The government recently transcribed the EU Anti-tax Avoidance Directive into Italian law. The decree's new controlled foreign corporation (CFC) rules are applicable from the fiscal year following that in progress on 31 December 2018 (ie, from 2019 for calendar-year taxpayers). The rules introduced by the decree have removed the distinction between a tax haven CFC and a white list CFC.
Italy's value added tax (VAT) group scheme recently took effect. The scope of application, conditions and implications of the VAT group scheme are different from the existing VAT consolidation scheme. Contrary to the VAT consolidation scheme, where each entity remains not only independent from a juridical point of view, but also a single taxable person, a VAT group is considered a single VAT taxpayer and the participating entities are jointly and severally liable for VAT (and interest and penalties) to the tax authorities.
Italy recently implemented the recommendations set out in the Organisation for Economic Cooperation and Development's Additional Guidance on the Attribution of Profits to Permanent Establishments regarding the definition of a 'permanent establishment'. Article 162 of the Income Tax Code now includes a negative list of activities that do not constitute a permanent establishment, the anti-fragmentation rule and details of the requirements that give rise to a permanent establishment.
The Tax Administration can now introduce unilateral corresponding downward adjustments to eliminate double taxation where a foreign tax authority makes a primary adjustment as a result of applying the arm's-length principle to transactions involving associated enterprises in a different tax jurisdiction. This new administrative procedure aims to accelerate the resolution of double taxation deriving from transfer pricing adjustments under mutual agreement procedures.
The new principles introduced by Actions 8 to 10 of the Base Erosion and Profit Shifting project have been reflected in Italy through Decree-Law 50/2017's amendments to Article 110(7) of the Income Tax Code. The new article includes a specific reference to the arm's-length principle and provides for implementing provisions to be issued by the Ministry of Finance to align with international best practices.
The Supreme Court recently decided a labour litigation case filed by an Italian employee of the British Council. The court affirmed the principle that the exoneration from Italian jurisdiction of foreign states and entities that, in a broad sense, hold the status of bodies of a foreign state meets a double limit in the field of labour relations for disputes concerning employment relationships unrelated to the institutional functions and the organisation of the entity and when a claim with exclusively patrimonial content is raised.
The Turin Court of Appeal recently found that Foodora riders should not be considered employees. However, the court also held that Foodora riders cannot be considered fully self-employed and instead belong to a third type of relationship between self-employment and subordinated employment. This decision sees Italy join the ongoing debate regarding the classification of gig economy operators.
The Constitutional Court recently declared Article 3 of the Jobs Act, which provides the formula to calculate damages for the unlawful dismissal of employees hired after March 2015, to be unlawful. The decision has created uncertainty for employers and reduces their ability to assess the consequences and costs associated with redundancies, which was one of the Jobs Act's benefits.
The Supreme Court recently examined the use of recordings of employer-employee discussions as evidence in a lawsuit and provided a number of useful principles in this regard. For example, this type of recording can be used as evidence if at least one of the individuals involved in the recorded discussion is a party to the lawsuit and the party against whom the recording has been filed as evidence has not duly contested its actuality or content.
The Constitutional Court has deemed unlawful the provision of the Jobs Act concerning indemnity in the case of the unlawful dismissal of employees hired after March 2015. According to the court's first press release, the sole criterion of an employee's seniority provided by the act for the calculation of the indemnity is contrary to the principles of reasonableness and equality, as well as the employment rights and protection provided by Articles 4 and 35 of the Constitutional Chart.
The use of corporate renewable power purchase agreements (PPAs) looks set to increase in Italy. Corporate PPAs are contracts between buyers and power producers to purchase electricity at a pre-agreed price for a pre-agreed period. As the market for the development of subsidy-free renewable energy projects grows, corporate PPAs are expected to become a common part of the energy and sustainability strategies of Italian corporates.
The Regional Administrative Court of Sardinia recently annulled the regional authority's decision to revoke authorisation for the construction and operation of a photovoltaic (PV) plant on the rooftops of agricultural greenhouses following its alleged loss of status as an agricultural company. The decision confirms that the lack of qualification as a professional agricultural entrepreneur should not jeopardise the right to operate PV plants and receive incentive tariffs on the production of renewable energy.
