The incentive is available to Italian-resident joint-stock companies, commercial entities, and permanent establishments of non-resident companies, and non-commercial entities on income from commercial activities.

Italy’s Ministry of Economy and Finance has announced the issuance of a ministerial decree implementing the “reward IRES” — a temporary corporate tax incentive designed to encourage companies to reinvest profits in productive and socially responsible activities.

The measure, introduced by the 2025 Budget Law (Law No. 207/2024), applies only to the tax period following 31 December 2024 and provides a four-percentage-point reduction of the standard IRS rate under Article 77 of the Tuir.

Eligibility Criteria
The incentive is available to Italian-resident joint-stock companies, commercial entities, and permanent establishments of non-resident companies, as well as to non-commercial entities on income from commercial activities. It excludes entities in liquidation or insolvency proceedings, those using flat-rate or simplified accounting regimes, and companies that cannot demonstrate the necessary transparency and accounting detail.

Retention and investment requirements
To qualify, companies must retain at least 80% of their 2024 profits, with at least 30% of retained profits (and not less than 24% of 2023 profits) allocated to “relevant” investments. Profits are considered retained if not distributed to shareholders, even when used to cover losses.

Relevant investments include capital goods listed in Annexes A and B of Law No. 232/2016 or in Article 38 of Decree-Law No. 19/2024, provided they are part of innovation projects aimed at reducing energy consumption. Assets must be interconnected with production or supply chain systems and achieve specific energy-saving targets. Investments must be made between 1 January 2025 and the deadline for filing the 2025 tax return, with a minimum value equal to the greater of 30% of retained profits, 24% of 2023 profits, or EUR 20,000.

Employment and social conditions
Beneficiaries must maintain average employment levels recorded over the past three years and achieve at least a 1% increase in permanent staff (minimum one new hire) in 2025. Use of wage supplementation schemes (“cassa integrazione guadagni”) is generally prohibited during the 2024 and 2025 tax periods, except in limited statutory cases.

Revocation and clawback Rules
The benefit is revoked if retained profits are distributed within two years, or if relevant assets are sold, transferred abroad, or used for non-business purposes within five years. Companies must disclose reserve amounts and any changes in their tax return. In the event of revocation, the ordinary IRES rate applies retroactively, and the tax difference must be repaid.

Special rules for groups and transparency regimes
Specific provisions govern consolidated tax groups, ensuring that the reduced-rate portion of income is calculated separately and subject to group-level adjustments. For companies opting for tax transparency, the reduced-rate portion is allocated proportionally to shareholders.

A strategic shift in corporate tax policy
This temporary reduction forms part of a broader fiscal reform under Law No. 111/2023, reflecting the government’s strategy to incentivise profit reinvestment, sustainable growth, and the development of human capital. While limited to 2025, it signals a policy direction favouring long-term, socially responsible business practices.

Earlier, Italy enacted Law No. 207 of 30 December 2024, outlining the 2025 State Budget along with the multi-year financial plan for 2025-2027.