Investment in Italy

Investment in ItalyTax losses carried forward by the shareholders and generated before the election cannot beused to offset profits imputed under the consortium relief.5.1.9Deduction of interest expensesThe thin capitalisation rules applying up to 2007 have been replaced by earning strippingrules that allow net interest expenses (interest expenses exceeding interest income) to bededucted to the extent of 30 percent of the EBITDA computed, with certain adjustments,from the profit and loss account.The expenses that are non-deductible in the year can be carried forward indefinitely anddeducted according to the same criteria (i.e. up to 30 percent of each year’s EBITDA). Startingfrom the third tax year following 31 December 2007 (i.e. 2010 for calendar-year taxpayers),the portion of EBITDA not used up in the deduction of interest expenses and financial chargespertaining to a tax year may also be added to the EBITDA of subsequent tax years.Within a domestic tax group, the EBITDA of all the participating members can be pooledfor deduction purposes (on certain conditions non-resident companies can also be included‘virtually’ in the domestic tax group).5.1.10 General anti-avoidance tax rulesGeneral anti-avoidance tax legislation provides that transactions executed for no valid businessreason, and aimed at circumventing tax obligations or obtaining illegitimate tax reductions orreimbursements, maybe disallowed for tax purposes. In particular, this legislation regards:• transformations, mergers and demergers, voluntary liquidations and distributions ofreserves not formed by retained earnings• contributions, transfers and leases of business units• transfers of receivables• transfers of tax credits• the transactions indicated in Directive 90/434/EEC (mergers, demergers, spin-offs, andexchanges of shares with EU companies)• changes of tax residence• operations, including evaluations, regarding shares and foreign currencies• transfers of goods/services within a tax group (tax consolidation)• interest/royalties paid between EU companies directly or indirectly controlled by a non-EU resident shareholder• penalties paid to related parties not resident in a ‘white-list’ jurisdiction.5.1.11 Specific anti-avoidance tax measuresItalian tax law contains a number of separate provisions designed to prevent tax avoidanceby Italian companies through entities located in tax havens. These measures regard:a - the tax deduction of costs and expenses46© 2012 KPMG S.p.A., KPMG Advisory S.p.A., KPMG Fides Servizi di Amministrazione 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 independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.