Costs with their own limit: entertainment, meals and hotels, phones, maintenance and interest expense

An SRL with 2,000,000 € of revenue spends 45,000 euros on client events and upmarket gifts. In the accounts it is all cost; in the tax return, entertainment is deductible only up to 1.5% of revenue, that is 30,000 euros. At the 24% IRES rate, the 15,000 euros above that cost the company 3,600 euros of extra tax.

Entertainment: an allowance tied to revenue

Article 108, paragraph 2, allows entertainment expenses in the year they are incurred, provided they meet the relevance requirements set by decree of the Minister of Economy, including by reference to their nature and purpose. The deductible amount is then measured against the core-business revenue and income reported in the return for the same year.

The allowance works in bands: 1.5 percent of revenue up to 10 million euros, 0.6 percent on the portion between 10 and 50 million, and 0.4 percent on the portion above 50 million. Spending within the allowance is fully deductible; anything above it is added back to profit.

Spending on goods given away free with a unit value of no more than 50 euros is deductible in any case: branded pens or the company calendar stay outside the allowance calculation. Every expense under this paragraph, however, is deductible only if paid by bank or postal transfer, or by the other traceable methods the law provides.

Telling entertainment apart from advertising has a real effect, because this paragraph's allowance only concerns the former. Paragraph 4-bis lets the business ask the tax authority, through a formal ruling request, whether a given expense counts as advertising and promotion or as entertainment, before deducting it.

The allowance is based on revenue reported for the same year, so it is only known for certain once the year closes. During the year it is sensible to estimate it from expected revenue and keep a separate account for entertainment, so the excess does not come as a surprise at filing time, when the money has already been spent.

Meals and hotels: 75 percent

The last sentence of paragraph 5 of article 109 makes hotel stays and food and drink deductible at 75 percent. Costs covered by article 95, paragraph 3, which deals with employees' business trips, are excluded from the cut: those follow the rules that apply to employment.

Paragraph 5-bis adds a condition for spending within Italy. Meals, accommodation, taxi and chauffeur-driven hire journeys, and itemised reimbursements of the same costs, are deductible only if paid by bank or postal transfer or another traceable method. Paragraph 5-ter extends the rule to such costs for assignments given to self-employed workers.

The taxi in the example is not subject to the 75 percent cut, which only covers hotels, food and drink: paid by card it would have been deductible in full. The traceability required by paragraph 5-bis applies to spending within Italy; abroad, the 75 percent rule on meals and hotels still applies.

For self-employed professionals the rules are different and tighter. Article 54-septies allows meals and hotels at 75 percent but within 2 percent of the fees received in the year, and entertainment up to 1 percent of fees, always with traceable payment. The percentage of fees replaces the revenue bands used for businesses.

Phones: 80 percent

Article 102, paragraph 9, allows at 80 percent the depreciation, lease or rental payments and running and maintenance costs of terminal equipment for publicly available electronic communication services. This covers phones, smartphones and their subscriptions.

The percentage rises to 100 percent for phone systems in vehicles used to carry goods by road haulage companies, limited to one system per vehicle. A 500 euro smartphone falls within the assets up to 516.46 euros and is deducted in the year, but at 80 percent: 400 euros.

Maintenance: 5 percent of depreciable assets

Paragraph 6 of article 102 limits maintenance, repair, modernisation and conversion costs that the accounts have not added to the cost of the assets concerned. They are deductible up to 5 percent of the total cost of all depreciable tangible assets, as shown in the fixed-asset register at the start of the year.

The excess is not lost: it is deducted in equal instalments over the next five years. For newly formed businesses, in the first year the 5 percent is calculated on the cost of assets at the end of the year. Regular fees paid to third parties under maintenance contracts remain deductible on an accruals basis and outside the calculation.

Interest expense: the 30 percent of ROL limit

Article 96 deducts interest expense in two steps. First it is offset against the year's interest income and any interest income carried forward. The excess is then deductible up to 30 percent of gross operating profit from core business, known as ROL, for the year plus any ROL carried forward.

Interest left undeducted is not lost: it is deducted in later years, when 30 percent of those years' ROL, together with interest income, leaves room. Unused ROL for a year, on the other hand, can be carried forward to increase ROL in the following five years.

Surplus interest income also has a memory: if in a year it exceeds interest expense, including amounts carried forward, the surplus moves to later years. For businesses working with public bodies, statutory late-payment interest calculated under Legislative Decree 231 of 2002 also counts as interest income.

The overall picture

The table is a reminder that each limit applies after the general principles of the first module, not instead of them. A dinner with no business purpose does not become 75 percent deductible: it stays fully non-deductible. And maintenance relating to 2027 does not enter the 2026 limit, whatever the invoice date.

Keeping track of deferred amounts

Two of these cost families create claims on the future: maintenance above 5 percent and interest above the ROL limit. A yearly schedule listing these excesses, with their year of origin and the portions already recovered, stops them from being forgotten when the adviser or the accounting software changes.

• Maintenance excess: amount, year of origin, fifths already deducted
• Undeducted interest expense: remaining amount to carry forward
• Unused ROL: amount and year, because it expires after five years
• Surplus interest income: amount that can be carried to later years