The adopted tax measures include updates to controlled foreign company (CFC) rules and tax loss carry-forward provisions.

Italy has published Decree No. 84 of 17 June 2025 in Official Gazette No. 138 on 17 June 2025, introducing changes to the controlled foreign company (CFC) rules and the carry-forward of tax losses.

Law Decree No. 84 took effect on 18 June 2025. Parliament must now convert the decree into law, with possible changes, within 60 days.

The key tax measures include:

Traceable expense rules

When calculating employment or professional income, the rule requiring qualifying accommodation, food allowances, transport, and travel to be paid through traceable methods applies only to expenses in Italy. For professional income, entertainment and promotional expenses are deductible up to 1% of gross fees earned in the fiscal year if paid via traceable methods.

Tax loss carryforward rules

When a company undergoes a change of control and primary business activity, the limitation on carrying forward tax losses does not apply. Losses may be carried forward up to the certified economic value of the net assets, minus an amount equivalent to twice the total contributions and payments made over the past 24 months.

ETR test considerations

For the effective tax rate (ETR) test under the CFC rules, the qualified domestic minimum top-up tax (QDMTT) in the jurisdiction of the relevant CFC must be considered. This is based on the allocation method specified by that jurisdiction’s legislation or, if unavailable, on the ratio of (i) the income attributable to the non-resident controlled entity to (ii) the total income of all group entities subject to the QDMTT, calculated on a consolidated basis.

15% substitute tax limits

The 15% substitute tax alternative to domestic CFC rules is not deductible for income tax or regional tax on productive activities (IRAP) purposes.

Tax payment deadline extension

Taxpayers engaged in economic activities covered by synthetic indexes of reliability (ISA), or similar taxpayers meeting the same criteria, can pay taxes due from income tax, IRAP, and VAT returns by 21 July 2025 (previously 30 June 2025). A 0.4% interest applies to payments made between 22 July and 20 August 2025.