New Rules on the Tax Treatment of Dividends, Capital Gains and Financial Transactions under the 2026 Italian Budget Law

1. Introduction

The 2026 Italian Budget Law introduces a series of important changes affecting the taxation of equity investments and financial transactions in Italy. These measures concern both the tax treatment of dividends and capital gains received by entrepreneurs, companies, and resident entities, as well as the financial transaction tax commonly referred to as the Tobin Tax.

The measures may be grouped into four main areas:
(i) the partial exemption regime for dividends received by resident taxpayers;
(ii) the participation exemption (PEX) regime applicable to capital gains;
(iii) the reduced withholding tax regime for dividends paid to EU and EEA non-resident entities; and
(iv) the financial transaction tax applicable to specific sales of financial instruments.

2. Restrictions on the Dividend Exemption Regime

Under the Italian tax system, dividends received by resident taxpayers acting as entrepreneurs benefit from a partial exclusion from taxable income, amounting to 95%. Traditionally, this regime applied regardless of the size of the participation held.

The 2026 Budget Law limits the application of this preferential treatment. The partial exemption now applies only to dividends derived from participations that satisfy at least one of the following thresholds:

• a direct or indirect participation (including through controlled companies) of no less than 5% of the share capital or voting rights; or
• a participation with a value or acquisition cost of at least EUR 500,000.

Where neither threshold is met, dividends are subject to the ordinary rules, thereby distinguishing between economically significant investments and smaller portfolio holdings.

3. Application of the Same Thresholds to Capital Gains under the PEX Regime

The same requirements apply to capital gains qualifying for the participation exemption (PEX) regime. Under existing rules, qualifying capital gains benefit from a partial exemption equal to 95% for IRES taxpayers.

Under the 2026 Budget Law, capital gains qualify for the PEX regime only if the participation disposed of:

• represents at least 5% of the share capital or voting rights, held directly or indirectly; or
• has a value of at least EUR 500,000.

This change is, therefore, particularly relevant for holding companies and investors engaged in transactions involving minority shareholdings.

4. Effects on Dividends Paid to EU and EEA Non-Resident Entities

The 2026 Budget Law also affects dividends distributed to non-resident entities. Dividends paid by Italian companies to companies or entities resident in EU Member States or in States adhering to the EEA Agreement benefit, under certain conditions, from a reduced withholding tax rate of 1.20%.

Access to this reduced rate is now subject to the same participation thresholds outlined above. The 1.20% withholding tax applies only if the non-resident recipient holds, directly or indirectly through controlled companies:

• a participation of at least 5%; or
• a participation with a value of at least EUR 500,000.

5. Direct and Indirect Participations

For the purposes of applying the new thresholds, the 2026 Budget Law expressly includes indirect participations, including those held through controlled companies. This reflects a substance-based approach aimed at preventing the artificial fragmentation of shareholdings through intermediary entities.

In complex corporate structures, issues may arise regarding the definition of control and the aggregation of participations. Further administrative clarification may therefore be required to ensure consistent application.

6. Scope of Application

The provisions relating to dividends apply to distributions of profits, including distributions of annual profits, reserves, and other equity funds, resolved from 1 January 2026 onward. The decisive element is the date of the shareholders’ resolution approving the distribution.

Capital gains realized after the entry into force of the new rules are subject to the revised participation thresholds regardless of the date of acquisition of the participation.

7. Changes to the Italian Tobin Tax

The 2026 Budget Law doubles the proportional rates of the Italian financial transaction tax (Tobin Tax) provided for under Article 1, paragraphs 491–495 of Law No. 228/2012.

It is important to recall that the Tobin Tax applies to the following transactions:

• transfers of ownership of shares and participating financial instruments issued by resident companies;
• transactions involving derivative contracts and securities whose underlying assets are such shares;
• high-frequency trading transactions.

The changes concern the proportional tax rates applicable to transfers of shares and to high-frequency trading. In particular:

• for transfers of shares and participating financial instruments carried out on non-regulated markets, the rate increases from 0.2% to 0.4%;
• for transfers carried out on regulated markets, the rate increases from 0.1% to 0.2%;
• for high-frequency trading transactions, the rate increases from 0.02% to 0.04%.

The increased rates apply to transfers and transactions carried out from 1 January 2026 onward.

The 2026 Budget law did not have any impact on the derivative contracts.

According to official estimates, this increase in taxation is expected to generate a significant rise in State revenues over the next three years.

It should be recalled that the Tobin Tax does not apply to shares traded on regulated markets or multilateral trading facilities that are issued by companies, which are identified annually by Consob, whose average market capitalization in November of the preceding year is below EUR 500 million.

Moreover, the tax does not apply where the transfer of ownership occurs by way of inheritance or donation.