What is a holding company in Italy
A holding company in Italy is a company whose main activity is not selling products or services, but holding shares in other companies. The Italian parent controls one or more subsidiaries and receives dividends from them, without necessarily carrying out its own operational activity.
This structure is used to consolidate investments, plan succession, centralise group treasury and optimise the taxation of profits flowing up from subsidiaries to the parent. Compared with other jurisdictions, Italy stands out for a participation exemption regime that is among the most favourable in the European Union.
The participation exemption: 95% exemption
The participation exemption (PEX) is the main incentive for setting up a holding company in Italy. It allows dividends distributed by a subsidiary to its parent to be 95% exempt from Italian corporate tax (IRES). Only 5% of the dividend is taxed, so with an IRES rate of 24% the effective taxation is reduced to 1.2%.
The exemption is not limited to dividends: it also applies to capital gains from the sale of shareholdings, which are exempt at the same 95% if the requirements of Article 87 of the TUIR (the consolidated text of income tax law) are met.
This is a considerable advantage compared with repatriating profits as an individual or through a company without a holding, where the dividend would be taxed in full.
Requirements of the participation exemption
To apply the 95% exemption it is not enough to hold the shares: you must hold them and classify them correctly from the first balance sheet. These are the main conditions:
Key points
- Uninterrupted ownership of the shareholding for at least 12 months
- Classification of the shareholdings as financial fixed assets from the first balance sheet
- The subsidiary must be resident in a country not considered a tax haven
- The subsidiary must carry out a real commercial activity, not merely passive
The SRL as the holding vehicle
The Società a Responsabilità Limitata (SRL) is the most common legal form for a holding company in Italy, either the ordinary version or the SRLS. For a holding, the ordinary SRL is the recommended option, since the SRLS suits simpler projects.
It offers limited liability up to the capital contributed and flexible management, without the formal requirements of a joint-stock company (SpA).
Key points
- Share capital: no legal minimum (usually €10,000); SRLS from €1 to €9,999
- Shareholders: one or more
- Liability: limited to the capital contributed
- Governance: flexible, defined in the articles of association
Taxation of the holding company in Italy
The holding company is subject to IRES, whose general rate is 24% on profits. On top of this comes IRAP, a regional tax on the value of production that usually stands at around 3.9%, although it may vary slightly depending on the region.
The general VAT rate in Italy is 22%. A pure holding company, which does not sell goods or services, has limited activity for VAT purposes, but it must be properly registered and file its returns.
If the holding company provides management services to its subsidiaries, those services are subject to VAT and must be invoiced at market price. Spain and Italy have a double taxation treaty, which prevents paying twice on the same profits.
Advantages and incorporation of a holding company in Italy
Compared with other European jurisdictions, a holding company in Italy combines a well-established 95% exemption regime with a stable regulatory environment and a broad network of double taxation treaties, including the one signed with Spain.
Incorporating it requires defining the legal form, drafting the articles of association, opening a bank account, registering the company and completing tax registration, as well as having a registered office in Italy.
Incorporation takes an estimated 4 to 10 weeks, covering the articles, registration with the Registro delle Imprese and tax registration. The cost depends on capital, notary fees and the structure.
Keeping the exemption requires holding the stake for 12 uninterrupted months, classifying it as a financial fixed asset from the first balance sheet and ensuring the subsidiary carries on real activity outside a tax haven.
