Tax Law

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This fast-growing firm has a strong tax team to support its busy workload in corporate, M&A, banking and finance. The team is recognised for its commercial sensibilities and a practical, hands-on approach. Tax litigation has been a busy area for the team of late, including contentious matters relating to transfer pricing. Sources say: “These lawyers are helpful, practical and hands-on: we’re very happy with them.
Chambers Europe

Over the years Nctm’s team of tax experts has gained a strong reputation with audit firms and the corporate sector. We are set up to meet the needs of domestic as well as international clients, for domestic and cross-border tax issues, including reorganizations and tax planning. We provide tax advice on an ongoing basis and assistance in tax litigation.

  • Domestic and international tax issues
  • Transfer pricing
  • VAT
  • Tax dispute resolution
  • Tax assistance in M&A and private equity
  • Tax due diligence
  • International Tax planning for inbound and outbound investments
  • Trust and estate planning
  • Tax and social security issues related to employees/directors compensation
  • Distribution chain, VAT and customs planning
  • Tax rulings
  • Tax optimization of financial products, cash repatriation, and hybrid financial instruments
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16/05/2017

On April 24th, 2017, the Italian Government enacted the Law Decree n. 50/2017 that introduces a new

tax regime applicable to “carried interest”, i.e. the share to the profit of an investment earned by managers of undertaking for collective investments and more generally by employees/directors of companies.

The new rules provide that the income realized by managers/employees in relation to carried interest embedded into units of undertaking for collective investments (“UCIs”) or shares/financial instruments of companies qualifies as financial income (in principle subject to 26% substitute tax).

The new regime applies to carried interests deriving from the participation to companies, entities or UCIs resident or established in the Italian territory or in States that allow an adequate exchange of information.

Conditions of applicability
In particular, the carried interest regime applies to the income deriving from the direct or indirect participation in companies and UCIs, earned by employees and directors of such companies/UCIs (or of any other entity controlling such companies or managing the UCIs) and relating to units, shares and other financial instruments embedding economic returns higher than the ordinary ones (the “Preferred Financial Instruments“), provided that the following conditions are met:

  1. the actual commitment in the UCI of all the employees/directors entitled to the carry interest is equal, at least, to (i) 1% of the overall investment carried out by the UCI or (ii) 1% of the net equity value of companies or other entities issuing the Preferred Financial Instruments. The 1% minimum commitment is determined by computing also the amount invested in ordinary units or shares (i.e. financial instruments having the same economic rights of all the other investors/shareholders), as well as the amount, if any, taxed as employment income in the hands of the employees/directors upon subscription of the shares or quotas (or that would have been taxed in Italy if the employees/managers had been Italian tax residents);
  2. the carried interest, i.e. the higher return embedded in the Preferred Financial Instruments, is paid to employees/directors only   after   the    repayment    of    the    invested    capital    contributed    by    all    the investors/shareholders plus the agreed-upon minimum yield of return (“hurdle rate”) provided for by  the by-laws or the internal rules of the UCI. In case of change of control, the carried interest accrues upon the condition that the other investors/shareholders realize a consideration for the sale at least equal to the invested capital plus the hurdle rate;
  3. the Preferred Financial Instruments are held by the employees/directors (or, in case of death, by their heirs) for a period of at least 5 years, or until the date of change of control (that should also include the liquidation event) or substitution of the management company if such events occur prior than the five-years period.

Entry into force
The new provisions apply to the income from the Preferred Financial Instruments received from the date of   entry into force of the Law Decree. The Law Decree has entered into force on April 24 2017 and it must be converted into law within 60 days (i.e. within June 23rd, 2017), otherwise it will decay. At the moment, the Decree is under examination at the Parliament, which can amend or abolish, during the conversion procedure, the current version of the new provisions.

For any other information or clarification about the new tax regime do not hesitate to contact Barbara Aloisi b.aloisi@nctm.it or Andrea Mantellini a.mantellini@nctm.it

15/03/2017

Last 8 March 2017, the Revenue Agency issued order No. 47060 implementing the regime for new residents under Article 24-bis of the Consolidated Income Tax Code, introduced by the 2017 Budget Law.

Furthermore, the Revenue Agency declared that en explanatory circular would soon be issued providing all the necessary clarifications on the application of the new regime.

