The taxation of simple partnerships (S.s.s) in Italy is a topic that often raises questions, mainly because this type of company follows very different tax rules compared to corporations. Simple partnerships fall within the category of partnerships, but represent a special case within this group, both due to the absence of direct income tax and the central role attributed to partners from a tax perspective. If you're considering setting up a simple partnership, or if you already run one, you need to understand how this type of company is taxed, what the principle of transparency entails, how simple partnerships differ from limited liability businesses (S.r.l.s) and joint-stock companies (S.p.A.s), what tax obligations fall on the partners, and what the pros and cons of this legal form are.

This article analyses the taxation of simple partnerships to help you understand whether this structure is suitable for your business project. We'll focus specifically on the most common variants: agricultural, real estate and holding companies. We will examine how profits are taxed, what happens when shares are transferred, and why simple partnerships are unique in the Italian tax system.

What's in this article?

• How taxation works for simple partnerships
  
• The principle of tax transparency
  
• How does taxation differ between simple partnerships and S.r.l.s?
  
• What are the tax obligations of simple partnerships?
  
• Pros and cons of simple partnerships from a tax perspective
  
• How Stripe Tax can help
  

How taxation works for simple partnerships

The taxation of simple partnerships differs significantly from that of corporations. From a tax perspective, simple partnerships are not subject to Italian corporate income tax (IRES) and do not pay tax on the income they generate. This applies both to non-commercial simple partnerships and to many agricultural or real estate simple partnerships.

Simple partnerships determine income according to the rules applicable to the activity carried out but do not subject it directly to taxation. Instead, the income is attributed to the partners, who declare it in their tax returns. This mechanism forms the basis of the taxation of simple partnerships and explains why they are referred to as a "transparent" corporate form for tax purposes. From an operational point of view, the taxation of simple partnerships could concern:

• Property income: With particular reference to the taxation of rental income in real estate simple partnerships
  
• Agricultural income and land ownership income: In the case of agricultural simple partnerships, according to the relevant tax regime
  
• Miscellaneous income: In cases such as the sale of shares or certain assets
  

Taxation of dividends in simple partnerships

It's important to clarify the concept of taxation of dividends from simple partnerships. In this type of company, there are no dividends in the technical sense, as there are in S.r.l.s or S.p.A.s: this is because simple partnerships are not subject to corporate income tax and do not represent an independent tax entity.

The profits generated by a simple partnership are not taxed at the partnership level and are not taxed again upon distribution. Instead, the income is attributed directly to the partners for transparency purposes and is taxed only once, through personal income tax (IRPEF) applied to the personal tax position of each partner, regardless of whether the profits have actually been distributed or not.

This mechanism eliminates the double taxation typical of corporations, but also means that taxation is closely linked to the overall income level of the partners. Accordingly, simple partnerships might be tax-efficient in asset-related or family contexts, but less suitable when tax planning is required based on fixed corporate tax rates or the ability to retain and manage profits within the corporate structure over the medium to long term.

The principle of tax transparency

The cornerstone of simple partnerships and their taxation is the principle of tax transparency. Under this principle, the income generated by partnerships is not taxed at the corporate level, but is attributed directly to the partners in proportion to their respective equity investments.

A key element is that taxation occurs irrespective of the actual distribution of profits. Even if the simple partnerships decide to set aside income, each partner is still required to declare their share and pay taxes on it.

This mechanism also applies in specific contexts, such as the following:

• Taxation of partners in agricultural simple partnerships: Agricultural income is attributed directly to the partners

• Taxation of rental income in real estate simple partnerships: Rental income contributes to the personal income of partners

• Taxation of holding companies: The partnership is used for the management of noncommercial shareholdings

From a tax planning perspective, the principle of transparency can be an advantage or a disadvantage, depending on the total income level of the partners and their personal income tax rates.

How does taxation differ between simple partnerships and S.r.l.s?

Comparing the taxation of simple partnerships with that of S.r.l.s or other types of corporations, such as S.p.A.s, is important to understanding its scope.

In corporations, income is taxed in two stages:

• The business pays corporate income tax (IRES) on the income generated
  
• Shareholders pay tax on distributed dividends
  

This system creates a clear separation between the corporate entity and its individual members, in terms of assets and taxation alike.

By contrast, simple partnerships do not constitute independent entities for income tax purposes. The taxation of simple partnerships is based on the principle of transparency and is carried out as follows:

• Corporate income tax (IRES) does not apply
  
• No separate taxation is applied to dividends
  
• Income is allocated directly to shareholders for transparency purposes
  

This means that income is attributed directly to the partners, who declare it in their personal tax returns, regardless of whether they actually receive the profits. This results in a direct link between corporate income and personal taxation, which can have a significant impact on the overall tax rate applied.

