Tax Law

The lawyers are technically strong, always make themselves available and are very good at responding to our needs
Chambers Europe
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
  • Articles
  • Newsletter
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

15/07/2016

With the referendum dated 23 June 2016, the United Kingdom (hereinafter, the “UK”) decided to leave the European Union (hereinafter, the “EU”). The “leave” vote does not imply the immediate exit of the UK from the EU since it is required for the UK to invoke article 50 of the Lisbon Treaty. Consequently, negotiations between the UK and the EU would define the exact terms and conditions of the exit of the UK from the EU (i.e. the UK joining the European Economic Area “EEA” – as Norway, Iceland and Liechtenstein – and/or the UK joining the customs union).

 

Hereinafter, we analyse the main potential tax implications of Brexit and the treatment of the next Italy-UK relations focusing on the following topics:

 

  • Withholding taxes applicable on financial flows between Italy and UK;
  • Taxation of the M&A transactions;
  • Impact on indirect taxation (VAT and customs); and
  • Other considerations on specific tax regimes and dispute resolution mechanisms.

 

 

  1. Withholding taxes

 

The EU adopted some Directives aimed at removing double taxation in case of group of companies operating across different Member States.

 

More specifically, the Parent-Subsidiary Directive eliminates withholding tax on dividends paid between associated companies located in different Member States, as well as the Interest and Royalties Directive eliminates withholding taxes on interest and royalty payments between associated companies located in different Member States.

 

If the above mentioned Directives will no longer be applicable and no similar agreements will be negotiated between UK and the EU, double taxation would arise on dividend payments – as well as on interests and royalties payments – between an Italian parent company and a UK subsidiary or vice versa.

 

As a consequence, in case of payment of dividend, interest or royalties from Italy to the UK, Italian withholding taxes will apply at domestic rates (respectively 26% withholding on dividend/interest, 30% on royalties).

 

On the basis of the Double Tax Treaty (hereinafter, the “DTT”) currently in place between Italy and UK, the withholding taxes applicable on payments between associated companies would instead be the following:

 

  • Dividends: according to Article 10 of the Italy-UK DTT, the withholding tax on dividends can not exceed 5% in case the beneficial owner of the dividends holds at least 10% of the voting rights of the entity paying the dividends. In the other cases, the withholding tax can not exceed 15%;

 

  • Interests: according to Article 11 of the Italy-UK DTT, the withholding tax on interests can not exceed 10% in case the recipient is the beneficial owner of the interests;

 

  • Royalties: according to Article 12 of the Italy-UK DTT, the withholding tax on royalties can not exceed 8% in case the recipient is the beneficial owner of the royalties.

 

With specific reference to dividends, it is worth mentioning that the Italian domestic tax law provides for a 1.375% withholding tax on outbound dividends distributed to companies located in EU/EEA countries. Therefore, the circumstance that the UK would or not join the EEA would be extremely relevant to define the withholding tax applicable on dividends.

 

 

  1. M&A transactions

 

Through the Merger Directive, the EU adopted a tax deferral mechanism aimed at removing tax obstacles to cross-border reorganizations involving associated companies situated in two or more different Member States. More specifically, the Merger Directive provides for the deferral of the taxes that could be charged on capital gains derived from the restructuring transactions. This mechanism ensures the tax neutrality of restructuring transactions by deferring the capital gain taxation until the assets transferred are effectively realized.

 

In case the tax deferral regime would no longer be applicable in UK as a result of Brexit, the capital gains deriving from the cross-border reorganizations involving UK would be immediately taxable.

 

Additionally, the tax treatment of the deferred capital gains would have to be further investigated upon Brexit since it can not be excluded that the tax deferral regime would be interrupted – even if the assets are not yet realized – also with regard to the cross-border reorganizations realized before Brexit.

 

 

  1. Indirect taxation

 

As a consequence of Brexit, the UK would no longer be required to apply VAT Directives and Regulations. Therefore, the sale of goods between Italy and the UK would be no more considered as intra-EU transactions but as import/export. Also the VAT regime applicable to the provision of services would be strongly impacted by Brexit and specific regimes as the Mini One Stop Shop (the “MOSS” that applies to services provided via electronic means) would no more be applicable in the UK.

 

Additionally, Brexit may – depending on the effective negotiations between the UK and the EU – result in the exit of the UK from the customs union. Indeed, the UK could also remain in the customs union in accordance to a separate agreement to be stipulated with the EU as Turkey already did. In such a case, there would be no significant differences from the current customs discipline applicable to the trading of goods within the EU. On the contrary, customs – and duties where applicable – would be applicable on the trading of goods between the UK and the EU Member States.

 

 

  1. Other considerations

 

Brexit would also impact on the applicability of specific Italian tax regimes and EU dispute resolution mechanisms that are applicable only to companies located in the EU Member States/EEA countries.

 

For instance, the “horizontal fiscal unit regime” that has been recently introduced in the Italian tax law requires that the holding company is resident in a EU Member State or in an EEA country with which Italy has signed an exchange of information agreement. Consequently, assuming that the UK would leave EU without entering the EEA, Italian subsidiaries controlled by a UK entity would not be able to opt for the horizontal fiscal unit regime.

