay

Everything above assumes that the price is defensible. In Italy the arm's-length income-adjustment rule is old-TUIR article 110(7) (new-TUIR article 119(8) from 2027). It addresses parent/subsidiary and common-control cross-border dealings, including loan interest, a charged guarantee and royalties. Our guide to transfer pricing for an Italian subsidiary covers documentation, the RS106 box and penalty protection; three points are specific to financing.

The rate needs a comparison.

Analyse the borrower's credit profile, currency, maturity, security and options available to both parties. A group-wide interest rate is not necessarily comparable to a loan to this SRL; the OECD financial-transactions guidance explains why loan features and the borrower's financial capacity matter. A missing benchmark is a documentation gap, not itself proof that the contractual price is wrong.

The instrument must be characterised accurately.

For the specific article 26-quater exemption, paragraph 3(c) excludes from its definition of interest claims allowing the lender to exchange interest for a share of profits, claims without a repayment obligation, and those repayable more than fifty years after issue. That exclusion does not itself settle every other tax or civil-law classification.

A guarantee needs a benefit analysis.

The OECD guidance on financial transactions distinguishes a genuine incremental benefit from support received merely because a company belongs to the group. Even an express guarantee does not always generate a separately chargeable benefit; where it does, examine its value and which entity bears the risk. A zero guarantee fee can be arm's length. No automatic contribution or article 2467 result follows simply from the absence of a fee.

Formalities and the file to keep

The interest-deductibility, transfer-pricing and withholding provisions discussed here do not themselves require a loan or licence contract to be filed in advance with the tax authority. This does not settle separate registration-tax or other document-registration obligations; a professional must check the form, execution and use of the particular agreement. Ordinary loan interest generally follows competenza (accrual), under old-TUIR article 109 (new-TUIR article 118 from 2027), subject to the interest rules. Default interest (interessi di mora) is an exception, recognised for income tax when received or paid under old article 109(7) and new article 118(13). For ordinary loan interest, non-payment alone does not disallow an otherwise eligible accrued deduction. The withholding provision concerns interest paid; do not assume that the accounting deduction date and the withholding date coincide.

For interest and other capital-income withholding, the Revenue Agency's October 2026 tax calendar specifies electronic modello F24 payment on 16 October 2026 for amounts paid or accrued in September. The example should not be treated as a universal due date or withholding trigger for every interest or royalty arrangement: the Italian withholding agent must identify the payment, applicable withholding provision, tax code and actual deadline. Royalty withholding is classified separately.

Keep an evidence file: the loan agreement recording amount, rate, maturity and security; authorising decisions; drawdown and payment records; ledger accruals and withholding; and the analysis supporting the rate and borrower creditworthiness. These are recommended records for substantiation, not a universal statutory checklist. For a royalty, retain the licence identifying the rights, territory, term, price and taxable-base analysis, plus evidence that the SRL actually uses the right. For relief, retain the appropriate foreign residence certificate, recipient declarations and Form B, C or F, as relevant, and reconcile the payments and withholding with the annual modello 770. The group's Master File and Local File can support the pricing analysis where prepared; see our transfer pricing guide.

What this guide does not cover

It does not give treaty rates: the applicable article and protocol must be checked for the parent's jurisdiction. Nor does it establish the tax treatment in the parent's home country, registration tax on the particular loan instrument, or the treatment of a permanent establishment. Dividend withholding is covered in the linked guide. Special banks' and insurers' deduction regimes are identified only to distinguish them from the ordinary SRL rule. For an actual payment, an Italian professional should confirm the entity's financing conditions, the legal form and registration of the instrument, the lender's tax status and beneficial ownership, the royalty's classification and taxable base, the applicable treaty, the correct forms, and any 2027 legislative changes before paying or applying relief.

Sources

• Civil Code, articles 2463, 2464, 2467, 2481-bis, 2482-bis, 2482-ter, 2497-quinquies and 2497-sexies, supplemented by Cassation order 21422/2022, Crisis Code article 164 and Milan Notarial Council Massima 125.
• Old TUIR, Presidential Decree 917/1986, articles 23, 71, 96, 109 and 110, applicable on 27 October 2026; new TUIR, Legislative Decree 117/2026, applies from 1 January 2027 under its article 377.
• Presidential Decree 600/1973, articles 25, 26 and 26-quater; Revenue Agency Circular 47/E/2005, §6.4, explaining royalty taxable bases.
• Decree-Law 66/2014, article 3, the 26% rate on interest.
• Legislative Decree 117/2026, new income tax code, article 105, applicable from 1 January 2027.
• Directive 2003/49/EC on interest and royalties between associated companies.
• Law 199/2025, article 1(133)-(136), financial-intermediary interest limits; Revenue Agency approval of Forms B, C and F.

Frequently asked questions

Can the parent charge interest at whatever rate the group uses internally?

No. The rate must reflect conditions independent parties would have agreed for that borrower; old-TUIR article 110(7) (new article 119(8) from 2027) can adjust the Italian company's taxable result. Article 96 (new article 105) applies its interest limit to the otherwise deductible amount. Article 26-quater(5) separately caps the EU interest or royalty exemption by normal value under old article 110(2), corresponding to new article 119(4).

Is it better to lend or to capitalise?

It depends on the SRL's ability to service the debt, the available tax-adjusted ROL, the withholding position of the foreign parent, the loan terms and any article 2467 subordination. No legal rule makes either route inherently cheaper. Compare the cost and recoverability of each before choosing how much permanent capital the company needs.

Does the Italian company have to withhold tax even if the parent will claim a refund?

If the applicable exemption or treaty documentation has not been obtained in time, the Italian payer cannot assume a reduced or zero rate at source. Ordinary interest withholding is 26%; covered royalty withholding is 30% of the applicable taxable base, which may be 75% of gross for a qualifying acquired intangible right (an effective 22.5% of gross in that case). Withholding paid in excess of an available relief may be recoverable through a documented refund application, subject to the relevant conditions and time limit. The payer should not simply omit withholding in anticipation of a later refund.

What happens to interest the company could not deduct?

Article 96(5) sets no fixed expiry: interest disallowed by its formula may be deducted in a later year where that formula leaves room. But old-TUIR article 84(3-quater), corresponding to new article 93(6) from 2027, applies preservation restrictions to excess-interest carryforwards, including on a qualifying change of ownership and activity. Unused ROL capacity is carried forward for five years.

Can a loan from a sister company be treated differently from a loan from the parent?

Potentially. Article 2497-quinquies applies article 2467 to a loan by a person exercising direction and coordination and another entity subject to it; article 2497-sexies presumes that relationship for an entity obliged to consolidate the company's accounts or controlling it, unless contrary evidence is shown. That legal relationship, the SRL's financial position and the date of the advance matter, not merely the word “sister”. For withholding, article 26-quater's EU exemption does examine the holding chain: it requires a direct qualifying link, or an eligible EU common parent directly holding the required voting rights in both payer and recipient. A treaty has its own distinct conditions.

If you are deciding how to fund an Italian subsidiary or reviewing an existing arrangement, request a quote with the amounts, the parent's country and the SRL's current accounts for a case-specific review.