Italy Tax Agency Clarifies Deductibility of Labor Costs for Personnel Employed Abroad

The Italian Revenue Agency April 1 issued Letter No. 95/2026, clarifying deductions from the regional tax on productive activities (IRAP) for the cost of personnel hired in Italy and working abroad. The taxpayer, an Italian company, hired personnel under permanent contracts in Italy who were classified there for labor law and social security contribution purposes. The personnel performed activities abroad without a permanent establishment (PE) abroad. The taxpayer sought clarification on whether these labor costs were deductible from IRAP. Upon review, the Tax Agency clarified that: 1) the taxpayer would determine the IRAP base under the ordinary rules in Legislative ...