A RECENTLY ENACTED LAW  ENABLES NON-LISTED ITALIAN COMPANIES TO ISSUE CORPORATE BONDS WITH NO TAX CONSTRAINTS PURSUANT TO RECENT LAW CHANGES

In the past Italian non-listed companies could not  issue corporate bonds due to certain tax limitations regarding (i) withholding taxes on the  interest paid in respect of the bonds; and (ii) deduction of interest accrued on the bonds for corporate income tax purposes.

For such reasons Italian private companies generally relied on traditional lending by Italian banks. Throughout the course of  2012 the credit crunch crisis led the Italian Government to reform the legal and tax framework regarding corporate bonds issued by non-listed companies.

As a consequence of this reform  certain Italian non-listed companies have already issued or are in the process of issuing corporate bonds.

As amended, the law now provides that  if an Italian non-listed company issues a corporate bond that is listed on a regulated market or on a multilateral trading facility then (a) the Italian issuer will be allowed to deduct interest accrued and other proceeds matured  on the bond in accordance with ordinary Italian income tax provisions; and (b) payments of interest and other proceeds in connection with the bond will be made without applying a Italian withholding tax provided that the beneficial owner of such payments is resident in a “white list country” i.e., a country which allows an adequate exchange of information with the Italian tax Authorities.

Moreover, in addition the new regulation provides for (1) interesting tax deductions in respect of subordinated bonds subject to certain requirements and conditions; and (2) a special regime for short-term commercial papers i.e., bonds with a maturity dates ranging from one month to a maximum of 36 months.