Italian SRL Corporate Tax: From Accounting Profit to IRES

A worked guide to the reconciliation, the second tax charged on a different base, and what actually reaches the foreign shareholder.

An Italian SRL has one profit in its annual accounts and, very often, a different taxable profit in its tax return. The gap is not an error and not an exotic Italian peculiarity: article 83 of the TUIR, the consolidated income tax code, tells the company to take the result of the income statement and apply the tax rules to it, item by item. The 24% rate applies to the second figure.

This guide explains how that reconciliation works for an ordinary trading or services company, which adjustments a foreign-owned SRL actually meets, how IRAP is computed on a separate base, when the two taxes are paid, and what the shareholder receives afterwards. For the full picture of how an Italian company is taxed, including VAT and the dividend routes, start with Italian taxes for a foreign-owned company; for the dates, the SRL tax deadlines calendar is the companion piece.

The short answer

IRES is charged at 24% on the company's taxable profit (article 77(1) TUIR). The rate is flat: there are no brackets and no reduced band for small profits. That profit begins with the accounting result but is not the same as it: provisions, tax charges, part of the amortisation of goodwill, excess interest and prior losses are added back or deducted under rules that have nothing to do with the accounting standards used to draft the accounts.

IRAP is a second, regional tax at the ordinary rate of 3.9%, charged on the net value of production rather than on profit. Its base is closer to an operating margin: it deducts services, other operating costs and depreciation, does not deduct interest or most provisions, and deducts the full cost of employees on permanent contracts.

Dividends are a third, separate layer. When the SRL distributes profit to a foreign shareholder, the company withholds tax on the gross amount, normally 26%, reduced by the EU and treaty regimes described below. The distribution is not deductible for IRES: the company pays tax on the profit first, then withholds on the way out.

Why the accounting profit is only a starting point

Article 83(1) TUIR is short. The overall income is determined by adding to, or subtracting from, the profit or loss shown in the income statement for the year the increases and decreases that follow from applying the criteria in the following provisions of the code. That is the whole architecture: the accounts are the base, the tax code is the filter.

Two consequences matter for a foreign owner reading an Italian filing.

First, the reconciliation lives in the tax return, not in the accounts. The annual accounts approved by the shareholders and filed with the Business Register show the statutory result; the adjustments appear in the Redditi SC return, in the framework that starts from the accounting result (rigo RF4 or RF5 in the 2026 model). The taxable profit is not a line of the filed accounts, although the notes may disclose a reconciliation between the theoretical and the effective tax charge. Our guide to reading Italian company accounts covers the civil-law side; this article covers the fiscal side.

Second, the differences are of two kinds. Permanent differences never reverse: a non-deductible tax stays non-deductible. Temporary differences reverse in a later year: a provision added back in 2026 is deducted when the risk materialises, and the accounts record the tax effect through deferred taxes. A foreign parent comparing the Italian subsidiary's book tax charge with the cash paid will see both effects.

The adjustments an ordinary SRL meets

The list below is not the code. It is the set of items that recur in a small or mid-sized foreign-owned company, with the rule behind each one.

Taxes.

Income taxes are not deductible (article 99(1) TUIR), and taxes for which the law provides a right of recourse are not deductible either. IRAP is a special case: it is not deductible from the IRES base in general, but article 6 of Decree-Law 185/2008 allows two deductions, one analytical for the IRAP relating to employee costs and one flat at 10% of the IRAP paid, as a proxy for the financial charges that IRAP does not deduct. The flat 10% is available where non-deductible interest contributed to the IRAP base, and it follows the IRAP actually paid, so the cash timing matters.

Provisions.

Provisions for risks and charges are not deductible unless a specific rule allows them. Article 107(4) TUIR states that no deduction is allowed for provisions other than those expressly considered in the code. A general risk fund set aside in the accounts is therefore added back, and the cost becomes deductible when it is actually incurred.

Amortisation of goodwill and other intangibles.

Goodwill recognised in the accounts is deductible in tax over at least eighteen years under article 103(3) TUIR. A company that amortises it over ten years in the accounts must add back the excess each year. The 2026 Budget Law, and the decrees that followed it, changed the rules for intangibles recognised from the 2026 tax period and for companies using IFRS, so the year of recognition matters; for goodwill already on the books of an Italian GAAP company, the eighteen-year limit remains the reference.

Interest expense.

