DOING BUSINESS IN ITALY 2011 April 2011
Picolli, Difino & Associati
Corso Italia, 8 – 20122 Milano T. +39–02–89011039 – F. +39-02-89011291 www.pdctax.com
1 Doing Business in Italy - April 2011
Introduction The aim of this publication is to provide background information for setting up and running a business in Italy, in compliance with the legislation in force in 2011. It is of use to anyone who is thinking of establishing a business in Italy as a separate entity, as a branch of a foreign company or as a subsidiary of an existing foreign company, and to anyone who is considering coming to work or live permanently in Italy.
2 Doing Business in Italy - April 2011
1. The publication describes the business environment in Italy
and outlines the financial and legal implications of running, or working for, an Italian business. The most important issues are included, but it is not feasible to discuss every subject in detail within this format. Accordingly, Doing Business in Italy 2011 is written in general terms and is not intended to be comprehensive. If you would like to know more, please contact our Firm who can provide you with implementation guidance. Contents 1.
Corporate income tax (IRES) (TUIR, articles 72-184).........................................8 1.1
Scope and residence (TUIR, article 73)..................................................8
1.2
Taxable income (TUIR, articles 81, 83, 109 and 110)............................8
1.3
Specific Items...........................................................................................9 1.3.1 Capital gain and losses, extraordinary gains and losses (TUIR articles 86, 88 and 101) 1.3.2 Inventories (TUIR, article 92) 1.3.3 Construction, supply and service contracts (TUIR, article 93) 1.3.4 Financial instruments (TUIR, article 94) 1.3.5 Depreciation and amortization (TUIR, articles 102, 103, and 108) 1.3.6. Capitalised expenses (TUIR, article 108) 1.3.7. Entertainment expenses 1.3.8. Accruals and provisions (TUIR, articles 105, 106, and 107)
1.4
The participation exemption (TUIR, article 87)...................................12 1.4.1 Dividends (TUIR, article 89) 1.4.2 Capital gains (TUIR, article 87)
1.5
Restrictions on Deductibility of Interest Expenses (TUIR, art.96)…..12
1.6
Tax losses (TUIR, article 84)................................................................13
1.7
Imputed income (sector surveys)..........................................................14
1.8
Tax consolidation (TUIR, articles 117-142)........................................14
1.9
Tax transparency (TUIR, articles 115-116).........................................15
1.10
Rulings..................................................................................................15
1.11
International tax aspects.......................................................................16 1.11.1 The EC Directive 3
Doing Business in Italy - April 2011
1.11.1.1 The EC Parent-Subsidiary Directive 1.11.1.2 The EC Interest and Royalty Directive 1.11.2 Intercompany transactions 1.11.2.1 General principles 1.11.2.2 Sale of goods 1.11.2.3 Services 1.11.2.4 Royalties 1.11.2.5 Interest 1.11.2.6 Limited-risk-margins agreements 1.11.3 Tax Treaties (TUIR, article 169) 1.11.4 Foreign tax credit (TUIR, article 165) 1.11.5 Controlled foreign companies (TUIR, article 167 and 168) 1.11.6 White list countries (TUIR, article 168-bis) 1.11.7 Permanent establishment (TUIR, article 162) 1.12
IAS/IFRS................................................................................................28 1.12.1 Companies required to adopt IAS/IFRS 1.12.2 Tax effects of the introduction of IAS/IFRS
1.13 Reorganisations.........................................................................................31 1.13.1 Acquisitions 1.13.2 Spin-offs (TUIR, articles 175 and 176) 1.13.3 Transfer of registered office abroad (TUIR, article 166) 1.13.4 Mergers (TUIR, article 172) 1.13.5 De-mergers (TUIR, article 173) 1.13.6 Liquidations (TUIR, article 182) 1.13.7 Conversions (TUIR, articles 170 and 171) 1.13.8 Exchange of shares (TUIR, article 177) 1.13.9 Company reorganisations in the EU (TUIR, articles 178-179) 1.14 Tax incentives............................................................................................36 1.15 Tax Rates...................................................................................................36 1.16 Returns and payment................................................................................36 1.17 Deadlines..................…...............................................................................36 2.
Regional tax on productive activities (D. Lgs 15 December 1997,no.446)....….40 2.1 Taxpayers......................................................................................................40 2.2 Taxable income.............................................................................................40 2.3 Rates of tax…................................................................................................40
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2.4 Accounting aspects........................................................................................40 3.
Value added tax (DPR 26 October 1972, no. 633)...............................................41 3.1 General scope................................................................................................41 3.2 Foreign VAT tax payers................................................................................41 3.3 VAT Package.......…......................................................................................42 3.4 Import VAT...................................................................................................42 3.5 VAT rates………….......................................................................................42 3.6 VAT requirements………………………………………………………….42
4.
Personal income tax (TUIR, articles 1-71)..........................................................43 4.1 Residence ( TUIR, article 2)……………………………………………….44 4.2 The taxation of residents (TUIR, article 3)..................................................44 4.3 Taxable income (TUIR, article 3)................................................................44 4.4 Treatment of the family (TUIR, articles 12 – 13)........................................44 4.5 Income from employment (TUIR, articles 49 – 52)....................................44 4.5.1 Salary 4.5.2 Foreign employment income (TUIR, article 51) 4.5.3 Benefits-in-kind 4.5.4 Treatment of directors 4.6 Income from a business of profession (TUIR, articles 53 – 66).................45 4.7 Income from property (TUIR, articles 25 – 43)...........................................45 4.8 Income from investments (TUIR, articles 44 – 48).....................................45 4.8.1 Dividends 4.8.2 Interest 4.8.3 Capital gains (TUIR, article 67) 4.8.3.1 Gains from the sale of real property 4.8.3.2 Gains from the sale of shares or partnership interests 4.9 Deductions and allowances (TUIR, article 10)............................................47 4.9.1 Deductions for expenses 4.9.2 Personal allowances 4.10 Tax treatment of non-residents (TUIR, article 23)....................................48 4.10.1 Withholding taxes 4.11 Rates of income tax (TUIR, article 11)......................................................49 4.12 Regional and local income taxes ...............................................................49 4.13 IRAP (D. Lgs 15 December 1997, no. 446)................................................49 4.13.1 Scope of charge on individuals
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4.13.2 Taxable income 4.13.3 Rates of tax 4.14 Double Taxation Treaties...........................................................................50 4.15 Tax returns and payments..........................................................................50 4.16 Inheritance and gift tax..............................................................................50 5.
Other Taxes............................................................................................................52 5.1 Registration tax (DPR 26 April 1986, no. 131)...........................................52 5.2 Local tax on real estate (D.Lgs 30 December 1992, no. 504).....................52
6.
Social security contributions.................................................................................53 6.1 Employers and employees.............................................................................53 6.2 The self-employed.........................................................................................53
Appendix 1 Double taxation agreements.....................................................................54 Appendix 2 Estate tax treaties......................................................................................54 Appendix 3 Social security treaties..............................................................................55 Appendix 4 Directive no. 435/90/CEE for parent companies and subsidiaries of different Member States: EU countries corporate form eligible for certain specific tax benefits...............................................................…..................55 Appendix 5 Directive no. 435/90/CEE for parent companies and subsidiaries of different Member States: EU countries corporate income taxes eligible for certain specific tax benefits............................................…..................58 Appendix 6 Application form for exemption on interest and royalties payments in accordance with the Interest and Royalty Directive.................................59
6 Doing Business in Italy - April 2011
