A Case of Agitation, Discontent, and the Ensuing Discourse
The 2025 Budget Law has introduced a temporary corporate tax incentive in Italy, known as the IRES discount. This measure aims to encourage businesses to reinvest profits in productive and socially responsible activities.
Background
The incentive, often referred to as the "reward IRES," was implemented by a ministerial decree from Italy's Ministry of Economy and Finance. It targets Italian-resident joint-stock companies, commercial entities, permanent establishments of non-resident companies, and non-commercial entities with income from commercial activities. Companies in liquidation, insolvency proceedings, or using simplified or flat-rate accounting regimes are excluded.
Eligibility and Conditions
To qualify for the IRES discount, companies must retain at least 80% of their 2024 profits rather than distribute them as dividends. At least 30% of the retained profits (and no less than 24% of 2023 profits) must be reinvested in qualifying or "relevant" productive assets, including automation, digitalization, and technologies linked to Industry 4.0. Profits used to cover losses are also considered retained. The incentive rewards companies that demonstrate transparency and detailed accounting.
Implications
The 4% IRES rate cut reduces the tax burden, enhancing cash flow for companies reinvesting in growth and innovation, helping them accelerate the adoption of new technologies. This policy complements other incentives like a 20% tax credit for investments in 4.0 technologies and 10% credit for intangible assets (cloud computing, etc.), adding financial support to drive digital transformation and competitiveness.
The IRES discount encourages long-term productive investment rather than short-term profit distribution, promoting sustainable corporate growth and alignment with social responsibilities. By stimulating corporate reinvestment, the incentive aims to boost Italy's economic productivity, employment, and the development of strategic industrial sectors.
The Premium Version of IRES
In addition to the discounted IRES, a premium version of the tax was introduced on 8 August 2025. This premium version, with a 20% rate, is reserved for businesses that invest in production and hire new personnel. The premium version of IRES is intended to incentivize businesses to invest in production and hire new personnel.
Who Pays IRES?
Ires applies to business income and is paid by 1.3 million companies and entities. Approximately 1.2 million of these taxpayers are limited liability companies (LLCs). Joint-stock companies (JSCs) and other capital companies, such as limited partnerships, are also required to pay Ires. Cooperatives and mutual insurance companies are among the entities that must pay Ires.
Non-profit organizations, such as 473 foundations, must also pay Ires. Ires is worth over 57 billion euros a year. Ires is a tax paid by joint-stock companies and entities, as regulated by article 73 of the Tuir.
In summary, the 2025 IRES discount is a targeted fiscal stimulus encouraging Italian companies to retain earnings and invest significantly in innovation and digitization, reinforcing Italy’s aim to modernize its industrial base while fostering responsible corporate behavior. The premium version of Ires, introduced concurrently, aims to further incentivize businesses to invest in production and hire new personnel.
The 2025 Budget Law's temporary corporate tax incentive, known as the IRES discount, is aimed at businesses, and it is regulated by article 73 of the Tuir. Companies that qualify for the IRES discount must reinvest at least 30% of their retained profits in qualifying productive assets, such as automation, digitalization, and technologies linked to Industry 4.0, which falls under the broad category of finance business activities. This strategy not only encourages long-term productive investment but also promotes sustainable corporate growth and alignment with social responsibilities.
