DIRECT TAXES
INTEREST AND DIVIDENDS PAID BY REITS (SIIQ)
Interest paid by a REIT on loans obtained from an EU parent company may benefit from the withholding tax exemption scheme pursuant to article 26-quater of the Italian DPR 600/1973.
Whereas dividends paid by both unlisted and by listed REITs (i.e. SIIQs and SIINQs) to the EU parent for profits from exempt operations cannot benefit from the withholding tax exemption scheme pursuant to article 27-bis of the Italian DPR 600/1973 (so called "mother-daughter-regulation") (Italian tax authority, answer to request for advance ruling 93 of 9 April 2025).
DEDUCTION OF INTEREST EXPENSE ON MORTGAGE-BACKED LOANS
Interest expense on mortgage-backed loans for properties used for ground installation of photovoltaic panels, and on which a surface right will be established, do not benefit from the full deduction provided for under article 1 (36) of the Italian law 244/2007 (applicable to properties intended for lease).
This is because a lease is not comparable to the establishment of a surface right (Italian tax authority, answer to request for advance ruling 110 of 15 April 2025).
DETERMINATION OF FOREIGN TAX CREDIT
The part of foreign income that does not add to the Italian income, as provided for under the participation exemption scheme pursuant to article 87 of the Italian income tax code (TUIR), does not meet the eligibility requirements for a foreign tax credit to be used in Italy. In such case, a proportional reduction of the foreign tax, as provided for under article 165 (10) of the Italian tax code (TUIR) applies.
Moreover, the reduction must be calculated on the "actual" foreign tax and not on the "hypothetical" foreign tax that would have been levied in the foreign country, if the participation exemption regulation in force in such country had not been applied (Italian tax authority, answer to request for advance ruling 101 of 15 April 2025).
ELEGIBILITY FOR FOREIGN TAX CREDIT
The right to use the tax credit for taxes paid abroad is not precluded in the event of:
- failure to file an income tax return,
- failure to disclose the income yielded abroad in the income tax return filed.
The tax credit may be enforced within the ordinary 10-year statute of limitations provided for under article 2946 of the Italian civil code (Italian Supreme Court, judgement 9671 of 13 April 2025).
NON-COMPETITION CLAUSE
Sums paid upon termination of employment relationships fall under the scope of article 15 of the OECD Model Convention. Article 15 sets forth that income from employment is taxed in the beneficiary's state of residence only, unless the work is performed also in the other contracting state (this results in concurrent taxation in both countries).
Thus, sums paid under a non-competition covenant are subject to taxation in the recipient's state of residence only if they are not directly related to the work performed before the termination of the employment relationship in the other state (Italian tax authority, answer to request for advance ruling 111 of 17 April 2025).
DEMERGER OF PARTNERSHIPS
The demerger of a partnership
- in favour of other three newly incorporated partnerships, without any settlement or compensation among the partners,
- by allocation of the interest holdings of the demerged partnership to the beneficiaries,
from a fiscal point of view
- does not fall under the scope of the tax neutrality scheme pursuant to article 173 of the Italian income tax code (TUIR), since the partnerships do not carry out business activities;
- but does not even fall under one of the income cases listed under article 67 of the Italian income tax code, if the transferred assets (equity interests in this case) maintain in the beneficiaries the same fiscally recognized value that they had in the demerged partnership (Italian tax authority, answer to request for advance ruling 124 of 30 April 2025).
WITHHOLDING TAX ON RENTAL FEES
Rental fees for boxes and pallets paid by a company resident in another EU member state are subject to withholding tax in Italy at 30 percent; such withholding tax may be reduced by applying the double taxation agreement in force between Italy and the other EU member state (Italian tax authority, answer to request for advance ruling 1117 of 28 April 2025).
