How to Calculate the Tax Base

Latest update: 13/07/2023

Companies and other Business Entities

Under Italian tax law, all incomes derived by companies and other business entities always qualify as business income. To determine  the tax base for corporate income tax (Ires) purposes the  starting point is the profit or loss calculated for accounting purposes, as shown in the entity’s financial statements. Such an amount must be increased or decreased in accordance with the tax provisions governing the determination of the tax base for Ires purposes. 

Non-commercial Entities

Incomes derived by non-commercial entities may qualify for each of the six categories of income (income from immovable property, employment income, professional income, business income, financial income, other incomes) provided for by Italian tax law. Therefore, to determine the tax base for corporate income tax purposes of a non-commercial entity, the first step is to calculate separately the tax base for items falling within the different categories.

One has to separately calculate the relevant tax base computed with respect to each item of income falling into one of the mentioned six income categories. The total tax base of the entity is the sum of the tax bases of the relevant income categories. Tax-exempt items of income and those items of income subject to a final withholding tax or to a substitute tax are not added to the income subject to the corporate income tax.

Non-resident Companies and Commercial Entities

Subject to the applicable double tax treaty, non-resident companies and commercial entities are liable to tax in Italy only with respect to the Italian sourced items of income as qualified and determined under Italian tax law.  

Tax base is the sum of the several categories of incomes provided for by Italian tax law, including business income derived by permanent establishments located in the Italian territory. Tax-exempt items of income and those items of income subject to a final withholding tax or to a substitute tax are not added to the total income liable to the corporate income tax (Ires).