Italian Taxation of Companies and Businesses

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The European Commission confirmed that Italian anti inversion rules treating foreign companies owned or controlled by Italian national and owning or controlling Italian companies as Italian resident companies subject to tax in Italy do not violate EC law to the extent that they are designed to combat tax evasion and provide taxpayers with a reasonable opportunity to rebut the tax residency presumption and treat the foreign company as foreign and outside Italian tax net…

Italian tax administration provided clarifications that expand the application of Italian CFC rules. In particular, the administration explained that income from contract manufacturing activities and income from purchases or sales of related party products count as passive income for the purpose of applying the passive income test that triggers the application of the rules to controlled foreign companies organized in non black listed jurisdictions. The clarifications pose additional burden on international tax planning of Italian multinationals.…

Tre risposte dell’Agenzia delle Entrate a domande in materia di CFC affermano l’estensione della normativa sulle controllate estere anche ai casi di controllate estere che svolgono attività di trading e di lavorazione di prodotti per conto della casa madre. Le imprese italiane multinazionali sono costrette a rivedere la pianificazione fiscale dei rapporti infragruppo e valutare la necessità di un interprello a salvaguardia della non applicazione automatica della normativa con recupero di reddito e imposte e applicazione di conseguenti sanzioni in Italia…

Italy’s Tax Administration provided additional clarifications on Italian taxation of trusts. In particular, Circular n. 61/E issued on December 27, 2010 addresses the situations in which a trust is disregarded as abusive or fictitious interposition between the settlor and the assets and income of the trust and must be disregarded for tax purposes. Circular 61/E expanded the list of examples of abusive situations and shows the administration’s willingness to contrast the use of trusts for tax avoidance purposes.…

Italian tax court ruled against Italian bank on tax abusive transactions involving use of derivative contracts to generate tax credits and double dips. Italian tax administration wishes to rely on the ruling to resolve similar dispute with other banks. The total amount of income that can be recaptured is around three billion with an additional tax in excess of one billion plus interest and penalties. Additional comments on the ruling will follow on our blog…

Italy issued ruling implementing transfer pricing documentation requirements. Italian transfer pricing documentation framework largely mirrors the EU transfer pricing documentation of conduct and OECD Guidelines. Strict deadlines apply to transfer pricing documentation for 2010 and prior years. Compliance with new transfer pricing documentation requirements allows protection from penalties.…