BUSINESS RELATEDNESS OF COSTS
The business relatedness of costs must be assessed with reference to the potential future usefulness or benefits (expansion in the market sector, increase in customers, introduction to the market of new products and services) that may be achieved by the company (Italian Supreme Court, judgement 7741 of 24 March 2025).
VAT
COMPLEX SERVICE
For VAT purposes, the lease of a property for business purposes – and more specifically of a racetrack – jointly with the provision of other services, such as ''hospitality services for the participants, catering and organizational support, which are indispensable for the holding of the sporting event'', is a complex service related to a property territorially relevant in Italy (Italian tax authority, answer to request for advance ruling 87 of 3 April 2025).
ANCILLARY SERVICES
Services rendered as part of the operation of a water amusement park, such as parking spaces made available and umbrellas rented out, are ancillary to the entry to the water amusement park (Italian tax authority, answer to request for advance ruling 96 of 11 April 2025).
PURCHASER'S RIGHT TO DEDUCTION IN THE EVENT OF TAX EVASION BY THE SUPPLIER
The purchaser's right to deduct VAT is to be granted only if he or she "did not and could not have had knowledge" of the supplier's VAT evasion.
Consequently, in the event of a corporate shareholding relationship or of personal relations that make it possible to assume that the purchaser could have behaved in a way as to have certainty (or dutiful knowledge) of the failure by the supplier to pay the VAT charged, the purchaser may be denied his or her right to deduction (Italian Supreme Court, judgement 9912 of 16 April 2025).
REGISTRATION FEES
ESTABLISHMENT OF SURFACE RIGHT ON AGRICULTURAL LAND
The 9 percent rate set forth in the first sentence under article 1 (1) of the tariff (TUR - Testo unico sulle Imposte di Registro), and not the 15 percent rate, applies to deeds on the establishment of surface rights on agricultural land.
Thus, the Italian tax authority aligns itself with the guidance of case-law, which had rejected the administrative practice to apply the 15 percent rate set forth for transfers and had instead deemed applicable the 9 percent rate (Italian tax authority, resolution 23 of 3 April 2025).
INVOICE RECORDING REQUIRED FOR VAT DEDUCTION
If an ingoing invoice is not recorded:
- neither in the relevant register of year “n”,
- nor in the section relating to invoices received in year “n” and recorded in year “n+1” (within the deadline for filing the tax return relating to year “n”),
VAT may not be deducted by submitting a supplementary tax return.
Furthermore, according to the Italian tax authority, in the event of failure to record the ingoing invoice penalties may be levied (Italian tax authority, answer to request for advance ruling 115 of 17 April 2025).
VAT DEDUCTION IN THE COMPANY'S LIQUIDATION PHASE
The activity carried out by a company in its liquidation phase may not necessarily be linked to the one previously performed during the ordinary course of business.
Consequently, an insurance company is entitled to deduct VAT paid on purchases made during the liquidation phase, if there is a direct link between the use of the goods and services purchased and the performance of the liquidation activity. The fact that the company's previous operations were exempted from VAT and that consequently VAT paid on purchases was not deductible, is irrelevant in this regard (Italian Supreme Court, judgement 4755 of 24 February 2025).
INHERITANCE AND GIFT TAX
NEWS INTRODUCED UNDER THE TAX REFORM
The Italian tax authority provided clarifications on the inheritance and gift tax news introduced under the Italian legislative decree 139/2024 (implementing tax delegation).
Among the most important news thus clarified is the application of the self-assessment principle to inheritance tax, which replaces the principle under which inheritance tax was due was established by the tax authorities.
Another important news regards the assets of the estate that may now be released by bank and other financial intermediaries, even before the inheritance tax return is filed, if
- the applicant is the sole heir and aged less than twenty-six,
- the estate includes real estate properties, and the release is limited to the amounts required to settle cadastral and mortgage fees and stamp duties owed for the properties (Italian tax authority, answer to request for advance ruling 3 of 16 April 2025).
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Sincerely yours
HAGER & PARTNERS