 

With regard to dispute resolution mechanisms, the EU Arbitral Convention establishes a procedure to resolve disputes where double taxation occurs between enterprises of different Member States as a result of an upward adjustment of profit for transfer pricing purposes of an enterprise of one Member State.

 

Similarly, most of the bilateral DTTs provide for a mutual agreement procedure (hereinafter, “MAP”) that – in accordance with Article 25 of the OECD Model Tax Convention – can be invoked by the taxpayer in case of transfer pricing adjustments in order to avoid double taxation.

 

Differently from the MAP, the EU Arbitral Convention imposes an obligation on the Member States to achieve a result eliminating the double taxation. Indeed, if no agreement is achieved between the Member States within two years, the case has to be analysed by an independent advisory body and Member States shall conform to the decision of the independent advisory body – or adopts a different agreement – in order to avoid double taxation.

 

Consequently, the exit of the UK from the EU would result in the inapplicability of the EU Arbitral Convention implying that double taxation arising from transfer pricing adjustments on intercompany transactions between Italy and the UK could be eliminated only through MAPs that, however, do not provide for a result obligation.

 

***

In light of the above, the results of the negotiations between the UK and the EU would significantly impact on the concrete consequences of Brexit on the taxation of Italy-UK relations.

 

 

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

For further information please contact Federico Trutalli federico.trutalli@nctm.it

In this issue, we explore the new “Project Review” rule provided for by Article 202 of Italian Legislative Decree No. 50/2016, which allows the State to revoke funding previously granted for projects which – upon later and more in-depth review – are found no longer to meet the cost benefit ratio. What will the impact of this new rule be on port infrastructure projects in Italy? Are we at the beginning of a new era? We come back to the Italian port reform issue, this time to examine the ordinance power vested in the President of the Port System Authority. Analysing a judgment of the Regional Administrative Court of Liguria, we note how case law anticipated the reform when recognising the ordinance power of the President of the Port Authority even in the absence of an express statutory provision. We then deal with the need for prior review by the EU Commission of State funding projects involving upgrade works on EU ports. On 23 January 2017 the new EU Regulation on port governance was approved. We give a first insight on the main issues covered by the Regulation: financial transparency and the provision of port services. We examine the request to amend Directive 2009/13/EC, aimed at delivering better working conditions to seafarers in accordance with the amendments made in 2014 to the Maritime Labour Convention (MLC / 2014). We also provide some updates on maritime employment agencies. We then focus on a recent decision of the European Commission on State aid, which further helps improve the general understanding of the criteria to be met in order for State aid in port and airport matters to be deemed compatible with EU law. Finally, we draw our attention to an interesting decision of the Consiglio di Stato regarding the interruption of airport handling services, which is forbidden when deemed detrimental to the public interest in operation of scheduled air transport services.] 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.

As we settle into 2017 the drama of Brexit and Trump seem to have eased somewhat. While the drama might have lifted it doesn’t mean that the complexities that these two phenomena have introduced and are introducing into the practice of law have gone away. In fact, the more we reflect on what needs to be done to achieve Brexit the less clear the situation is. This week President Trump will outline what he means by the Wall and taxes on imports of goods. From a WTO law point of view it can only be disruptive and even destructive. The drama might have gone but the work is only beginning. In this issue we have a range of contributions covering how the Russian constitutional court has reacted to the European Court of Human Rights rulings in favour of the owners of Yukos, the OECD’s review of its own bribery rules, the EU’s new proposed ePrivacy Regulation, how the European Court of Auditors confirms our understanding of the responsibilities and obligations of Port Authorities in relation to concessionaires. We explain the new Italian Save the Banks decree and show how the EU Commission has a strong role in every step of the process and look at how the Commission proposes disciplining insurance distribution agents.

Trade features significantly in this first edition of Across the EUniverse for the year 2017. It cannot be otherwise. US President Trump has said that he will change US trade policy building barriers to market access and forcing US companies to manufacture at home. China President Xi has said that China promotes barrier free trade so long as the barriers are in third countries (not in China). The EU is in the process of reforming its trade defence instruments and digesting how a post Brexit world will look.

 

This change in trade is evidence of wider change that is taking place around us and which is likely to continue into 2017. There will be federal elections in Germany and national elections in France. If Italy gets to change its electoral law there may well be an election in Italy. Will the forces that backed President Trump in the US win in the EU as well. The country most likely to change is the Netherlands, once a bastion of openness but now toying with the idea of giving the most votes to an anti-Islam party.

 

In this issue we look at the legal debate concerning an Italian exit from the Euro; a comparison between Trump and Xi approach on the concept of trade; some consequences of the excessive length of court proceeding; we also examine the advantages of the new italian “rent to buy” agreement; as well as the Multilateral Investment Court; an overview of the service sector; a further examination of the trade consequences of Brexit and finally the advantages or disadvantages of enhancing the bilateral framework between EU and US in the field of energy.

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