Background – Taxation of Gains and Losses
The disposal of shareholdings (e.g., shares or equity interests in companies) in Italy may trigger a charge to Italian tax on any capital gain under the Italian Tax Code (DPR 917/1986).
The tax treatment differs significantly based on the percentage interest in the company and Italian tax residency status. It also depends on whether the investments are held via an Italian regulated intermediary (bank, broker, insurance company, etc) or whether the shares are held directly by the taxpayer, albeit via non Italian regulated intermediaries.
Below is an overview for Italian residents and non-residents, though the complexity of these rules usually requires professional advice to ensure compliance.
This blog post applies to gains in equity type investments made by private individuals otherwise than in the course of a business or trading activity. the same rules may well apply to transaction in derivative instruments involving equity instruments. Italian tax rules in this regard generally follow the nature of the underlying instrument or instruments involved, but again, specific advice should be sought.
Italian Tax Residents
For Italian tax residents, capital gains from the disposal of shareholdings are taxed as miscellaneous income (Article 67, TUIR). Italian tax residents are liable to tax on gains on disposal of equity interests companies and other entities wherever in the world the entity is located, subject possibly to special rules under a DTA of disposals involving defined shareholdings in an entity located in the territory one of Italy’s treaty partners.
The tax rate depends on the type of shareholding:
Non-Significant Shareholdings (see definition above): Gains on equity instruments are taxed at a 26% flat substitute tax (Article 5, DLgs 461/1997). The tax is withheld by the Italian financial intermediary (e.g. bank, broker or intermediary) entrusted with the management investments, otherwise reported via an annual Italian tax return.
Significant Shareholdings: 49.72% of the gain is added to taxable income and taxed at progressive IRPEF rates (23–43%, plus regional/municipal taxes). The “participation exemption”, is a reflection of the Constitution principle that income or gains should be taxed twice, and of the fact that the entity being disposed of has paid tax on corporate profits. It is obviously a rough and ready method of arriving at an overall rate of tax paid on disposal of a significant shareholding in an Italian company, targeted at simplicity and easing tax reporting.
Investment Funds and ETFs: Gains on these assets are separated from gains on other investments. Under Italian tax rules the relevant gains are fully taxable as income – either withheld at source by an Italian intermediary, or to be reported in Section RM of the annual tax return in each case liable to the 26% substitute tax rate if the gain derives from the disposal of investment funds/ETF’s which are complaint with EU regulations, otherwise they are reported in section RL of the return and are liable to tax at scale rates. Losses on these assets cannot be offset against gains on the same type of asset, but flow into the general pool of gains and losses applicable to equity and other instruments.
- Exemptions: Gains from equities held in PIR’s – Individual Savings Plans offered by Italian regulated intermediaries may be exempt under specific conditions. Losses may offset gains within the same tax period.
Italian Tax Residents – Reporting Gains and Losses
Gains and Losses are subject to rigorous reporting requirements and processes.
If you invest via an Italian financial intermediary (e.g. bank, broker, or insurance company) the bank will handle the tax reporting and pay any income taxes due withholding the relevant amount of tax before crediting you with the net income. There are a number of alterative regimes which can be offered by Italian regulated financial intermediaries.
If you have not invested via an Italian financial intermediary, then you must report the income and gains personally in annual tax regime, following the same rules for financial institutions which can be summarised as follows
Gains on equity instruments must be “pooled” and shown in Section RT of the annual tax return. You need to show the total sales proceeds, total cost of sales and the net gain. Gains on investment funds and ETF’s do not form part of the pool and must reported in the income tax section (RM). The total pool value of gains and losses on equity instruments will also include gains on other non investment fund/ETF assets, such as ETC’s, gains and losses on corporate bonds.
If losses in the “pool” exceed gains for any particular tax year, they can be carried forward and offset against the total pool gains arising in the four successive tax years. Losses must be claimed in the tax return for the year in which the arise, otherwise they cannot be offset in future years,
Calculating the Gain
The gain is generally the difference between the sale proceeds and the original purchase price increased by purchase taxes, dealing costs on the purchase and other expenses which relate directly to the value of the investment on sale. Dealing costs on sale may not necessarily be deductible.