Net interest is deductible up to 30% of the ROL, the gross operating result defined in article 96(2) TUIR as the difference between the value and the costs of production, before depreciation and finance lease payments. Interest above that limit is carried forward without a time limit and deducted when the ROL of a later year allows it. Banks, financial intermediaries and insurance companies follow different rules, including the cap on the deductible share of their interest that the 2026 Budget Law introduced for the 2026 to 2029 periods; an ordinary SRL is not in that perimeter.

Tax losses.

Losses may be carried forward without a time limit, but in each year they can offset at most 80% of the taxable income before the offset (article 84(1) TUIR). Losses of the first three tax periods benefit from full deduction where they relate to a new business activity (article 84(2)). The 20% floor is why a company with large accumulated losses can still pay some IRES in a profitable year.

Dividends received.

Where the SRL itself holds participations, dividends it receives are largely exempt, with only a small share taxed. The 2026 Budget Law added minimum holding and value thresholds to that regime; Decree-Law 38/2026 removed them again with effect from 1 January 2026, so the year of distribution and the type of holding have to be checked rather than assumed.

Related-party costs.

Costs charged by the foreign parent must be at arm's length under article 110(7) TUIR. A transfer pricing adjustment is not an ordinary year-end difference but an assessment outcome; the documentation side is covered in the guide to transfer pricing for an Italian subsidiary.

IRAP is not a surcharge on IRES

The most common mistake in foreign-owned companies is to treat the two taxes as one rate. They are computed on different bases and can point in different directions.

For a company, article 5 of Legislative Decree 446/1997 defines the IRAP base as the difference between the value and the costs of production in the income statement, excluding personnel costs, the write-downs in B.10(c) and (d), and the provisions in B.12 and B.13 from the deductible items. In practice: services, other operating costs and ordinary depreciation reduce the base, with goodwill amortisation limited to one eighteenth under article 5(3); personnel, interest and provisions do not.

Two deductions then apply. Article 11(4-octies) of the same decree allows the full cost of employees on permanent contracts to be deducted from the base, a rule in force since 2015. Smaller deductions exist for apprentices, disabled employees and other categories. The result is a base that rewards permanent employment and does not reward debt.

The ordinary rate is 3.9%. Regions may vary it by up to 0.92 percentage points, and may differentiate by sector and type of taxpayer, so the rate actually applied depends on where the value of production is attributed, not only on the registered office. A temporary two-point increase applies for the two tax periods after 2025 to the activities identified by Decree-Law 21/2026, and raises the rates for banks and insurance companies; an ordinary trading or services SRL is outside that perimeter unless its ATECO code is specifically covered. Check the regional rate and the ATECO position before using 3.9%.

Because the bases differ, a company can have zero taxable income and still pay IRAP, and a company with heavy interest expense can pay less IRES and no less IRAP. This is also why 27.9% is not a tax rate. Adding 24% and 3.9% assumes that both taxes are charged on the same amount, which is exactly what article 5 of the IRAP decree prevents. Our Italian corporate tax calculator keeps the two bases separate and states its own simplifications.

A worked example, with the assumptions stated

The company is a software SRL in Milan, calendar financial year, Italian GAAP accounts, wholly owned by a German GmbH. All employees are on permanent contracts and their cost is booked in B.9. The example is for the 2025 tax year, so the ordinary 24% rate applies and no special incentive is assumed. Assume the IRAP actually paid during 2025 was €17,160, carried over from the prior year and independent of the €17,472 accrued for 2025: the flat 10% deduction in the 2025 return is computed on the IRAP paid in 2025, not on the IRAP accrued for 2025 and paid in 2026. The figures are invented for the illustration.

Income statement, 2025

Line	€
Revenue	1,250,000
Services and materials	(300,000)
Personnel	(400,000)
Other operating costs	(60,000)
Amortisation and depreciation	(50,000)
Provisions for risks	(12,000)
Operating result	428,000
Interest expense	(10,000)
Profit before income taxes	418,000

The €50,000 of amortisation includes €18,000 of goodwill: goodwill of €180,000, amortised over ten years in the accounts. The €12,000 provision is a general risk fund, not one of the provisions the tax code allows. For IRAP too, goodwill amortisation is deductible only up to one eighteenth (article 5(3) of Legislative Decree 446/1997, confirmed by resolution 248/E of 2009), so €10,000 is deducted from the IRAP base and the €8,000 excess is not.

