Italian Taxation of Companies and Businesses

Pursuant to the Tax Cuts and Jobs Act (“TCJA”) passed on Dec. 22, 2017, the U.S. will tax U.S. corporations with the following tax rates:

– 21 percent general corporate income tax rate,
– 13.125 effective tax rate on U.S. corporation’s foreign derived intangible income (“FDII”), for taxable years from 2018 through 2025;
– 10.5

Italian taxation of foreign investments in Italian real estate is complex.

Transfer taxes charged upon the acquisition of the real estate (alternatively, registration tax or VAT) vary depending on the nature and tax status of the buyer (foreign private individual, foreign company purchasing and owning the real estate directly, or foreign individual or corporate investor

With its Ruling n. 4091 of June 12, 2017, the Eighth Department of Tax Commission (District Tax Court) of Milan, Italy ruled that upon the cancellation of an inter company loan from a Dutch parent company to its Italian subsidiary, the interest accrued on the loan and deducted by the Italian subsidiary on an

With ist ruling n. 27113/2016 issued on December 28, 2016, the Italian Supreme Court interpreted and applied the beneficial ownership provision of article 10 of the tax treaty between Italy and France, for the purpose of determining whether a French holding company, wholly owned by a U.S. corporation, was entitled to the imputed credit granted under that treaty in respect of dividends received from an Italian subsidiary.

The Italian Supreme Court held that the beneficial ownership provision of the Italy-France treaty requires that the recipient of the dividends has full dominion and control over the dividend, meaning, that it enjoys the right to receive and keep dividends, unconstrained by any legal or contractual obligation to pass the dividends on to its parent, and actually enjoys the economic benefit of the dividend, which it treats and reports as its own income on its accounting books and can dispose of without legal or contractual constraints. 

According to the Supreme Court, the fact that the French holding company did not have staff, offices and other significant sources of income, except for the dividends it received from time to time from its subsidiaries, and did not engage in any other activities except for holding the legal title to the shares of its subsidiaries, is consistent with a holding company’s typical functions and role, and does not negate the status of beneficial owner and eligibility to the tax treaty benefits.

The ruling is consistent with a previous decision of the Supreme Court, which we reported in the past on our blog, holding that beneficial owner is the person who has the legal control and economic enjoyment of the dividend (we refer to the Supreme Court’s ruling n. 10792  issued on May 25, 2016).

The interpretation of the term ‘beneficial owner’ as the person having the legal and economic dominion and control over the dividend, followed by the Supreme Court in ruling n. 27113/2016,  is also consistent with the clarification set forth at paragraph 12.4 of the 2014 Commentary to article 10 of the  OECD Model Income Tax Convention, according to which ‘beneficial owner’ is the person who has the full right to use and enjoy the dividend, unconstrained by a contractual or legal obligation to pass on the payment received to another person.

 The Supreme Court expressly rejected the notion that, in order to qualify as a beneficial owner of the dividend, the holding company is required to have a minimum level of organization, including employees and offices, and to engage in business activities generating operating receivables, aside from holding the legal title to the shares of its subsidiaries and receiving dividends therefrom.     

     


Continue Reading Italian Supreme Court Rules on Beneficial Ownership and Holding Companies

The EU Directive n. 2015/849 (the “IV Directive”) on anti money laundering sets forth new provisions requiring financial institutions and professional individuals to verify their customers or clients by identifying the ultimate “beneficial owner” of an entity, legal arrangement or financial transaction; obtaining and conserving information about their customers and the ultimate beneficial owners, as

The Italian Supreme Court with its ruling n. 10792 of May 25, 2016 held that the 5 percent reduced dividend withholding tax provided for under article 10 of UK-Italy Tax Treaty does not apply, when the company that receives the dividends does not prove that it is the "beneficial owner" of the dividend as required

The Italian Supreme Court, with its ruling n. 8196 of April 22, 2015 held that a NY corporation, wholly owned by an Italian company, and effectively managed and controlled by its Italian shareholders and directors in Italy, had to be treated as an Italian resident company for Italian tax purposes, and was subject to corporate

Foreign trusts, with connections to Italy such as Italian located assets, beneficiaries or grantors, and aimed at producing legal and tax effects in Italy, will be subject to full disclosure in Italy including registration in the Italian public register of enterprises regardless of the fact that they are created and administered abroad and governed by foreign law. The disclosure obligation falls upon the trustee, even if residing abroad. Failure to disclose brings with it criminal and monetary penalties.

That is the result of the new transposition in to Italian law of the new EU anti money laundering directive.

The deadline for the implementation of the Directive in the law of the EU Member States is June 2017.

Foreign trustees of foreign trusts with connections to Italy must pay attention to the developments in this area of law.
Continue Reading Foreign Trusts Subject to Disclosure in Italy

In recent years the concept of ‘beneficial ownership’ has emerged as a major anti abuse rule applicable in the context of tax treaties and other important areas of international tax law. This article provides an overview of the recent interpretation and applications of the beneficial ownership rule as clarified by the OECD, pursued by tax