Another significant difference concerns the predictability of the tax burden. In S.r.l.s and S.p.A.s, the IRES rate is fixed, whereas in simple partnerships, the tax burden varies depending on the income situation of the partners. This makes simple partnerships more flexible, but also less suitable for contexts where it is necessary to plan taxation accurately in the medium to long term.

What are the tax obligations of simple partnerships?

In the taxation of simple partnerships, the partners play a central role. Tax obligations do not fall on the partnership, but directly on its members.

Each member must:

• Declare their share of income attributed by the partnership

• Pay personal income tax (IRPEF) and regional and municipal surcharges

• Fulfill any contribution obligations, e.g. Italian National Social Security Institute (INPS) contributions, if the member carries out regular work within the partnership or is subject to a compulsory social security regime

Taxation on the sale of real estate or shareholdings

A particularly important aspect of taxation for simple partnerships concerns capital gains realised on the sale of real estate or shareholdings. Since simple partnerships are transparent for tax purposes, capital gains are also attributed directly to the partners, in proportion to their respective shares.

In the event of the sale of real estate owned by a simple partnership, any capital gain, i.e. the positive difference between the sale price and the property's tax value, contributes entirely to the partners' taxable income and is subject to IRPEF at the applicable rates. Similarly, in the event of the sale of shares in a simple partnership, the selling partner might realise a capital gain classified as other income, which is taxed according to the rules set forth in the TUIR (Italian Consolidated Income Tax Act).

This same mechanism also applies to the sale of shares in agricultural simple partnerships: the capital gain does not affect the agricultural tax regime of the partnership, but generates taxable income for the shareholder who carries out the sale, according to criteria similar to those applicable to other simple partnerships.

Agricultural simple partnership: Tax regime and distinctive features

Agricultural simple partnerships benefit from specific tax treatment, but only if the activity carried out actually falls within the limits of agriculture as defined by the Italian Civil Code. According to Article 2135 of the Italian Civil Code, agricultural activity is defined as that carried out by those who cultivate the land, practice forestry, raise animals, and perform related activities, provided that the latter are directly linked to the exploitation of the land, forests or animal resources. Essentially, the activity must be closely linked to agricultural production and cannot take on the characteristics of an independent commercial activity.

From a tax perspective, when these requirements are met, taxation of agricultural simple partnerships is not based on business income, but on land and agricultural income, as determined by the land registry. This makes the tax burden more stable and predictable, independent of actual revenue.

Under specific conditions, the exemption regime for simple partnerships in agriculture, governed by Article 34, Paragraph 6, of Presidential Decree 633/1972, could also apply. This regime applies to agricultural simple partnerships with an annual turnover not exceeding €7,000 derived mainly from agricultural activities and involves exemption from ordinary value-added tax (VAT) obligations, such as settlements and tax returns. The exemption regime significantly simplifies compliance, but also limits the possibility of deducting VAT on purchases.

Pros and cons of simple partnerships from a tax perspective

From a tax perspective, simple partnerships have very specific characteristics that can be advantageous or disadvantageous depending on the type of activity carried out and the personal circumstances of the partners. The following table summarises the main tax pros and cons, helping you to quickly assess whether this legal form is right for you.

Essentially, the taxation of simple partnerships can be highly efficient in specific contexts, such as agriculture or real estate management, but requires careful prior assessment. Tax transparency, which is the main advantage of this corporate form, is also the factor that amplifies its limitations when the personal income of the partners is already high or when more structured tax planning is required.

How Stripe Tax can help

Although the taxation of simple partnerships is based on the principle of transparency and does not provide for direct taxation of the partnership, general tax management can become more complex when simple partnerships operate within more complex structures, hold shares, manage assets used by operating companies, or interact with activities subject to VAT in Italy and abroad. In these cases, having tools that simplify indirect tax management and ensure regulatory compliance becomes important for reducing errors, risks and administrative burdens.

This is where Stripe Tax comes in, reducing the complexity of tax compliance so you can focus on growing your business. Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful API.

Stripe Tax helps you monitor your obligations and alerts you when you exceed a tax registration threshold based on your Stripe transactions. It can also register to collect tax on your behalf in the US and manage filings through trusted partners. Stripe Tax automatically calculates and collects sales tax, VAT and GST on:

• Digital goods and services in all US states and over 100 countries
  
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Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration, or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: If you need to register for a sales tax in the US, let Stripe manage your tax registrations. You'll benefit from a simplified process that prefills application details – saving you time and simplifying compliance with local regulations. If you need help registering outside of the US, Stripe partners with Taxually to help you register with local tax authorities.

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