IRAP

Item	€
Value of production (A)	1,250,000
Less services, other costs and depreciation	(402,000)
Personnel and provisions left in the base	—
Deduction for permanent employees	(400,000)
IRAP base	448,000
IRAP at 3.9%	17,472

IRES

Item	€
Profit before income taxes	418,000
Add: provisions for risks (article 107 TUIR)	12,000
Add: goodwill amortisation above one eighteenth (article 103 TUIR)	8,000
Less: IRAP deduction, 10% of IRAP paid in 2025 (article 6, DL 185/2008)	(1,716)
IRES taxable profit	436,284
IRES at 24%	104,708
IRES plus IRAP	122,180

The analytical part of the IRAP deduction is nil here. The full cost of the permanent staff is already out of the IRAP base, so no IRAP remains attributable to it; only the flat 10% of the IRAP paid in 2025 for financial charges reduces the IRES base.

The interest test needs a separate figure. The fiscal ROL under article 96(2) is not the accounting operating result plus depreciation read off automatically: it is rebuilt with its own exclusions, and the non-deductible provision does not necessarily fall in the same place as it does for IRES. Assume a fiscal ROL of €478,000, stated as a hypothesis rather than derived from the accounts. Thirty per cent is €143,400, above the €10,000 of interest, so the limit does not bite; with €200,000 of interest, €56,600 would have been disallowed and carried forward.

The total of €122,180 is 29.2% of this company's pre-tax profit, before any deferred tax. That percentage is an outcome, not a rate. Change the regional IRAP rate, the share of fixed-term staff, the interest charge or the provisions, and it moves. A company with a large provision and no interest can pay more than 29.2%; a company with a big ROL and a low regional rate can pay less.

Profit before income taxes less these current taxes is €295,820. That is the result before deferred taxes, not a statutory net profit: both temporary differences in the example, the provision and the goodwill excess, are deductible in later years, so they would normally give rise to deferred tax assets, recognised only where recovery is probable. The example does not compute them and does not assume they are nil. Whether a dividend can be paid depends on the distributable profit shown by the approved accounts and on the reserves: the legal reserve, any reserve the articles require, and any reserve tied to a tax benefit. The tax base of €436,284 is not a distributable amount. The dividend scenario below is a separate hypothesis about a distributable amount, not a forecast of what this company will distribute.

What the example leaves out

The calculation assumes no prior tax losses, no dividends received, no incentives, no fixed-term staff, no leasing, no impairment of receivables, no IRAP rate variation and the separate fiscal ROL stated above. Each of those would add a line, and some would change the sign of an adjustment.

A loss carried forward, for instance, would be used against the €436,284 within the 80% limit: a €150,000 loss would be fully usable, while a €500,000 loss would leave €349,027 usable this year and the rest carried forward. Incentives that increase the deduction for eligible costs sit in the same part of the return and depend on conditions that change with the year, which is why they are better checked against the return instructions than against a rate table.

For 2025 only, a company that allocated at least 80% of its 2024 profit to a dedicated reserve, invested at least the greater of 30% of the amount allocated to the reserve, 24% of its 2023 profit and €20,000 in new 4.0 or 5.0 capital goods, and met the employment conditions of the MEF decree of 8 August 2025 could apply a 20% IRES rate instead of 24% for that period. The reduction is described by the Revenue Agency as limited to the tax period after the one in progress on 31 December 2024, so it is claimed in the return filed in 2026 and does not apply to 2026 profits.

Timing: balance, advances and the return

IRES and IRAP follow the same payment calendar, which is not the calendar of the tax year.

The advance is normally 100% of the tax declared for the previous period, split 40% with the balance and 60% in November. Businesses within the ISA reliability regime pay 50% and 50%. In all cases, the first instalment is not paid separately where it would not exceed €103. The advance is set on the previous year's tax unless the company uses the forecast method, which is allowed but carries a penalty if the estimate falls short of the tax actually due. In 2026 the calendar was not uniform: businesses within the ISA regime obtained a deferral of the June payments to 20 July 2026, or 20 August 2026 with 0.80%, under article 1-sexies of Decree-Law 63/2026, converted by Law 113/2026.

The return follows later. Redditi SC 2026, covering the 2025 tax year, is due by the last day of the tenth month after the close, which for a calendar year is 2 November 2026 because 31 October falls on a Saturday. The IRAP return is a separate form with the same deadline; it is no longer transmitted in unified form with the income tax return.

In practice, 2026 cash out for a calendar-year company is the 2025 balance plus the 2026 advance, while the 2026 liability itself is settled in 2027. A company that pays only the balance in June and forgets the advance will meet the second instalment in November and still owe the difference the following year.

The payment codes are the ordinary ones: 2003 for the IRES balance, 2001 and 2002 for the first and second advance instalments, 3800 for the IRAP balance, 3812 and 3813 for the IRAP advances. Amounts are paid through the F24 form, and IRES and IRAP can be offset against available credits within the F24 rules.

