The withholding on invoices between businesses is measured against corporate income tax, not against turnover
6 November 2026, 08:13
Article 35 of the 2027 budget bill, now before Parliament, doubles a withholding on invoices between businesses that the 2026 budget law has already introduced and that will start in 2028. The text is not yet final.
This is how it works. A business that pays an invoice from another Italian company does not pay it in full: it holds back a small part and passes it to the Treasury with the F24 payment form, in the supplier's name. It is the same mechanism as the withholding tax applied to professionals' fees, but with much lower rates: 1% of the taxable amount in 2028 and 2% from 2029, if the doubling goes through, instead of half a point and one point.
On an invoice of €10,000 plus €2,200 of VAT, from 2029 the customer will pay the supplier €12,000 instead of €12,200 and will pay the difference, €200, to the Treasury.
The withholding concerns all businesses, from companies to sole proprietorships, whether they keep ordinary or simplified accounts, and it affects them in two ways: they suffer it on the invoices they collect and apply it on those they pay. Excluded are taxpayers under the flat-rate scheme (regime forfettario), those who have joined the two-year preventive agreement (concordato preventivo biennale), the arrangement under which the tax authorities propose in advance the income to be taxed for two years, those in cooperative compliance (adempimento collaborativo), the regime of continuous dialogue with the tax administration reserved for large groups, and the fees of professionals and agents, which already have their own withholdings. The detailed rules will be set by a measure of the Italian Revenue Agency, not yet issued.
For anyone who sells to other businesses, the question is how much cash this withholding will take from them, and the answer does not depend only on how much they invoice.
A withholding brings the tax forward; it does not add another one
A withholding tax on account is a part of the income tax that the supplier would have to pay anyway, paid in advance by whoever pays the supplier. In the tax return the supplier deducts it from the tax due; for a limited company that tax is IRES, Italy's corporate income tax, equal to 24% of taxable income. For a sole proprietorship it is IRPEF, personal income tax, and the calculation works the same way with its rates. As long as the amounts withheld in a financial year stay below the IRES for that same year, the company does not pay a single euro more: part of the tax leaves earlier, with every payment, instead of on the dates of the advance and balance payments, and the weight on cash lies entirely in the timing.
The calculation, however, starts from two different bases. The withholding applies to sales, IRES to taxable profits, and the two amounts are equal only when taxable income is high enough relative to what is sold. With the withholding at 2%, the threshold is found by dividing 2 by 24: taxable income must be worth at least 8.3% of sales made to Italian businesses, while in 2028 4.2% is enough. Below those thresholds the amounts withheld exceed the tax, and the difference becomes a credit towards the Treasury that forms again every year.
Those who sell a lot and earn a few points build up a credit
The most exposed companies are those that sell almost everything to other Italian firms and keep a few points of income on every euro sold: wholesale distribution, mechanical subcontracting, haulage. Exports and sales to private individuals are not subject to the withholding and do not enter the calculation. The two-year preventive agreement, which exempts from the withholding, is open only to those declaring revenue of up to €5,164,569: a larger company does not have this route.
If taxable income is worth 3% of sales made to Italian businesses, with the rate at 2% the amounts withheld are almost three times the IRES for the same financial year: just under two thirds of what customers hold back stays with the Treasury as a credit, and the following year another of the same size builds up.
The credit is recovered through offsetting, within precise rules
The credit can be claimed as a refund or used in the F24 payment form to pay other taxes and payments to INPS (Italian social security), including, from 2028, the amounts the company itself withholds on its own suppliers' invoices. Above €5,000 a year, however, offsetting requires a certificate of compliance (visto di conformità) on the tax return, that is, the check signed by an accountant or another qualified professional, and it can start only from the tenth day after the return is filed.
What to prepare before 2028
The first calculation is done by the administration department: taxable income from the latest tax return divided by sales to Italian businesses in the same year, which the management software extracts from the electronic invoices issued to those customers. If the ratio is below 4.2%, the credit arises as early as 2028; if it is between 4.2 and 8.3, it appears the following year. In the cash forecast used in controlling, every receipt from an Italian customer will arrive, from 2028, with 1% of the taxable amount missing and, from 2029, with 2% missing: that portion is recovered by paying less IRES and, for the part that exceeds the tax, only through later offsetting.
Two things need to be set up in the software. On the customer side, the receipt is recorded together with the withholding; otherwise the invoice stays open for 1% or 2%, and the administration department sends a reminder to someone who has paid in full. On the supplier side, the software must calculate the withholding at the moment of payment and prepare the payment to the Treasury. Finally, with the accountant, it is decided who will issue the certificate, which payments to cover with the credit, month by month, and whether to reduce the 2028 IRES advance payments, which are normally calculated on the 2027 tax, when there was no withholding.
How much the withholding will weigh, then, cannot be read in the total of the invoices issued to other businesses: it is settled by how much income remains on every euro of those sales.
This article was prompted by a news item published in Informazione Fiscale on 2 November 2026.