San Marino's General Income Tax reform applies from the 2026 tax period. It was widely discussed last November, when it was approved; far less so now, which is when it actually bites. We are halfway through the first year of application, the tax return is due on 31 July and the first advance payment on 31 August.
This note is not a summary of the law. It tries to answer a narrower question: what is worth looking at now, before the year closes, if you run a San Marino company.
For tax periods from 2026 to 2030 the proportional IGR rate is set at 18% instead of 17%. The provision is expressly extraordinary and transitional, and the additional revenue is earmarked by law for infrastructure investment and public debt reduction, through dedicated budget lines.
One detail worth knowing: anyone reading the main body of the law still finds 17%. The 18% comes solely from the transitional provision at the end of the statute. This is not a lawyer's curiosity — it is exactly the kind of oversight that leads to a valuation model built on the wrong rate.
One extra percentage point, across five years, matters when assessing multi-year transactions: an acquisition, a depreciation plan, a planned exit. But the provision has a written expiry date, and anyone building long projections today should model two regimes, not one.
On advance payments the reform changes a single word, and it is easy to conclude there is nothing to see. That would be the most expensive mistake in this note.
The mechanism is the one in force since 2018: two advance payments, 35% and 55%, calculated on the tax due for the previous year net of any credits for taxes paid abroad on business and self-employment income, and not owed if the business is suspended or ceased before the due date. The only change is the date of the first instalment, which moves from 31 July to 31 August.
The point is that the mechanism has not changed: what has changed is what sits underneath it. The advance payments made in 2026 are anchored to 2025, a year computed at 17% and under the previous rules. The current year, however, runs on the new regime at 18%. If the company is growing, or if the new rules widen its taxable base, the balance emerging in 2027 will be heavier than the advance payments suggest — and nobody will notice beforehand, because the advance payment calculation gives no signal.
This is not a tax problem, it is a cash problem, and the only way to solve it is to see it coming. The sensible thing to do now is straightforward: recompute expected 2026 tax under the new rules, compare it with what is being paid in advance, and set the difference aside.
The opposite case is less common but real: a company with an exceptionally strong 2025 and a contracting 2026 is currently overpaying.
Up to the 2025 tax period, a documented loss was deductible up to 80% of taxable income, but only in the three following tax periods: beyond that it lapsed. The rule had been stable for nearly twenty years.
From 2026 the trade-off is reversed. A loss may be carried forward with no time limit, but only up to 70% of taxable business income in each subsequent period. For sole traders the limit is computed on business income net of compulsory social security contributions; for companies the wording is the same without that qualification.
Ten percentage points less each year, in exchange for a horizon that does not end. For a company returning quickly to profit it is a deterioration; for one that has been through difficult years and recovers slowly it is a material improvement — previously, older losses simply evaporated.
Two points that matter. The base is not total income but business income: for an individual with income in several categories the difference is substantial. And 70% is a per-year cap: in each period at least 30% of business income remains taxable. Losses no longer wipe out the tax, they spread it out.
There is also a consequence for buyers and sellers. In a share deal, a stock of losses carried forward indefinitely is worth something different from a stock due to lapse within three years: it is a line item to be repriced, and in a tax due diligence it is among the first we look at.
For the acquisition of business-use real estate under a finance lease, deduction of the lease payments is allowed over a period of no less than twelve years, raised to fifteen for real estate companies, regardless of the actual term of the contract. For other business assets acquired under a lease the minimum period is three years.
The detail to read carefully: the new rules apply to contracts entered into from 1 January 2026 — with the exception of real estate companies, for which they also apply to contracts already in place. If the company is a real estate company with leases running, the deduction schedule must be redone for the current year, not the next one.
In the same area, the depreciation rate for buildings is now set at 2%, and at 1.5% for real estate companies.
Costs and other negative components relating to cars and motorcycles are fully deductible in four cases: vehicles for public use, vehicles used directly as business assets, vehicles used by commercial agents or representatives, and vehicles assigned for mixed use to employees under the fringe benefit rules. In all other cases deductibility is 60%.
