Italy: Tax News for 2017

With the new year, a set of tax measures for corporate taxpayers, mainly enacted with the budget law for 2017, which was approved by the Italian Parliament on December 7, 2016 (the "2017 Budget Law"), become effective in Italy. Apart from revenue goals, the measures are also aimed at rendering Italy more attractive for foreign investments, supporting domestic investments by Italian companies, and promoting economic growth in general.

Corporate Income Tax Rate Reduction and Surtax for Certain Financial Institutions

As of 2017 tax year, the Italian corporate income tax ("CIT") standard rate is reduced from 27.5 percent to 24 percent. Banks, parent companies of banking groups, individual asset management companies, financial intermediaries, electronic money institutions, payment institutions, and financial companies are, however, subject to a 3.5 percent surtax, so that the effective CIT rate for such entities will remain 27.5 percent. The surtax does not apply to insurance companies and parent companies of insurance groups and to management companies of undertakings of collective investments (e.g., investment funds).

As a consequence of the CIT rate reduction:

(i) The withholding tax rate applicable to outbound dividends paid by Italian companies to European Union ("EU") or European Economic Area ("EEA") corporate shareholders resident in countries that allows an effective exchange of information with Italy, included in the so-called White List, is reduced from 1.375 percent to 1.2 percent; and

(ii) A ministerial decree will proportionally redetermine the taxable portion of dividends and capital gains on substantial shareholdings realized by private taxpayers and by sole proprietors (currently at 49.72 percent).

Repeal of Limitation on Deduction of Interest Payable by Banks and other Financial Institutions

As a rule, banks, parent companies of banking groups, asset management companies, financial intermediaries, electronic money institutions, payment institutions, financial companies, insurance companies, and parent companies of insurance groups are not subject to the 30 percent earnings before interest, tax, depreciation, and amortization ("EBITDA") limitation on deduction of interest payable that generally applies to corporate taxpayers for CIT purposes. However, until 2016, they encountered a cap on deduction of interest payable equal to 96 percent of the amount of the interest payable incurred in the tax year. This limitation applied for both CIT and regional tax on value of production ("IRAP") purposes.

As of 2017, banks, parent companies of banking groups, individual asset management companies, financial intermediaries, electronic money institutions, payment institutions, and financial companies are no longer subject to the 96 percent cap, while such cap continues to apply to insurance companies and parent companies of insurance groups, and to management companies of undertakings of collective investments (e.g., investment funds).

Transfer of Tax Losses Between Affiliates

The Italian tax system provides for domestic and worldwide tax consolidation regimes applicable (under certain circumstances) to members of a group whereby they are allowed, for CIT purposes, to offset taxable income of the members of the group against the tax losses generated by other members of the same tax group. In addition, Italian tax law allows (under certain circumstances) corporate taxpayers to be treated, for CIT purposes, as partnerships and, therefore, as tax transparent.

The 2017 Budget Law introduces new rules whereby companies can transfer to affiliates the tax losses generated in the first three-year period of operation (outside any tax consolidation or tax transparent regime) provided that:

(i) The shares of the transferee or the shares of the company that directly or indirectly controls the transferee are traded in a regulated market or negotiated in a multilateral trading facility in an EU or an EEA country included in the so-called White List;

(ii) The transferor is not involved in real estate business;

(iii) The transferor and the transferee have the same financial year;

(iv) The transferor and the transferee are affiliate. For this purpose, a company is deemed to be an affiliate of another company if the latter has an equity interest granting 20 percent of the voting rights that can be exercised at the ordinary shareholders' meeting of the former and of the right to participate in the former's profits. Such requirement must exist at the end of the tax year when the transfer of the tax losses is made; and

(v) The transfer is finalized within the deadline for the filing of the tax return.

As mentioned, the tax losses that can be transferred are only those that are generated in the first three-year period of operation of the transferor and must be transferred in full (and not partially). The tax losses transferred may be then entirely used by the transferee to offset the taxable income of the tax year when the transfer is made and of the following tax years.

