The regulations (Italian) are contained in a decree dated 2 August 2013, which was published in the Italian official gazette on 12 August 2013.
The Italian “exit tax” regime was amended in 2012, to comply with a judgment of the Court of Justice of the European Union (CJEU) in National Grid Indus BV (C-371/10, 29 November 2011).
The CJEU found that the Italian exit tax provisions were not compliant with EU tax law.
Under the amended tax law provisions (article 166 of the Italian income tax law), an Italian company that transfers its tax residence to another EU Member State or to European Economic Area “white list” countries (i.e., EU Member States plus Iceland and Norway) may elect either for:
- Immediate payment of taxes due on the unrealized capital gains relating to the transferred assets, or
- Postponement of the tax payments to the time when gain on the transferred assets will be realized
New rules under August 2013 decree
The implementing regulations provide that at the time of the corporate migration, the taxpayer may elect for:
- Immediate tax payment (under a “deemed realization” method)
- Tax payments in installments (plus interest) over a 10-year period (under a deemed realization—alternative payment method)
- Postponement of the tax payment (until transferred assets are realized)
To elect for the tax deferral treatment, taxpayers must arrange for a guarantee (that would guarantee payment of the tax to the Italian tax authorities).
The new decree also provides certain details, including information concerning:
- What type of assets/items can benefit from the tax deferral
- How capital gains are to be determined
- How tax losses (if any) are to be used in light of the corporate migration
- The tax deferral is available with respect to the transfer of an Italian permanent establishment (PE) to another EU/EEA “white list” country (apparently in recognition of subsequent CJEU exit tax judgments in cases involving Portugal (C-38/10) and Spain (C-64/11))
- Situations that may “interrupt” the tax deferral
The regulations also anticipate that additional future guidelines will be issued by the Italian tax authorities concerning certain formalities for the tax deferral, as well as guidance providing rules for installment payments, for periodical monitoring of the capital gains, for guarantees to be granted, and other measures.
Tax professionals in Italy have observed that practically speaking, despite the August 2013 decree, taxpayers are currently unable to opt for this new exit tax regime.
For more information, contact a KPMG tax professional in Italy:
+39 06 809 631