Article 24-bis of the Consolidated Income Tax Code provides for an optional favourable regime for new residents involving among the others a flat-rate tax of 100,000 Euro for non-Italian sourced income. Eligible for such regime are individuals who have been resident outside of Italy for at least nine tax years out of the ten preceding the beginning of the period of validity of the option.

The order concerns the terms for exercising the option for the new regime.

Eligible taxpayers can exercise the option when they file their tax return for the fiscal year during which they moved their residence in Italy, or during the immediately following year. A certain amount of information must be provided in the return, e.g. attesting foreign tax residence status for at least nine out of the previous ten tax years, the last jurisdiction where the taxpayer was resident before exercising the option and the foreign states where the taxpayer does not intend to use the new favourable regime.

The option for tax year 2017 must therefore be exercised by 30 September 2018.

Without prejudice to the necessity to meet the relevant requirements, the order confirmed the applicability of the favourable tax regime also to Italian citizens who in the past moved to States or territories with a favourable taxation regime and in respect of whom the presumption under Article 2, paragraph 2-bis of the Consolidated Income Tax Code applies.

The most important change introduced by the order is the optional nature of the request for a private letter ruling to be allowed to participate in the favourable tax regime.

In other words, the existence of the requirements for being allowed to participate in the regime is a matter for individual assessment by the person concerned, who may opt for making a request for a private letter ruling or not, it being understood, however, that the option is exercised upon filing the tax return.

The application can be filed with the Agency even before meeting the residence requirements under Article 2 of the Consolidated Income Tax Code.

Given the complex and delicate nature of this issue, in order to prevent any errors that may have adverse consequences, one should assess whether it may be appropriate to make a request for a private letter ruling to the Revenue Agency anyway, while in any event having himself/herself assisted by a trusted professional.

 

 

15/03/2017

Last 8 March 2017, the Revenue Agency issued order No. 47060 implementing the regime for new residents under Article 24-bis of the Consolidated Income Tax Code, introduced by the 2017 Budget Law.

Furthermore, the Revenue Agency declared that en explanatory circular would soon be issued providing all the necessary clarifications on the application of the new regime.

Article 24-bis of the Consolidated Income Tax Code provides for an optional favourable regime for new residents involving among the others a flat-rate tax of 100,000 Euro for non-Italian sourced income. Eligible for such regime are individuals who have been resident outside of Italy for at least nine tax years out of the ten preceding the beginning of the period of validity of the option.

The order concerns the terms for exercising the option for the new regime.

Eligible taxpayers can exercise the option when they file their tax return for the fiscal year during which they moved their residence in Italy, or during the immediately following year. A certain amount of information must be provided in the return, e.g. attesting foreign tax residence status for at least nine out of the previous ten tax years, the last jurisdiction where the taxpayer was resident before exercising the option and the foreign states where the taxpayer does not intend to use the new favourable regime.

The option for tax year 2017 must therefore be exercised by 30 September 2018.

Without prejudice to the necessity to meet the relevant requirements, the order confirmed the applicability of the favourable tax regime also to Italian citizens who in the past moved to States or territories with a favourable taxation regime and in respect of whom the presumption under Article 2, paragraph 2-bis of the Consolidated Income Tax Code applies.

The most important change introduced by the order is the optional nature of the request for a private letter ruling to be allowed to participate in the favourable tax regime.

In other words, the existence of the requirements for being allowed to participate in the regime is a matter for individual assessment by the person concerned, who may opt for making a request for a private letter ruling or not, it being understood, however, that the option is exercised upon filing the tax return.

The application can be filed with the Agency even before meeting the residence requirements under Article 2 of the Consolidated Income Tax Code.

Given the complex and delicate nature of this issue, in order to prevent any errors that may have adverse consequences, one should assess whether it may be appropriate to make a request for a private letter ruling to the Revenue Agency anyway, while in any event having himself/herself assisted by a trusted professional.

9/01/2017

The 2017 Italian Budget Law introduces a tax relief for individuals transferring their tax residence to Italy, in accordance with similar regimes adopted by other countries such as the United Kingdom, Switzerland and Portugal.  The relief is part of a package of measures intended to facilitate investment in Italy and to attract high-net-worth people and highly-skilled workers or managers.

