The local Tax Court of Emilia Romagna with a judgment entered on November 30 has ruled against the Italian bank Credito Emiliano Holdings in a dispute involving transactions whose sole purpose, according to the Italian tax administration, was to artificially generate tax credits to reduce Italian taxes. The tax schemes under challenge involved the use of derivative contracts on Brazilian securities generating tax sparing credits usable in Italy and sale and repurchase transactions of UK stocks and bonds generating double tax credits with one single withholding ("double dip"). The court used the general anti abuse and anti tax avoidance doctrine recently blessed by the Italian Supreme Court to sustain the tax assessment by the tax administration and reject the taxpayer’s petition. The ruling is now being referred to by the Italian tax administration as a precedent for the resolution of a series of similar disputes currently under way with other reputable Italian banks. It is estimated that the total amount of additional taxable income at stake may be in the region of three billion euro with an additional tax in excess of one billion euro plus interest and penalties. We are in the process of retrieving a copy of the tax court’s decision for additional more detailed comments on our blog