What reaches the foreign shareholder

The company-level tax is only the first layer. When the SRL distributes the profit, the company acts as withholding agent on the gross dividend.

The domestic rate is 26%. Four routes reduce it, and each has its own documentation and timing:

• the EU Parent-Subsidiary regime, under which no Italian withholding applies where an EU parent company has held at least 10% of the shares for at least twelve months and the other conditions are met (article 27-bis DPR 600/1973);
• the 1.2% rate for a company subject to corporate income tax in an EU or EEA state with adequate exchange of information (article 27(3-ter) DPR 600/1973); the text in force in October 2026 does not require a minimum holding: the 2026 Budget Law briefly introduced thresholds and Decree-Law 38/2026 repealed them with effect from 1 January 2026;
• the treaty rate, which varies by treaty and by the size of the holding, and applies only if the residence certificate and the other documents reach the company before payment;
• the refund route, for a shareholder that was entitled to a reduction but did not have the documents in place in time: the excess is claimed from the Revenue Agency within 48 months, with the evidence of the withholding.

To show the withholding arithmetic, take a distributable profit of €295,820 — a separate hypothesis, subject to the approved accounts and the reserves: €295,820 with the Parent-Subsidiary exemption, €292,270 after 1.2% withholding, €218,907 after 26%. The shareholder's country may then tax the dividend and grant a credit for the Italian tax, which is a question of its own law, not of Italian law.

Two points are worth repeating to a board. The distribution does not reduce the IRES already paid, and it does not create a deduction: the profit was taxed when it was earned. And the rate applied at source depends on documents that must be in the company's hands before the payment date; a treaty rate claimed afterwards becomes a refund claim. The procedure, the forms and the deadlines are set out in the guide on claiming reduced Italian dividend withholding tax, and the dividend withholding calculator models the rate for a given shareholder.

A short checklist for the foreign owner

1. Separate the three figures. Accounting profit, IRES taxable profit and IRAP base are three different numbers. Ask the accountant for the reconciliation, not only for the tax charge.
2. Check the adjustments that recur. Provisions, taxes, goodwill amortisation, interest above 30% of ROL and prior losses explain most of the gap in a small company.
3. Do not use 27.9%. Compute IRES and IRAP on their own bases, and treat any combined percentage as an outcome of one set of assumptions.
4. Plan the June payment as two numbers. The balance and the first advance fall on the same date; a company that budgets only the balance understates its June cash need.
5. Decide the dividend route before paying. The 1.2% rate and the exemption both depend on documents held by the payment date.
6. Check the year of the rule. The 2025 reduced rate, the 2026 interest rules for financial intermediaries and the 2026 changes to the dividend and participation regimes all apply to specific periods.

Sources and further reading

• TUIR, DPR 22 December 1986, no. 917 — current text, in particular articles 77 (rate), 83 (determination), 84 (losses), 96 (interest), 99 (tax charges), 103 (intangible assets) and 107 (other provisions).
• Legislative Decree 15 December 1997, no. 446, article 5 on the IRAP base and the one-eighteenth limit on goodwill amortisation, with articles 11 and 16 on deductions and rates; resolution 248/E of 17 September 2009 confirms the one-eighteenth rule for IRAP.
• Dipartimento delle Finanze — IRAP, disciplina del tributo.
• Agenzia delle Entrate — IRAP 2026 instructions, including the 3.9% rate, the regional variation and the 100%/40%/60% advance rules.
• Agenzia delle Entrate — IRES: what it is, updated in July 2026, including the 2025 reduced rate.
• Agenzia delle Entrate — Redditi SC 2026 instructions, in particular the determination of business income, the loss and interest frameworks and the 20% rate section.
• Agenzia delle Entrate — Redditi SC: when and how to file.
• Agenzia delle Entrate — payment of income taxes for companies, including the 30 June and 30 November terms and the 0.40% rule.
• DPR 7 December 2001, no. 435, article 17 on the payment of balances and advances.
• Decree-Law 30 April 2026, no. 63, article 1-sexies, converted by Law 113/2026 on the 2026 ISA deferral to 20 July or 20 August.
• MEF — decree of 8 August 2025 on the 2025 reduced IRES rate.
• DPR 29 September 1973, no. 600, articles 27 and 27-bis on the withholding on dividends and the Parent-Subsidiary exemption.
• Decree-Law 27 March 2026, no. 38, which restored the dividend and participation-exemption regime and replaced article 27(3-ter) of DPR 600/1973.