Where the asset is denominated in a non Euro currency, the value in Euros at the time of the purchase needs to be calculated and compared to the value of sale proceeds in Euro at the time of sale, using, ideally, Bank of Italy FX rates for the month of the transaction. Similarly purchase tax taxes, dealing costs needs to be converted at the appropriate FX rates at the time they were incurred.
Whether or not you were tax resident at the time of purchase is irrelevant – the base cost is calculated on the basis of the purchase price, converted into Euro, if necessary, at the time of purchase.
In computing gains and losses a LIFO (last in first out) method must be used. This means computing the gains or losses on the basis of the price of the most recent purchase or purchases, in the case of part disposals of assets, or where a disposal involves a partial sale of investments. Since many brokers and asset managers outside Italy use an average cost or pooling method, the Italian rules may require a statement using the LIFO method, of all purchases and sales over the years to establish the correct base cost, in each particular case.
Definitions
A Substantial Shareholding (“particpazione qualificata“) is an equity interest corresponding corresponding to:
- at least 5% of the total share capital; or
- at least 2% of total shares carrying a right to vote
for shares and securities traded or listed on a regulated financial market.
- at least 25% of the total share capital; or
- at least 20% of total shares carrying a right to vote
for shares not traded or listed on a regulated financial market.
For these purposes all sales in any twelve month period should be counted checking if the disposal concerns a shareholding that is substantial at any time time during during that period.
PIRs – Individual Savings Plans
Piani Individuali di Risparmio (PIR) are Italy’s tax-advantaged individual savings plans, introduced by Article 1, commas 100–114, Law n. 232/2016 (Legge di Bilancio 2017) to encourage investment in Italian and EU companies, particularly SMEs. Key features:
- Eligibility: Open to Italian tax residents; one PIR per person, managed through banks or authorized financial intermediaries.
- Investment Rules: At least 70% of the portfolio must be invested in Italian or EU companies (with Italian operations), and 25% of that in SMEs not listed on major indices (e.g., FTSE MIB). Annual contribution limit: €40,000; total limit: €200,000.
- Tax Benefits: Capital gains and dividends are exempt from the 26% substitute tax (or IRPEF for qualified shareholdings) if held for at least 5 years. Early withdrawal (before 5 years) voids the exemption, taxing gains retroactively.
Alternative PIRs (PIR Alternativi)
Alternative PIRs (introduced by Legge di Bilancio 2021, Law n. 178/2020) are specialized Individual Savings Plans targeting investments in alternative assets like venture capital, private equity, and startups, particularly SMEs and innovative firms. They offer the same tax exemptions as standard PIRs (no 26% capital gains tax after 5 years) but require at least 70% allocation to illiquid investments (e.g., startup funds or unlisted companies). Minimum holding period is 5 years, with annual limits of €150,000 and total €750,000. These plans encourage long-term funding for Italy’s startup ecosystem, but compliance with investment criteria is strict, and early withdrawal forfeits benefits.
Non-Residents
For non-residents, Italian tax generally applies to gains from shareholdings in Italian-sited entities, under the general definition of Italian source income, unless exempt under a DTA or Italian law. Where gains are taxable in general they will be subject to a mandatory 26% flat substitute tax withheld at source where made via an Italian intermediary, or reported via an annual tax return.
Exemption to this general rule may apply for:
capital gains deriving from the disposal for consideration of non- Significant Shareholdings (see definition above) in Italian resident companies traded on regulated markets;
capital gains deriving from the sale for valuable consideration or redemption of securities not representing commodities and mass certificates (securities such as bonds and other debt instruments offered to the public at large) traded on regulated markets, as well as from the sale or withdrawal of foreign currencies deriving from deposit and current accounts;
- disposals made by residents of another country that can claim the benefit of a Double Tax Treaty (DTA), such as the US-Italy DTA (Article 13), may allocate taxing rights to the state of tax residence state, potentially reducing or eliminating Italian tax liability.
Legislation and Guidance
See this article for more details on the Italian tax compliance, reporting and payments involved with a portfolio of assets managed outside Italy.
- Legislation: TUIR Articles 23, 67 (DPR 917/1986); DLgs 461/1997; Legge di Bilancio 2023 (Law n. 197/2022).
- Guidance: Agenzia delle Entrate Circular n. 23/E/2010; Risposta n. 175/2025.