Repowering is the process of replacing an energy plant's original components with new ones and reconfiguring the layout in order to boost the plant's yield. Given that the regulatory framework in this regard is ambiguous, repowering works are innovative and the case law on such matters contains gaps, energy producers seeking to repower their plants are advised not to start the simplified deemed-consent procedure without obtaining prior clearance from the competent authorities.
Even after the retrospective cut in renewable energy incentives in Italy, the acquisition of operating solar photovoltaic (PV) plants under the right conditions still provides strong financial returns to investors. Nonetheless, irrespective of a project's financing structure or size, there are risks associated with such transactions which buyers should be aware of during the due diligence process.
The government recently approved a legislative decree on clinical trials that introduces changes to several provisions of the existing national regulation on clinical trials. At present, clinical data obtained in Italy from non-profit clinical trials cannot be used for commercial purposes. Moreover, pharmaceutical companies funding non-profit research cannot claim ownership of data and results obtained from such research, irrespective of any agreement with the non-profit entity. This may now change.
The Lazio Regional Administrative Court recently ordered a number of ministries, including the Ministry of Health, to launch an information campaign to advise the public about the potential risks arising from the misuse of mobile and cordless phones. The decision received considerable media coverage and will most likely renew the debate about electromagnetic pollution and mobile phones.
The Italian Medicines Agency recently opened a public consultation on national templates for medicinal products and medical devices to be used in clinical trials carried out in Italy. The public consultation will hopefully help to clarify whether such templates should be considered mandatory and to what extent they may be replaced by sponsors' templates or be subject to negotiation and amendments.
Under the EU Medical Device Regulation and the EU In Vitro Diagnostic Medical Device Regulation, organisations that want be recognised as notified bodies must obtain a new designation. According to Assobiomedica (the association of medical device suppliers), the number of notified bodies in Italy that have applied for said designation is low. This has led to questions around what will happen if notified bodies fail to obtain the new designation and what liability they will face regarding manufacturers and patients?
The Lazio Administrative Court recently decided that, as a rule, parallel importers of medicinal products have no right to change the trademark affixed to products in their country of origin unless this change is strictly necessary due to safety grounds or national regulatory restrictions. The court found that the right to undertake the parallel import of medicinal products should not unduly take advantage of the national reputation and trust built by the marketing authorisation holder in the products' state of origin.
The reorganisation effort of distressed companies often requires new funding. This has led the Italian insolvency system to abandon punitive solutions in favour of incentives for companies in distress. An interesting aspect of this change is represented by the new rules adopted in recent years with regard to financing granted by shareholders of companies in crisis.
Bankruptcy agreements are governed by Articles 124 to 141 of the Bankruptcy Law and aim to speed up bankruptcy proceedings. When a bankruptcy agreement proposal is filed with the bankruptcy court, the delegated judge seeks the receiver's opinion and the approval of the creditors' committee. For a proposal to be approved, it must obtain a favourable vote of a majority of the creditors admitted to vote by Article 127 of the law.
The new civil insolvency proceedings look set to become increasingly important, especially considering their application to the large number of microenterprises and business entities which operate below the thresholds set out in Article 1 of the Bankruptcy Law. The new deed arrangement is a confirmation that the legislature has understood (at last) the economic importance of microenterprises in Italy and the need to regulate their financial difficulties, the impact of which could no longer be ignored.
The recent enactment of Law 155 represents an ideal opportunity to modernise Italian insolvency proceedings through a comprehensive set of guiding principles and criteria to be applied to rationalise the associated judicial proceedings. Key changes include the development of mechanisms to recognise and resolve a debtor's business crisis before it becomes irreversible and the simplification of judicial proceedings, which will be faster and prioritise proceedings that allow business continuity.
In the recent rescue of two major national banks, the Ministry of Economy and Finance considered the banking sector's traditional measures for an administrative compulsory liquidation to be inadequate and insufficient. As a result, it issued Decree-Law 99, which placed the banks into administrative compulsory liquidation and introduced instruments to manage their financial crisis.