Sister companies resident in Italy are now allowed to exercise
the group taxation option and act as the consolidating
According to the tax consolidation regime previously in force, a
non-resident taxable company (corporate income tax - IRES) was
allowed to exercise the group taxation option in its capacity as
parent company only if it had a stable organisation in Italy, whose
equity comprised the stakes held in each subsidiary company
(Article 117 (2), Consolidated Law on Income Tax – TUIR).
Article 6, Legislative Decree 147/2015 relating to national
consolidation has overcome this restriction, allowing
"sister" companies to exercise the group taxation option
and to act as the consolidating company. These sister companies can
be resident in Italy or stable organizations (the entities referred
to in Article 73 (1) d)) of companies resident in EU member states,
or in the states that provide an exchange of information according
to the Agreement on the European Economic Area (EEA).
This new so-called "horizontal" consolidation or
consolidation between sister companies (referred to in Article 117
(2-bis), TUIR) is granted on instructions by the non-resident
entity to the "designated" subsidiary to exercise the
group taxation, which in this way becomes the consolidating entity.
The designated subsidiary cannot consolidate companies that in turn
control it (Article 2359, Italian Civil Code, and Article 120,
This option on designation of the foreign entity can be
exercised using a proper form (to be filed electronically to the
Revenues Agency) and produces the following effects:
the designated subsidiary, in its
capacity as consolidating company, acquires all the rights,
obligations and duties set out in the laws on consolidation
(Article 117-127, TUIR) for the parent companies or entities
the control requirements must be
verified in regard to the non-resident parent entity
the effectiveness of the option is
subject to the condition that the non-resident parent entity
designates the resident subsidiary taking on, subordinately, the
responsibilities set out by the law (in particular, Article 127,
TUIR – for parent companies or entities).
If the tax consolidation regime ceases before the end of the
three-year period of effectiveness or is not renewed on expiry, the
tax losses indicated in the consolidation statement (Article 122,
TUIR) – when the allocation criterion has not been specified
– shall be allocated proportionally to the subsidiaries that
have generated them; net of the used ones, towards which the
control requirement ceases according to the consolidation
Moreover, if the control requirement towards the designated
subsidiary ceases on any ground, before the end of the three-year
period, the non-resident parent company may designate, among the
subsidiaries belonging to the same consolidation, another resident
subsidiary without interrupting the group taxation regime. The
newly designated subsidiary takes on the responsibilities set out
by the law for the parent companies or entities, relative to the
previous tax years during which the group taxation regime was in
force, jointly and severally with the designated company, towards
which the control requirement ceases to exist. For all the periods
of validity of the consolidation, the subsidiary responsibility of
the non-resident parent company remains.
All the provisions mentioned so far are applicable as from the
beginning of the relevant tax period as at 7 October 2015 (the date
that Legislative Decree 147/2015 came into force), or from 1
January 2015 for the companies whose tax year coincides with the
solar year. To this purpose, both the designation by the EU parent
company and the adhesion by the "sister" subsidiary
companies had to be done by 31 March 2016 or, for the tax years
ending after 1 January 2016, this option is to be indicated in the
Italian Tax Return 2017 (Modello Unico).
The provisions of the aforementioned decree have been adopted by
order of the Director of the Revenues Agency of 6 November
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.
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