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Tax Minimization in Italy

Updated on Thursday 04th August 2016

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Tax-minimization-in-ItalyItaly is a very attractive country from a taxation point of view because the Government has enabled various incentives, such as grants, tax exemptions and deductions in order to encourage foreign investments. All these incentives also make efficient tax minimization solutions for Italian companies. In order to understand what tax minimization, tax planning is it suffices to say that both terms represent a conglomerate of techniques employed to avoidance paying large amounts of money on taxes. The best aspect of tax minimization in Italy is that it represents a legal way of reducing tax payments.

How to use tax minimization in Italy?

Italian companies have plenty of choices when seeking tax planning solutions. Among the most employed ones are governmental incentives offered for investments made in disadvantaged regions of the country which can be made up of:

  • -          tax credits for companies investing in research and development activities;
  • -          tax exemptions under the Patent Box Regime for local companies and permanent establishments of foreign companies in Italy;
  • -          foreign tax credits, which apply to foreign shareholders making taxable income in Italy.

Companies can also take advantage of EU directives related to taxation in EU member states, such as the Parent-Subsidiary Directive which provides for tax exemptions.  Under this directive, a company from an EU country holding a certain percentage of the shares in an Italian company may benefit from tax exemptions. This directive is suitable for holding companies, which make excellent tax minimization solutions in Italy.

Our company registration agents in Italy can offer complete information about tax minimization strategies.

Tax minimization through Italian double tax treaties

Double tax treaties are probably the most common to foreign investors when it comes to tax minimization techniques. Italy has an extended network of double tax treaties also known as agreements for avoidance of double taxation. Depending on the treaty, foreign shareholders may benefit from deductions or exemptions on withholding taxes on dividend, interest and royalties payments.

For assistance in setting up a company and choosing the best tax minimization strategy, please contact our Italian company formation consultants.

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