The relief involves the possibility to opt for the application of a substitute tax on all foreign-sourced income, as an alternative to ordinary worldwide taxation at progressive rates up to 43%.  The option can be exercised by any individual moving his/her tax residence to Italy, provided that he/she has not been tax resident in Italy for at least nine out of the ten tax years preceding the start of the option period.
The option, which is subject to advance clearance from the Revenue through a ruling procedure, allows the taxation of all foreign income through the application of a €100,000 lump-sum substitute tax. Only the capital gains arising out of significant interests generated in the first five tax years of the option period are excluded from the relief.  The option can be withdrawn at any time and ceases to have effect upon expiry of a period of 15 years.
The option for the special regime can be extended to one or more family members, provided that they in turn meet the conditions for its exercise. In such a case, the substitute tax will amount to 25,000 Euro per family member besides the above-mentioned €100,000 substitute tax.
Italy has one of the most favourable inheritance and gift tax regimes in Europe, rating as low as 4% for immediate relatives and spouses, with a 1-million exemption allowance.  In this regard, the 2017 Italian Budget Law provides for a further tax relief for individuals who decide to exercise the option.  For successions and gifts taking place throughout the election period, inheritance and gift tax is indeed levied only on assets and rights situated in Italy.  In other words, there is an exception to the principle of taxation on a worldwide basis in favour of the principle of taxation on a territorial basis.
The UK’s decision to leave the EU (Brexit) and the restrictions applicable from April 2017 to the so-called “resident non-domiciled” rules will make our country particularly attractive to UK individuals – especially those with significant assets – who decide to transfer their residence to Italy.
Nctm is able to provide specialist legal assistance to individuals wishing to establish their residence in Italy, thanks to its strong expertise in tax law and compliance, international civil law and family law, labour and immigration law, which allows addressing any aspect involved in such particular event in one’s life.

9/01/2017

The 2017 Italian Budget Law introduces a tax relief for individuals transferring their tax residence to Italy, in accordance with similar regimes adopted by other countries such as the United Kingdom, Switzerland and Portugal.  The relief is part of a package of measures intended to facilitate investment in Italy and to attract high-net-worth people and highly-skilled workers or managers.

The relief involves the possibility to opt for the application of a substitute tax on all foreign-sourced income, as an alternative to ordinary worldwide taxation at progressive rates up to 43%.  The option can be exercised by any individual moving his/her tax residence to Italy, provided that he/she has not been tax resident in Italy for at least nine out of the ten tax years preceding the start of the option period.

The option, which is subject to advance clearance from the Revenue through a ruling procedure, allows the taxation of all foreign income through the application of a €100,000 lump-sum substitute tax. Only the capital gains arising out of significant interests generated in the first five tax years of the option period are excluded from the relief.  The option can be withdrawn at any time and ceases to have effect upon expiry of a period of 15 years.

The option for the special regime can be extended to one or more family members, provided that they in turn meet the conditions for its exercise. In such a case, the substitute tax will amount to 25,000 Euro per family member besides the above-mentioned €100,000 substitute tax.

Italy has one of the most favourable inheritance and gift tax regimes in Europe, rating as low as 4% for immediate relatives and spouses, with a 1-million exemption allowance.  In this regard, the 2017 Italian Budget Law provides for a further tax relief for individuals who decide to exercise the option.  For successions and gifts taking place throughout the election period, inheritance and gift tax is indeed levied only on assets and rights situated in Italy.  In other words, there is an exception to the principle of taxation on a worldwide basis in favour of the principle of taxation on a territorial basis.

The UK’s decision to leave the EU (Brexit) and the restrictions applicable from April 2017 to the so-called “resident non-domiciled” rules will make our country particularly attractive to UK individuals – especially those with significant assets – who decide to transfer their residence to Italy.

Nctm is able to provide specialist legal assistance to individuals wishing to establish their residence in Italy, thanks to its strong expertise in tax law and compliance, international civil law and family law, labour and immigration law, which allows addressing any aspect involved in such particular event in one’s life.

 

The contents of this article is meant for informative purposes only and cannot be considered as

professional advice.

