What is IRAP?
IRAP (imposta regionale sulle attività produttive) is Italy’s regional tax on productive activities, set by Legislative Decree 446 of 1997. Companies and other organisations pay it on their net value of production, a base that differs from taxable profit. It is a cost for the business: unlike income tax, it is not withheld from employees’ pay.
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The standard rate is 3.9%, and each region can raise or lower it by up to 0.92 points. Higher rates apply to concession holders, banks and insurers, and public bodies. Two temporary increases also apply: 2 points for banks and insurers from 2026 to 2028, under the 2026 Budget Law, and 2 points in 2026 and 2027 for businesses mainly active in sectors listed in Decree-Law 21 of 2026.
How labour costs are treated
IRAP matters for hiring decisions because labour costs are not automatically deductible. The cost of employees on open-ended contracts is fully deductible for companies that calculate IRAP under the main rules, and 70% of the cost is deductible for some repeat seasonal workers. Other labour costs, such as fixed-term employees, are generally deductible only through specific, smaller deductions. So the same salary can cost more if the contract is fixed-term.
Filing and payment
The IRAP return is filed electronically by the end of the tenth month after the tax period, so for calendar-year companies the IRAP 2026 return, covering 2025, is due by 2 November 2026, as 31 October falls on a Saturday. The balance is generally due by the end of the sixth month after the period, or 30 days later with a 0.40% surcharge. Advance payments are also made during the year, with the F24 form.
IRAP and your Italian payroll
When TopSource runs your payroll in Italy, our payroll data give your accountant the labour cost figures needed for the IRAP return, split by contract type. The return itself is part of your company’s tax filings.
Frequently asked questions
What is the IRAP rate in Italy?
The standard rate is 3.9%. Regions can change it by up to 0.92 points, and some sectors pay more.
Is IRAP deducted from employees’ salaries?
No. It is a tax on the business, calculated on the net value of production.
Are salaries deductible for IRAP?
The cost of employees on open-ended contracts is fully deductible for companies under the main rules. Other labour costs generally have only limited deductions.
Related terms in Italy
- Comunicazione Obbligatoria (Italy)
- Libro Unico del Lavoro (Italy)
- Smart Working Agreement (Italy)
- ROL and Ex-Festività Permits (Italy)
- Patto di Non Concorrenza (Italy)
- Employee Categories (Italy)
- Mandatory Disability Hiring Quota (Italy)
- Cassa Integrazione (Italy)
- Decreto Flussi and Nulla Osta (Italy)
- Welfare Aziendale (Italy)
- F24 Payment Form (Italy)
- UniEmens (Italy)
- Certificazione Unica (Italy)
- Modello 770 (Italy)
- Busta Paga (Italy)
- Conguaglio Fiscale (Italy)
- Supplementary Pension Funds (Italy)
- Impatriate Tax Regime (Italy)
- Cuneo Fiscale (Italy)