By 2025, Italy has signed more than 100 double taxation treaties (Convenzioni contro le doppie imposizioni), the most in the EU, allowing residents to have powerful legal tools at their disposal to maximize overseas investment and minimize tax exposure. Properly constructed, an EU holding company (società holding) controlled by an Italian resident can reduce the effective rate of tax on investment profits to as little as 1.2%.

While most European entrepreneurs are liable to corporate tax rates (aliquote fiscali) of 20–30% on profits arising from their enterprises, Italian citizens are employing increasingly sophisticated holding company structures to retain up to 95% of their profits. 

Thus, thousands of Italian investors and entrepreneurs are already using this model to administer property developments in Portugal, stakes in Amsterdam technology start-ups, etc., with favorable tax treatment and total conformity with Italian tax law (normativa fiscale italiana) and EU directives.

How the Participation Exemption Works?

The foundation of this strategy is Italy’s Participation Exemption Regime (Regime della Participation Exemption, or PEX), which is designed to prevent economic double taxation and encourage long-term investment. Within the regime, 95% of capital gains and dividend income derived from qualifying shareholdings are excluded from the corporate income tax base (base imponibile dell’IRES).

To qualify, the investment must meet three conditions:

• The shareholding (partecipazione) must be held for at least 12 consecutive months.
• It should be entered as a fixed financial asset (immobilizzazione finanziaria) in the books of the company.
• The subsidiary should carry on substantial business activity (attività commerciale effettiva) and should not be in a blacklisted country (Paese a fiscalità privilegiata).

Once these obligations are met, only 5% of the profits are taxed at corporate level (IRES: Imposta sul Reddito delle Società) with not more than an effective rate of less than 2%. Few EU jurisdictions offer such favorable treatment.

Control and Asset Protection

Aside from tax advantages, the Italian holding company format offers strategic advantages for control (controllo societario) and asset protection (protezione patrimoniale). From Italy, one can group ownership and management of EU-based subsidiaries (società controllate), own foreign property, and operate under a centralized corporate entity.

At the same time, the company helps to isolate personal wealth (patrimonio personale) from business obligations, reducing exposure to the law. For investors, high-net-worth individuals, and businesspeople, the holding company provides a protected and money-saving way of owning diversified investments.

How to Set Up the Structure

The most commonly used legal entity for this structure is the Limited Liability Company (Società a Responsabilità Limitata, or SRL). It can be formed with a minimum share capital of just €1 and provides you full flexibility for equity management.

To set up an SRL you are to:

• draft articles of association (atto costitutivo e statuto) that define the company’s purpose as a holding entity.
• register your company with the Italian Business Register (Registro delle Imprese).
• appoint directors or managers (amministratori) in line with Italian corporate law (diritto societario italiano).
• maintaining both personal and corporate tax residence (residenza fiscale personale e societaria) in Italy.

While you set up this structure, this tax residency allows full access to Italy’s double taxation treaties (convenzioni contro la doppia imposizione), which protect against withholding taxes and double taxation when earning foreign income. You can find and use an income tax calculator to estimate your tax obligations under this residency status.

Compliance and Ongoing Management Requirements

Once established, the holding company must meet ongoing compliance obligations. These include filing annual tax returns (dichiarazioni fiscali annuali), maintaining accurate documentation of investment classifications, and tracking holding periods (periodi di possesso).

It is also essential to prove that the subsidiaries conduct real economic activity (attività economica reale) and meet the conditions set by the Parent-Subsidiary Directive (Direttiva Madre-Figlia) and the Interest and Royalties Directive(Direttiva Interessi e Canoni), which eliminate or reduce withholding taxes (ritenute alla fonte) on cross-border payments.

While audits (revisioni contabili) are not mandatory for pure holding companies, Italian tax authorities expect reliable documentation to support any exemption claims under the PEX regime.

Is This Strategy Right for You?

It depends what you want. This structure is ideal for Italian residents with cross-border investments, particularly those with business interests in multiple EU countries or those planning expansion across the European market. It supports centralized control, limits liability, and optimizes tax outcomes legally and transparently.

However, success depends on thoughtful planning, accurate recordkeeping, and adherence to both Italian and EU regulatory standards. Collaborating with professionals experienced in international tax planning (pianificazione fiscale internazionale) is key to long-term efficiency.

Creating a holding company in the EU while residing in Italy is not just a tax-saving tactic it is a modern, compliant way to manage and protect international wealth. By combining Italy’s participation exemption, treaty network, and EU tax directives, residents can legally reduce their tax liability, simplify business operations, and safeguard assets across Europe.

With the right legal structure and professional guidance, this approach offers Italian residents a powerful platform for building, growing, and preserving global wealth fully aligned with both domestic and European law.

Would you like to read more about similar topics? Then, take a look at our related articles here; Establishment of tax residence: investigative activities, Tax incentives for investor in Italy and Relocate Your UK Company to Italy: A Comprehensive 2025 Guide.