For further information please contact Paolo Rampulla, paolo.rampulla@nctm.it

Grounds for ineligibility or forfeiture of statutory auditors who are members of an association of professionals
Pursuant to Article 2399, letter c), of the Italian Civil Code, statutory auditors whose patrimonial relationships with the company or its subsidiaries may affect their independence cannot be appointed and, if appointed, cease from their office. It has been questioned whether the case whereby a statutory auditor is a member of an association of professionals providing consultancy services to the same company reflects the case provided for by the law. Although the answer to the question was generally affirmative, doubts still remain as to the criteria adopted by the Supreme Court in order to determine the cases in which the independence of a statutory auditor can be actually considered as compromised.

The scope of the delegation of management in limited liability companies (s.r.l.): content and limits
By decision no. 25085 of 7 December 2016, the Supreme Court established the legitimacy of a general delegation of management, by the board of directors to individual managing directors with the power to act separately, to the extent that it is not aimed at excluding the exercise of a concurrent managing power by the managing body.

Data processing for marketing purposes: the protection of legal entities
By order No. 4 of 12 January 2017, the Italian Data Protection Authority set out the discipline on personal data processing for marketing purposes, finding the unlawfulness of both the processing of data collected through forms available on websites and the processing of data (namely, telephone numbers) autonomously collected on the Web.

Administrative liability of entities under Legislative Decree No. 231/2001 within groups of companies
Liability can be found, under Legislative Decree No. 31 of 2001, on the part of a holding company for offences committed in connection with the activities of its subsidiaries, provided that a) the person acting on behalf of the holding company acts in concert with the person committing the offence on behalf of the controlled entity; and b) the holding company appears to have obtained a concrete advantage from, or pursued an actual interest by way of, the offence committed in the context of the subsidiary’s activity.

The liability of non-executive directors and the duty to act in an informed way
According to decision no. 17441, of 31 August 2016, of the First Division of the Supreme Civil Court, the liability of directors without management power cannot originate from a general failure to supervise – that would be identified in the facts as a strict liability – but must be attributed to the breach of the duty to act in an informed way, on the basis of both information to be released by executive directors and information that non-executive directors can gather on their own initiative. Therefore, the determination of the prerequisites for the liability of delegating directors fits in a context accentuating the distinction between the duties imposed on managing directors and those typical of non-executive directors.

Considerations regarding the possibility to waive the termination effect of a notice to perform
Judgment No. 4205 of 3 March 2016 of the Supreme Court, Second Division, gives us the opportunity to provide a brief overview of the different opinions expressed by courts and legal commentators regarding the possibility to waive the termination effect of a notice to perform.

Validity of the shareolders’ agreements which provide a preventive waiver of the liability action against the directors when taken at the conclusion of the mandate
With the decision of 28th September 2015, No. 19193, the Court of Rome stated the validity of the shareholders’ agreement clauses which provide that the “incoming” shareholders undertake not to bring the liability action against the “outgoing” directors or not to vote for it in the general meeting.

The Supreme Court’s overruling: the banking and finance agreement signed exclusively by the client is null and void
The Supreme Court decides again the issue of the validity of the so called “single signature” agreements, i.e. the copy of banking and finance agreements, kept in the bank’s archives, bearing the client’s signature and not the bank’s one. The Supreme Court holds that these agreements are null and void, thus unenforceable vis à vis the account holder.

Purchase of shares of a general partnership: can the mistake on the value of the share be legitimately qualified as an essential mistake?
The Tribunal of Milan has stated that, as a rule – also with reference to the purchase of shares of a general partnership – the contract can be avoided, upon application of a party, for an essential mistake, only if the contract contains an explicit guarantee on the value of the assets and on the quality of the goods of the company (a guarantee that, according to the Tribunal, the contract at hand lacked).

The new rules regarding the proceedings before the Supreme Court (Decree Law n. 168/2016, converted into Law n. 197/2016)
With another “late summer intervention”, the legislator intervened once more as a matter of urgency to modify the code of civil procedure, with particular reference to the rules regarding the proceedings before the Supreme court: on August 31, 2016, Decree Law n. 168/2016 was published, entitled “Urgent measures for the resolution of disputes before the Supreme Court and for the efficiency of the judicial offices” (“D.L. 168/2016”).

