Italy amended its CFC rules with effect from 1/1/2010. Under the new rules, the active business exception applies only when the controlled foreign company carries on a business in the local market of the country in which the company is established, and it never applies to company more than 50 percent of whose income is passive income (dividends, interest, gains and income from services to affiliated entities). Also, the CFC rules apply also to companies that are established in white listed jurisdictions, when (1) the foreign company is subject to an effective tax in its own country of organization that is less than 50 percent of the Italian tax, and (2) more than 50 percent of the foreign company’s income is passive income (dividends, interest, gains and income from services to affiliated entities. As a result of the changes, many tax planning structures for Italian companies shall have to be revisited. In particular, many holding companies used by Italian company to handle their outbound investments may become CFC and their income could become taxable currently upon their Italian shareholders in Italy.…