Italy

No material transfer tax or stamp duty is levied in Italy on a transfer of corporate seat from a foreign jurisdiction.

A company is qualified as resident for tax purposes in Italy if, for the greater part of the fiscal year, it has its registered office, place of effective management or place of primary day-to-day management in Italy.

This means that, on the type of inbound re-domiciliation discussed here (i.e. under the legal continuity principle, without the winding-up of the re-domiciling company), the re-domiciling company’s tax residence status for the fiscal year during which the re-domiciliation takes place will depend on timing of the re-domiciliation. If it falls within the first six months, the company would have its registered office in Italy for the greater part of the fiscal year and would therefore be regarded as tax resident in Italy for the whole year. Otherwise, it would not automatically (by reason of the re-domiciliation) be regarded as tax resident in Italy for the fiscal year in which the re-domiciliation takes place. For later years, the re-domiciling company should be regarded as tax resident in Italy based on the registered office criterion. Should a case of dual residence for tax purposes occur for the year of the re-domiciliation or a later year, the company may invoke the application of the relevant double tax treaty to define the correct residence for tax purposes.

In answering the following questions, it is assumed that the re-domiciling company becomes tax resident in Italy.

For an inbound re-domiciliation realized under the legal continuity principle, the tax basis of the assets and liabilities of the re-domiciling company would be equal to their fair market value (i.e. the arm’s length price that would be used for transfer pricing purposes) if the departure State is an EU Member State, a country included in the so-called white-list set forth by Ministerial Decree of 4 September 1996, or a country different from an EU Member State or a white-listed country, provided that the re-domiciling company has obtained a specific ruling from the Italian Tax Authority on the fair market values.

If the departure State is a country different from the ones listed in the preceding paragraph, the tax basis of the assets would be the lowest of acquisition cost, book value and fair market value, while the tax basis of the liabilities would be the highest of acquisition cost, book value and fair market value.

Whether or not the re-domiciling company is subject to an exit tax in the departure State does not affect the application of the above-mentioned principles. Should the departure State apply an exit tax on the assets and liabilities, but the fair market value is not the same as the tax basis defined according to the above-mentioned principles, a double taxation event could occur. It is debated among Italian scholars whether (and if so, to what extent) the re-domiciling company could claim credit for the foreign tax paid.

In principle, an inbound re-domiciliation realized under the legal continuity principle should entitle the re-domiciling company to maintain the holding periods already accrued. The Italian Tax Authorities confirmed this principle for the purposes of the holding periods under the participation exemption and the Parent-Subsidiary Directive regimes.

There are good arguments to maintain that the same principle should apply also to other regimes which are subject to holding periods or time limitations (e.g. the Interest-Royalties Directive, group taxation and VAT consolidation regimes).

It is debated among scholars if the re-domiciling company may carry forward the final tax losses that have not been offset in the other jurisdiction before its migration to Italy. The matter should be addressed in the context of the pending reform of the Italian tax framework (in particular, see Article 6(1)(e)(4) of Law No. 111 of 9 August 2023).

In addition, a specific tax regime has been enacted (Article 6 of Legislative Decree No. 209 of 27 December 2023) according to which 50% of the business income relevant for CIT purposes will be tax exempt provided that the company has transferred its business to Italy. 

This so-called reshoring regime would apply in the tax year of the transfer and the following five fiscal years. But certain recapture mechanisms apply if the business is, even partially, re-transferred abroad, and the regime is not available if the business was already carried out in Italy or another EU/EEA country in the 24 months before the transfer. The effectiveness of the regime is also subject to approval by the European Commission to confirm its compatibility with the EU State aid legislation.

No material transfer tax or stamp duty is levied in Italy when an Italian company transfers its corporate seat to a foreign jurisdiction.

If, following the outbound re-domiciliation, the re-domiciling company remains tax resident in Italy (for instance, because it continues to have its place of effective management or primary day-to-day management in Italy) or retains a PE in Italy to which all its assets and liabilities are allocated, no exit tax would arise in the hands of the company (including in respect of tax deferred reserves). It could also continue to offset tax losses within the limit of 80% of the company’s taxable income accrued in the fiscal year of the re-domiciliation.

If the re-domiciling company ceases to be tax resident in Italy and transfers all of its assets and liabilities out of Italy, latent capital gains on the assets and liabilities are subject to CIT at the rate of 24%. The chargeable amount is calculated as the difference between the fair market value of the assets/liabilities transferred and their tax basis. Tax deferred reserves would also be subject to tax. Tax losses can be offset against the taxable income of the company accrued in the fiscal year of the re-domiciliation (without the above-mentioned 80% limitation) and against the exit tax (if any).

The re-domiciling company may, subject to the provision of a guarantee, elect to pay the resulting exit tax (if any) in five equal yearly instalments if the destination country is an EU country or an EEA country included in the white-list that entered into an agreement concerning mutual assistance for the recovery of tax claims comparable to the Mutual Assistance Directive. Iceland and Norway do not meet this requirement.

Italian tax law does not provide for a specific withholding tax in the event of an outbound re-domiciliation. The same principle applies if the re-domiciling company retains a PE in Italy.

The Italian Tax Authorities clarified that, for the purpose of calculating the exit tax, the participation exemption regime does not apply in respect of participations owned by the re-domiciling company if the subject of the re-domiciliation constitutes a going concern. This principle applies even if the going concern consists mainly of shareholdings.