The joined chambers of the court of cassation on the qualification and challenge of the non-final award and of the partial award
“An award that partially decides on the merits of a dispute, immediately challengeable pursuant to art. 827, paragraph 3 of the code of civil procedure, is both that of a generic condemnation pursuant to art. 278 of the code of civil procedure, and the award that decides one or some of the questions of the case, without defining the entire proceedings; instead, the awards that decide preliminary issues are not immediately challengeable.”

Europe Must Go On 

The 60th anniversary of the Treaty of Rome sees the EU much changed from its early origins. We have moved from an economic community to a Union based on civil and human rights and the values common to the peoples of Europe. It has been, and is, a great success.

 

However it is clear that the Union is not without its troubles on this important anniversary. The Brexit negotiations are about to start. There are nationalist and decentralizing tendencies in many Member States and important elections in Germany and France. There are real problems of immigration and the absence of, or the uneven distribution of, economic growth.

 

These problems should not daunt us. Our fathers in the integration process faced greater problems. They sought to make peace and to make an institution to guarantee peace from the ashes of the most destructive of European wars.

 

What we must do is face up to our problems and resolve them. We have great shoulders to stand on. We have been given the evolving EU treaties, the Single Market, a strong Court of Justice in Luxembourg, good competition law, the rights of citizens, in other words a strong legal framework.

 

This is no time for faintheartedness. We must move on with courage and ensure that the Union is with us for more than another 60 years.

In this issue, we analyse a decision of the Italian Consiglio di Stato according to which the publication of applications for renewal of existing maritime port concessions in the EU Official Journal is not required. Any third party wishing to submit competing bids is however guaranteed by the possibility of preventively inquiring about the expiry of a concession as well as by the investigation conducted by the Port Authority (today Port System Authority), which must comply with the principle of selecting the tenderer offering the «best guarantees for a profitable use of the concession».

We then examine the differences in Italian law between a contract of carriage and a procurement contract for the supply of carriage services. It is important to properly classify the type of contract, and here we explain why.

Let us then examine two recent judgments of the Italian Regional Administrative Courts. The first one is on the possible ways of awarding a maritime concession. The second one relates to the applicability of the Italian Public Procurement Code to the management of intermodal freight terminals, the unavoidable consequences of which are summarised here.

In light of the forthcoming entry into force of the IMO Convention for the Control and Management of Ships’ Ballast Water and Sediments, we look at the impact it is expected to have on the shipping sector. One of the major problems is that, to date, there are no clear indications on how to make ships compliant with the new standards. Moreover, there are countries who have more stringent regulations than the IMO Convention. The risk is therefore to invest in equipment that can be deemed unsuitable at a later stage.

A recent ruling of the Italian Supreme Court allows us to briefly discuss the issue of non-payment of insurance premiums and consequent suspension of cover. The Supreme Court confirmed that insurance coverage applies if an insured event occurs within the «grace period», regardless of whether the next premium instalment is paid.

Concerning airports, the Italian Supreme Court opened the door to possibly finding liability on the part of ENAC (the Authority supervising airport activities and air transport in Italy) in case of airplane damage caused by poor maintenance of taxiways.

Finally, we conclude with our usual review of the news from the world of maritime and port labour. The most important news is about the renewal, in Italy, of the National Collective Bargaining Agreement for shipping agencies’ executives, which brought some improvement to the current situation.

We want to thank our colleagues at Nctm Brussels’s office for their contributions highlighting the most significant actions taken by EU institutions in the international shipping and trade sector.

You will also find a list of our events taking place at our Milan and Rome offices, in addition to the usual update on our firm’s activities over the past two months.

According to the Court of Cassation a concordato plan not describing in detail how it can be implemented is not feasible
The Court of Cassation (decision No. 4915 of 27 February 2017) lowered the threshold allowing the Bankruptcy Court to review the feasibility of the concordato preventivo proposal.

Does a concordato proposal need to assign all future earnings to the creditors ?
The Court of Florence (November 2, 2016) confirmed that the debtor can retain part of his assets, with a view to support the company’s recovery and in derogation to principles of liability of the debtor

Cram down pursuant to Art. 182-septies of the Italian Bankruptcy Law, if the agreement is more convenient for the bank than bankruptcy liquidation
A ruling of the Court of Padua of 31 December 2016 is compared with few other known Court decisions regarding the extension of the effects of a debt restructuring agreement to dissenting financial creditors

 

 

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