The transferee must remunerate the transferor for the benefit obtained with the transfer of the tax losses. Such remuneration should be computed by applying the CIT rate applicable in the year when the losses are generated to the amount of the losses transferred. The remuneration for the transfer of the tax losses, however, does not constitute taxable income for the transferor and is not tax deductible for the transferee. Finally, the transferor cannot adhere to any tax consolidation regime or opt for any tax transparency regime in the tax years when it has transferred tax losses under the above rules.

Deduction of the Allowance on Corporate Equity Deduction Regime (Notional Interest Deduction)

The 2017 Budget Law has provided a reduction of the allowance on corporate equity deduction regime ("ACE") rates and introduced some anti-avoidance provisions that limit the utilization of ACE.

ACE is an additional deduction—for CIT purposes only—corresponding to the notional return on capital. This notional return is equal to the aggregate net equity increase that has occurred as of the fiscal year 2011 (the so-called "ACE Base")1, by a rate of return, set at 4.75 percent until fiscal year 2016. It is sometimes referred to as "notional interest deduction." In particular, the ACE rate has been reduced to 2.3 percent for fiscal year 2017 and 2.7 percent as of 2018.

The 2017 Budget Law also extended the limitation provided for the carrying forward of tax losses and non-deductible interest expenses to the ACE. In particular, unless certain tests are passed, the ACE cannot be carried forward in the case of (i) a change of control and a change of the main business activity; or (ii) domestic and cross-border merger and demerger transactions.

In addition, for taxpayers other than banks and insurance companies, the increase of the stock in securities and financial instruments, other than shares and other equity interests, compared to the amount held at December 31, 2010, will reduce the ACE Base.

Enhanced Depreciation of Tangible and Intangible Assets

The Budget Law for 2016 had introduced a tax incentive, the so-called "enhanced depreciation," applicable to new tangible assets and/or vehicles purchased by business taxpayers between October 15, 2015 and December 31, 2016. Such tax incentive consisted in an increase by 40 percent of the acquisition cost on which the depreciation allowances were calculated. The incentive did not apply to investments in (i) tangible assets for which the depreciation installments were lower than 6.5 percent; (ii) buildings; and (iii) tangible assets listed in the Budget Law for 2016 (e.g., pipelines).

The 2017 Budget Law has extended the above tax incentive also to new investments (with the exclusion of vehicles) made by December 31, 2017 or by June 30, 2018 provided that, in the latter case, the purchase order is accepted by the seller and, 20 percent of the purchase price is paid by the purchaser, by December 31, 2017.

In addition to the above, the 2017 Budget Law provides for further tax incentives aimed at facilitating investments made in those technological assets included in the programme so-called "Industry 4.0." In particular, for the purpose of the enhanced depreciation, the acquisition cost of those tangible technological assets listed in the 2017 Budget Law is increased by 150 percent (instead of 40 percent). Moreover, business taxpayers which already benefit from the enhanced depreciation are also allowed to benefit from an "enhanced amortization" of those intangible assets (e.g., software, operating systems or platforms) listed in the 2017 Budget Law calculated on 140 percent of the purchase costs of such assets.

Step-Up of Corporate Assets

The 2017 Budget Law has extended the step-up of corporate assets for accounting and tax purposes for the tax year current at December 31, 2016. In particular, companies adopting Italian Generally Accepted Accounting Principles ("GAAP") may opt for the step-up of corporate tangible and intangible assets (excluding real estate assets booked as inventory) and of controlling equity interests that were already booked in the financial statements of the tax year current at December 31, 2015 by paying a substitute tax.

The step-up applies to all the assets which belong to the same "homogeneous" category. The substitute tax rate is 16 percent. for depreciable assets and 12 percent for other assets. The substitute tax has to be paid in a single installment by the deadline for the payment of the CIT balance due for the same tax period when the step-up is made (i.e., June 30, 2017).

The equity reserve created as a consequence of the step-up can be freely distributed provided that a further 10 percent substitute tax is paid on the amount of such reserve.

The stepped-up value is relevant for depreciation and amortization purposes as from the third tax year after the one when the step-up is made and, for capital gains purposes, as from the fourth tax year after the one in which the step-up is made. With reference to real estate assets (other than inventory), the stepped-up value is relevant as from December 1, 2018.

