UBI Banca Group

‐ the tax treatment of provisions or other liabilities as designated by IFRS;
‐ the application for tax purposes of classifications under the Consolidated Income Tax Act
concerning shares and bonds as opposed to the provisions of IAS 32.
With regard to interpretation, the tax authorities issued the following circulars:
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• Circular No. 7/2011, which illustrates the treatment for IRES purposes of items in financial
statements prepared according to IFRS and that is on the combined basis of Legislative Decree No.
38/2005, Law No. 244/2007 and Ministerial Decree No. 48/2009. The income of those entities
subject to IFRS, which include all the companies in the UBI Group, is first determined according to
the “simple derivation” principle, while the “reinforced derivation” principle has been in force since 1 st
January 2008. The latter principle also applies retroactively under certain conditions. The circular
confirms the validity of practices followed by UBI Banca Group companies for those years and we
therefore consider that the pending tax disputes in this regard can be concluded by applications for
internal review or abandonment of each inspection;
• Circular No. 23/2011, which follows on from the previous circular No. 51/2010, provides further
clarification of legislation concerning CFCs, “Controlled Foreign Companies”, introduced to prevent
the attribution of income to foreign companies located in blacklisted countries, or with tax levels 50%
lower than the corresponding national IRES, which would otherwise be attributable to the Italian
parent. This is also useful for the purposes of preparing the relative applications for non application;
• Circular No. 33/2011 illustrates the new tax regime for Italian and foreign registered mutual
investment funds in force from 1 st July 2011. The regime for the taxation of income from funds on a
mark-to-market basis was repealed on that date with tax now levied when earnings are received by
investors or when the investment is redeemed. This followed the approval of Decree Law No. 225 of
29 th December 2010, converted into Law No. 10 of 26 th February 2011, which removed the
penalisation of domestic funds with respect to the same funds registered abroad. From an operational
viewpoint, the change in the legislation required considerable action to be taken with regard to
procedures and above all the need to properly adjust the amounts and taxation for those instruments
held by customers as at 30 th June 2011. The circular in question contains important clarifications
concerning “tax substitutes” (who apply withholding taxes) and intermediaries and, in particular, on
the documentation and procedures that apply to them for the correct application of the new tax
regulations.
BUSINESS WITH NON RESIDENTS – TRANSFER PRICES
With regard to the special procedures designed to prevent resident companies from being subject to tax
penalties in relation to violations concerning the determination of “transfer prices” for tax purposes (Art.
110, paragraph 7 of the Consolidated Income Tax Act) in relation to transactions and business with
foreign subsidiaries, UBI Banca prepared the relative “master file” and the national documentation for
the tax year 2010.
BUSINESS WITH SUBSIDIARIES RESIDENT ABROAD
According to that which has already been reported above on Circular No. 23/E/2011, the UBI Banca
Group has presented seven applications for non application with regard to its subsidiaries located in the
state of Delaware (USA) – Banca Lombarda Preferred Capital Company LLC, Banca Lombarda Preferred
Securities Trust, Banca Popolare di Bergamo Funding LLC, Banca Popolare di Bergamo Capital Trust,
Banca Popolare Commercio e Industria Funding LLC, Banca Popolare Commercio and Industria Capital
Trust – and to the subsidiary UBI Banca International located in Luxembourg.
The tax authorities requested additional documentation which was duly provided. We feel confident that
all the documentation furnished will confirm the proper tax conduct of our subsidiaries and that no “tax
transparency” effects with result for the Parent.
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