On 1 August 2009 Italian Law-Decree No. 78 (Decree) was converted into law, having come into effect on 1 July 2009. On the same day, the Italian Government introduced amending provisions (Amending Decree) which addressed certain issues concerning the new Italian Tax Amnesty Plan (which itself amended the Decree on 15 July 2009).

1. Introduction

On 1 August 2009 Italian Law-Decree No. 78 (Decree) was converted into law, having come into effect on 1 July 2009. On the same day, the Italian Government introduced amending provisions (Amending Decree) which addressed certain issues concerning the new Italian Tax Amnesty Plan (which itself amended the Decree on 15 July 2009).

This paper follows earlier reviews of the Decree, published on July 2, 2009 and July 23, 2009. To view these publications, please see the McDermott website at:

New Italian Tax Measures Impact Operations of Multinational Companies

Proposed Tax Amnesty Plan Presented to Italian House of Representatives

Decree dispositions which have been converted to law have final definitive wording. However, the same is not true with regards to the provisions of the Amending Decree, which are still subject to potential alterations prior to conversion into law by the Parliament.

Despite the potential for the Amending Decree to be changed upon conversion, a few comments on the following subjects are provided below:

  • Tax breaks granted to new investments (so-called “Tremonti-ter” rules)
  • Tax breaks granted in connection with capital increases
  • Review and extension of the CFC (“Controlled Foreign Companies”) rules
  • Hardening of penalties imposed in connection with the undisclosed holding of assets abroad

2. Tax Breaks Granted to New Investments (so-called “Tremonti-ter” Rules, Article 5 of the Decree)

These rules concern the allowed deduction of 50 per cent of the amount invested in certain categories of machinery and equipments from the taxable base for corporate income tax purposes. Such deduction is allowed for investments made as from 1 July 2009 up to 30 June 2010.

Upon the conversion of the Decree, eligibility to the benefit was made dependent upon the brand new quality of the relevant machinery and equipment. Former similar tax breaks (launched in 1994 and 2001 and respectively called “Tremonti” and “Tremonti-bis”) already contained such a requisite. We can infer from a previous Resolution issued by the Italian Revenue Agency (No. 90/E, dated 17 October 2001) that goods that have already been used previously are out of the scope of the relevant tax break.

Upon conversion of the Decree the benefit was extended and can now be enjoyed for the 2009 fiscal year rather than only in 2010, meaning that the taxpayer can benefit from the tax break for investments made in 2009 when assessing the amount due for 2009 income tax. With regards to investments made between 1 January 2010 and 30 June 2010, the benefit shall be enjoyed upon assessing the taxable income for the year 2010.

Where the relevant goods are subsequently transferred to a third party or used for purposes other than those pertinent to the regular business within the second fiscal period subsequent to the one in which the goods were purchased, the benefit is then recaptured. Upon conversion of the Decree, a new case of recapture was introduced, i.e. when the goods are transferred to a company that has a permanent establishment in a jurisdiction that is not part of the European Economic Space (EES). The way in which the rule was drafted provides some uncertainties in that it does not seem to give relevance to the destination of the goods to such permanent establishment. It is not clear, for example, if the recapture also applies when the potential benefiter of the tax break is an Italian resident and actually uses the relevant goods in Italy, while it also has a permanent establishment out of the EES.

3.Tax Breaks Granted in Connection with Capital Increases (Article 5 of the Decree)

Upon conversion of the Decree, a new tax break measure was introduced, concerning capital increases made by companies or partnerships within the six months period following the date in which the converting law comes into force. In particular, a deduction from the taxable income is allowed equal to a figurative yield of three per cent of new capital increases (capped to EUR 500,000). In order to be eligible for the tax break, such capital increase has to be made by an individual in cash or in kind, pursuant to the applicable rules of the Italian Civil Code. The benefit will be available in the fiscal year in which the capital increase is effectively made and in the four subsequent fiscal years.

4. Review and Extension of the Controlled Foreign Companies (CFC) Rules (Article 13 of the Decree)

The converting law has introduced very few changes with respect to the CFC rules and even these few changes do not represent any material changes, rather they tackle only formal aspects of wording.

The Decree does not provide for any particular provision regarding the fiscal year in which the new CFC provisions will become effective. The wording of Article 26 of the Decree remains unchanged (providing, consistently with the general rule, that the Decree enters into force on the same day of its publication on the Official Gazette, which was 1 July 2009). In light of the foregoing, the general rule provided for by Article 3 of the Taxpayer Statute should be applicable and, therefore, the relevant changes should be applicable starting from the fiscal year subsequent to the one in which the relevant law comes into force (i.e., starting from 2010 for taxpayers whose fiscal year coincides with the calendar year). However, there are rumours that the Italian Revenue Agency might consider adopting a different – rather questionable – approach according to which the relevant changes would be considered effective starting from fiscal year 2009.

5. Hardening of Penalties Imposed in Connection with the Undisclosed Holding of Assets Abroad (Articles 12 and 13-bis of the Decree and Article 1 of the Amending Decree)

No changes have been introduced concerning the dispositions that provide that assets held in black list jurisdictions in breach of the legal disclosure requirements (that must be complied with by individuals, non-commercial entities and partnerships) are deemed to be income deriving from tax evasion (unless the taxpayers proves the contrary). With regards to doubling the ordinary applicable penalties for omitted or unfaithful tax returns, those dispositions also remain the same.

Regarding the tax amnesty plan dispositions, Article 1 of the Amending Decree has established that the disposition that provided that the assets repatriated or regularised could not be used against the taxpayer does not apply in the context of pending proceedings as at the date of the conversion into law of the Decree (i.e., 1 August 2009). Given the broad wording of the law, it can be argued that the relevant provision is applicable with regard to proceedings of all natures (civil, criminal and tax). However, one must bear in mind that this provision is subject to further changes upon its conversion into law.