In December 2019 Parliament passed the Budget Law for 2020 and a related tax law decree. Most of the new provisions apply from 1 January 2020 or will become applicable in 2020. For example, as of 2020, the tax on financial instruments held abroad and on foreign real estate also apply to non-commercial entities (including trusts and foundations) and certain Italian tax-resident partnerships. This article summarises the main changes applicable to corporate entities.
The recently passed Growth Decree has introduced a number of tax provisions which apply to various sectors. In particular, the decree-law has extended the super depreciation regime to investments in new tangible assets in certain circumstances, introduced a corporate income tax reduction on reinvested earnings and restored tax incentives for business combinations, allowing companies involved in mergers, demergers or business combinations to get a free tax step-up in the book value of relevant assets up to €5 million.
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.