The Italian government with the Decree n 1/2012 has recently amended the legislation regarding the so called "exit tax" for companies.

The new provisions do that into account a recent decision by the European Court of Justice (nr C-371/10 dated 29 November 2011)

Many countries - including Italy - do tax unrealized capital gains whenever a company resolves to transfer its legal seat to a different jurisdiction.

Broadly speaking, the purpose of such legislation is to safeguard a State right to tax. However, according to the view of European Court of Justice, the practice of taxing unrealized capital gains does cause a financial harm to those companies who resolve to migrate abroad if compared to those that instead do stay put in the country of incorporation; this circumstance has been deemed to contravene the provisions of the EU Treaty.

The European Court of Justice has therefore ruled that an exit tax shall be applicable only upon disposal of the company's assets.

The Decree nr 1/2012 now takes into account the above decision: companies that will move to a different State within the European Union or to a State within the European Economic Area (EEA) with whom Italy has entered a tax collection agreement, may apply for a deferral of the taxation of those unrealized capital gains until the actual disposal of the relating company's assets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.