Investment in Italy
Investment in Italy
Investment in Italy
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<strong>Investment</strong> <strong>in</strong> <strong>Italy</strong>country on the list to be issued by the M<strong>in</strong>istry of F<strong>in</strong>ance) will be subject to a reduced 1.375percent domestic withhold<strong>in</strong>g tax (the same level of taxation applied to dividends paid todomestic parent companies).Interest and royalties paid to non-resident recipientsInterest: generally a 12.5 percent withhold<strong>in</strong>g tax is provided (for <strong>in</strong>terest payments to ‘blacklist’countries, see section 5.1.11). This rate may be reduced under tax treaty provisions.The EC Interest and Royalties Directive 2003/49/EC, as implemented <strong>in</strong> <strong>Italy</strong>, precludes anytaxation at source on <strong>in</strong>terest (and royalty) payments to qualify<strong>in</strong>g affiliated/associated EUcompanies, with effect from 1 January 2004. Special rules apply to <strong>in</strong>terest on bonds andbank deposits.Royalties: generally a 30 percent withhold<strong>in</strong>g tax is applied on 75 percent of the grosspayment (i.e. 22.5 percent). This rate may be reduced under tax treaty provisions and theEU Directive (see above).5.1.7Tax consolidationBoth domestic and worldwide consolidation is available.Once exercised, the option for domestic consolidation is irrevocable for a period of threefiscal years and allows the taxable <strong>in</strong>come and losses of the participat<strong>in</strong>g companies to besheltered, tax loss carryforwards to be shared (but only those orig<strong>in</strong>at<strong>in</strong>g after opt<strong>in</strong>g forconsolidation), and <strong>in</strong>terest expense deductions to be carried forward (see section 5.1.9).Dividend payments between participants are 95 percent exempt and transfers of bus<strong>in</strong>essassets are taxable <strong>in</strong> the ord<strong>in</strong>ary way. Claw-back rules apply if the consolidation regime is<strong>in</strong>terrupted early and even if the option is not renewed at the end of the three years. Nonresident‘tax-treaty companies’ with ‘Permanent Establishments’ (PE) located <strong>in</strong> <strong>Italy</strong> can bepart of a (domestic) tax consolidation group only as controll<strong>in</strong>g companies.The option for worldwide consolidation may be exercised only on certa<strong>in</strong> conditions and,once exercised, is irrevocable for five fiscal years. If renewed, the option is irrevocable forthree fiscal years.5.1.8Consortium reliefThe taxable <strong>in</strong>come or tax loss of a qualify<strong>in</strong>g Italian company can, by election, be attributedto resident corporate shareholders proportionally to their dividend rights (and irrespectiveof whether a dividend is actually paid). Companies with shareholders hold<strong>in</strong>g at least 10percent but not more than 50 percent of the dividend rights qualify for election.Non-resident shareholders may opt for this regime on condition that no withhold<strong>in</strong>g taxis levied on the profits distributed by the Italian subsidiary. In practice, this requirement issatisfied only when the EU Parent-Subsidiary Directive applies.The option is irrevocable for three fiscal years and can be renewed for periods of three years.Companies opt<strong>in</strong>g for tax consolidation and companies that have issued f<strong>in</strong>ancial <strong>in</strong>strumentscarry<strong>in</strong>g different profit rights do not qualify for the relief.© 2012 KPMG S.p.A., KPMG Advisory S.p.A., KPMG Fides Servizi di Amm<strong>in</strong>istrazione S.p.A., KPMG Audit S.p.A., Italian limited liability share capital companies, and Studio Associato Consulenza legale e tributaria, anItalian professional partnership, are member firms of the KPMG network of <strong>in</strong>dependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.45