ITALY Law and Practice Contributed by: Giuliano Foglia, Foglia & Partners
action Between Tax and Criminal Procedures ); and • the participated company carries out a business activity. Starting in 2024, following decisions by the Italian Supreme Court (No 21261/2023 and No 27267/2023), the PEX regime has been extended to address previ - ous discrimination between non-Italian and Italian res - ident enterprises. As a result, non-resident companies and entities that do not have a permanent establish - ment in Italy but are subject to corporate income tax in an EU or EEA State can now benefit from the PEX regime for capital gains, provided all the previously According to Article 51 of the ITC, all sums, including compensations/benefits in kind, received by employ - ees, on whatever legal basis, in connection with their employment relationship, are considered part of the salary and are subject to tax at progressive rates. Tax - es on employment income (including compensation/ benefits in kind) are levied at source by employers. According to Article 51 (8-bis) of the ITC, remunera - tions received by employees from an activity perma - nently performed abroad are taxable on a forfeit basis, according to the amount determined by a specific annual Ministerial Decree, provided that the activ - ity performed abroad is the exclusive object of the employment and the employee stays abroad for more than 183 days in a 12-month period. According to the consistent administrative prac - tice of the Italian Revenue Agency (see Resolution No 92/2009, Rulings No 199/2025 and No 8/2026), employment income from employees’ incentive plans attributed and vested (wholly or partially) outside Italy but paid in a tax period when the employee is tax resident in Italy are considered fully taxable in Italy on a cash basis, with the possibility to offset the related tax credit for taxes paid abroad. mentioned conditions are met. 3.5 Employment Income Cross-border workers benefit from preferential tax provisions under both specific domestic rules (eg, an exempt threshold of EUR10,000) and international
If the relevant conditions are met, withholding tax can be reduced (usually in a range of 5% to 15%) or exempt pursuant to the applicable provisions of the DTCs or under the domestic provisions implementing the IRD. 3.4 Capital Gains Individuals Capital gains realised by Italian resident individuals from the sale of shares, bonds and other financial instruments issued by both resident and non-resident entities are subject to a 26% substitute tax pursuant to Article 5 (2) of Legislative Decree No 461/1997. If the alienator is a non-Italian resident individual, capi - tal gains from the sale of non-listed non-substantial participations (ie, equal to at least 20% of voting right or 25% of participation in the capital) are exempt, with the exception of capital gains on participations whose value derives for more than 50% from real estate assets located in Italy (see Article 5 (5 – 5-bis) of Legislative Decree No 461/1997). Capital gains realised by Italian resident individuals engaged in business activities are included in busi - ness income and are taxable at progressive tax rates. If the conditions for the application of the participa - tion exemption regime apply, capital gains are 41.86% exempt. Companies Capital gains from the sale of participation are usually included in the taxable income, subject to CIT at 24% rate (see Article 86 of the ITC). Under Article 87 of the ITC, the participation exemp - tion (“PEX”) regime exempts 95% of capital gains. The PEX regime applies if the following requirements are cumulatively fulfilled: • the participation has been uninterruptedly held at least from the beginning of the 12th month preced - ing the sale; • the participation has been booked as a fixed finan - cial asset since the first financial statement closed after its acquisition; • the participating company is resident in a jurisdic - tion without a privileged tax regime (see 6.3 Inter-
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