Italy has published Law No. 197 of 29 December 2022 on the State Budget for 2023 and the multi-year budget for 2023-2025. Some of the main tax measures of the law are summarized as follows:

• Tax credits for the purchase of electricity and natural gas are extended to the first quarter of 2023, along with an increase in the credit amount as follows:
  • a 45% tax credit for electricity expenses incurred by qualifying energy-intensive companies (up from 40%);
  • a 35% tax credit for electricity expenses incurred by other qualifying companies (up from 30%); and
  • a 45% tax credit for natural gas expenses incurred by qualifying companies (up from 40%);
• The reduced VAT rate of 5% on supplies of natural gas for domestic (civil) and industrial purposes is extended for the months of January, February, and March 2023;
• The income threshold for the application of the 15% lump sum tax for qualifying individuals engaged in business and professional income is increased from EUR 65,000 to EUR 85,000;
• The plastic tax and sugar tax are suspended further until 1 January 2024;
• The VAT rate is reduced from 10% to 5% for feminine hygiene products and baby products including certain milk and food products, diapers, and child seats for vehicles;
• A new limit is introduced on the deduction of expenses incurred in relation to transactions with companies in non-cooperative jurisdictions (according to the EU list) or services provided by professionals in non-cooperative jurisdictions, providing that such expenses may only be deducted for transactions that have actually been carried out, limited to the "normal value", which essentially means the normal free market value, although:
  • the limit does not apply if it is proven that the transactions correspond to an effective economic interest and have actually been carried out; and
  • the limit does not apply to transactions with non-residents covered by the CFC rules;
• A one-off substitute tax is introduced on undistributed profits of subsidiaries benefitting from a privileged tax regime (i.e., profits that would not qualify for participation exemption), which may be claimed in the tax return for 2022 and applies at a rate of 9% on qualifying undistributed profits (30% for individuals), with a 3 percentage point reduction (6% rate) for parent companies, subject to the following conditions:
  • the profits are received (repatriated) by the payment deadline for the balance of income taxes due for the tax period following the one in progress on 31 December 2022; and
  • the profits received are set aside for a period of no less than two years in a specific equity reserve;
• New rules are introduced for the taxation of indirect transfers of immovable property (real estate) situated in Italy, providing that gains from the alienation of shares in non-resident companies or entities are taxable in Italy if, at any time during the 365-day period preceding the alienation, the shares directly or indirectly derived more than 50% of their value from immovable property situated in Italy, with an exemption for shares listed on a regulated market;
• A new temporary solidarity contribution (windfall profits tax) is established for the year 2023 on companies that produce, import, or sell electricity, natural gas, or petroleum products if the revenue from such activities in the prior year is at least 75% of total revenue, with the contribution rate equal to 50% on corporate income in 2022 to the extent exceeding 110% of the average income in the four years 2018 to 2021, with the tax to be paid with 6 months following the close of the year (30 June 2023 if following the calendar year);
• New rules are introduced for the taxation of cryptocurrencies, including that capital gains and other income realized on the sale of cryptocurrency are subject to tax if equal to or greater than EUR 2,000 in a tax period, with such capital gains allowed to be offset by capital losses from cryptocurrency and excess loss allowed to be carried forward up to four subsequent periods;
• The cash transactions cap is increased from EUR 1,000 to EUR 5,000.

The measures of the law generally entered into force on 1 January 2023.