Then there is the cap, and this is the counterintuitive part. No account is taken of the portion of acquisition cost — including under a finance lease, ancillary charges included — exceeding EUR 50,000 for cars and EUR 10,000 for motorcycles, for each individual asset; rental costs are apportioned on an annual basis. But the cap does not apply to vehicles for public use or to those used directly as business assets.
Which means: the commercial agent's car and the one assigned for mixed use to an employee remain 100% deductible, but within the cap. Full deductibility and the cap coexist, and they are two different things. It is the easiest misreading to make on this provision.
For business income of individuals an explicit principle has been introduced: income components arising from transactions with related parties are valued at the normal value of the goods transferred, services rendered and goods and services received, where this results in an increase in income. The same provision applies, by express cross-reference, to self-employment income.
A downward adjustment, by contrast, is recognised in only two situations: pursuant to agreements concluded with the competent authorities of foreign States under the mutual agreement procedures provided for in double taxation conventions, or upon application by the taxpayer following a final upward adjustment consistent with the arm's length principle made by a State with which a convention allowing adequate exchange of information is in force. For this second situation, implementing rules are left to a circular of the Tax Office.
To be precise: the provision sits within the rules on business income of individuals and has, as things stand, no equivalent provision in the rules on income of legal persons. It nonetheless signals a direction that anyone operating with affiliated companies would do well to read, because the asymmetry is clear — the adjustment that increases income operates, the one that decreases it is conditional. The practical consequence is not fiscal but documentary: intra-group pricing is justified when the transaction happens, not two years later in front of an audit.
Financial investigations are carried out automatically where a taxpayer reports, over the last three tax periods, average annual income equal to or below EUR 15,000. The provision applies from the 2026 tax period, but the first three-year reference window is 2024-2025-2026.
It is worth rereading: two of the three years are already closed, and the trigger is not discretionary. For 2026 there is still time to review one's position.
Along the same lines, by 31 December 2026 the Tax Office must equip itself with tools and software cross-referencing information from tax, financial, asset and administrative databases, including through data analysis algorithms.
For new economic activities the 50% rate reduction for the first five tax periods remains, with added flexibility: its start can be postponed, by no more than one tax period after the year in which the activity begins. This is useful for anyone who knows the first months will be loss-making and does not want to burn a year of relief. The benefit applies on election by the beneficiary.
The sensitive part, however, lies in the conditions. The benefits are available to companies whose shareholders and beneficial owners have not carried on, in the twelve months preceding the application, business activity comparable to the one for which relief is sought, provided the company is newly incorporated and at least one full-time employee is hired — the director may count, even if not registered on the employment lists — within six months of the operating authorisation being issued, plus a further employee within twenty-four months.
And above all: maintaining the conditions in respect of shareholders and beneficial owners in the event of a transfer of shares, and complying with the employment requirement, are an indispensable condition for retaining the benefits. Anyone planning a new company on the strength of this relief must check that the condition holds over time, not only at the outset. A share transfer made without regard to this provision can cost the relief.
Two concrete simplifications: accounting books, registers and ancillary records no longer need to be stamped; and those keeping accounts on computerised systems must, by 30 September of the year following the close of the financial year, update the paper books or, alternatively, retain and archive them digitally, in accordance with the guidance the Tax Office will issue by circular.
The dates:
The law expressly provides that within two years of its entry into force, after consultation with the Standing Commission for the monitoring of taxation, its provisions may be amended by delegated decrees — not only for corrections and technical harmonisation, but also for further amendments updating the rules. It also mandates the Congress of State to coordinate, repeal and amend existing legislation in other sectors.
It is a broad delegation, and worth knowing about: on several points administrative practice is still forming. Anyone taking structural decisions in these months would do well to build them so that they hold up to a regulatory adjustment.
United Consulting has operated in the Republic of San Marino since 1994. We assist San Marino companies and Italian groups with a presence in the territory on tax planning, corporate reorganisation and extraordinary transactions, working with professionals enrolled in their respective professional registers, selected mandate by mandate.
Our role remains independent: we coordinate, oversee the quality of execution and answer to the client through a single point of contact.
If you are assessing the impact of the reform on your structure, a confidential conversation commits you to nothing.
Get in touchThis information is provided for general guidance and is current as at July 2026; it does not replace professional advice on a specific case.