Companies adopting International Financial Reporting Standards/International Accounting Standards ("IFRS/IAS") GAAP may benefit from the step-up on certain conditions. These companies shall pay the substitute tax for the higher value resulting from the step-up and, consequently, a tax-suspended reserve must be recorded for an amount equal to the stepped-up value. Such equity reserve can be freely distributed provided that a further 10 percent substitute tax is paid.

Amendments to the Tax Credit for R&D Expenses

In 2013, a tax credit for certain Research & Development ("R&D") expenses was introduced. The rules applicable to such tax credit were subsequently amended by the Budget Law for 2015 and now are again revised by the 2017 Budget Law.

In particular, the 2017 Budget Law has (i) extended to December 31, 2020 (previously December 31, 2019) the term within which the expenses in R&D can be incurred; (ii) fixed to 50 percent of all the eligible increased R&D costs (previously 25 percent or 50 percent, depending on the type of expenses) the amount of the tax credit; (iii) increased to EUR 20 million (previously EUR 5 million) the maximum annual amount of the tax credit available; (iv) extended to all staff expenses (previously limited to certain costs only) the tax credit; and (v) clarified that the tax credit is available also in relation to the R&D expenses incurred to supply R&D services by an Italian resident company (or an Italian permanent establishment of a non-resident company) to non-Italian residents principals provided that they are resident in a EU or EEA country included in the so-called White List.

Vat Group

In accordance with Article 11 of EU Directive 2006/112, the 2017 Budget Law introduces, the elective group of companies regime for VAT purposes ("VAT Group").

The VAT Group allows the treatment of individual Italian-based companies (and/or Italian permanent establishment) as a single VAT taxpayer provided that at least from July 1 of the previous year the following requirements are met:

(i) Direct or indirect control relationship between the entities or, alternatively, such entities must be controlled directly or indirectly by the same entity provided that it is resident in Italy or in a State having an actual exchange of information with Italy ("Financial Requirement");

(ii) The entities must all perform a business activity of the same nature or, alternatively, a complementary activity or an activity that supports that of one or more entities ("Economic Requirement"); and

(iii) A coordination, in accordance with Italian Civil Code or de facto, between the management bodies of the same entities, even if carried out by a third entity, must exist ("Organizational Requirement").

Unless evidence is given to the contrary, the Economic Requirement and the Organizational Requirement are deemed to be met in cases where the Financial Requirement exists.

The election for the VAT Group must be made by all the eligible entities and is binding for a three-year period automatically renewed until the revocation of the option.

In case of election for the VAT Group, (i) the transactions carried out between the entities of the VAT Group are not deemed to be sale of goods or supply of services from a VAT purposes; and (ii) transactions carried out between an entity of the VAT Group and a third party are deemed to be carried out by the VAT Group as a single entity. The VAT rights and obligations in the VAT matter are of the VAT Group; such rights and obligations are exercised and fulfilled, respectively, by the representative of the VAT Group which is the entity having the control under the Financial Requirement or, if the latter cannot exercise the election, by the entity having more revenues in the year preceding the one of the election.

The VAT Group regime will be available starting from January 2018.

This regime does not replace the existing VAT consolidation scheme that allows the consolidated entities to transfer and consolidate their VAT debit/credit position at the level of the group. Under the VAT consolidation regime, differently from the VAT Group regime, the group does not act as a single VAT taxpayer but the consolidated entities continue to keep their VAT number.

Purchase of Real Estate Assets at a Court Auction

The tax benefit consisting of fixed registration, mortgage and cadastral taxes at EUR 200 each (in lieu of the proportional rate) applicable in case of purchase of a real estate asset at a court auction has been extended until June 30, 2017. This rule applies to the purchase of businesses as well as residential real estate assets.

Such tax benefit applies to the extent that the real estate asset is resold within five years. The ordinary indirect tax regime, as well as a 30 percent penalty and interest apply, if the purchaser fails to re-sell the real estate asset within the above mentioned term.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.