Italy: New Law: Enactment Of 2001 Budget Law

As in the last few preceding years, the 2001 fiscal year will also be the focus of a significant number of new tax provisions which aim at reforming the Italian tax framework. The most meaningful provisions for corporate income tax purposes, which have been introduced by Law No. 388 of December 23, 2000, include:

For the fiscal year 2001, the Corporate Income Tax ("IRPEG") rate of 37% has been dropped one percentage point to 36%. An additional percentage point will be dropped as of fiscal year 2003 reducing the Corporate Income Tax rate to 35%. Tax credits granted to shareholders in order to compensate the Corporate Income Tax previously paid by the corporation will be adjusted accordingly.

The 2001 Budget Law has also significantly altered the Dual Income Tax treatment by abolishing the restriction setting the minimum tax rate applicable to the aggregate of incentive-benefiting income and ordinary income at 27%.

Along with the expected tax credits granted for R&D investments, a special tax credit will be available for the promotion and development of e-commerce activities as selected and regulated by Parliamentary Decree no. 114 of March 31, 1998. Eligible expenses include those for personnel training and for server-installation purposes.