The decision specifying how to prepare adequate documentation in order to directly opt for the application of the patent box tax advantages has been released.
Such option must be exercised at the time of filing of the income tax return relating to the tax period to which the tax advantage refers to. The option is irrevocable, valid for one year and may be renewed. Adequate documentation shall allow taxpayers to benefit from the non-application of penalties in the event of adjustment of the tax advantages by the Italian tax authorities (Italian tax authority, decision prot. no. 658445 as of 30 July 2019).
TRANSFER OF INTEREST EXPENSE TO THE CONSOLIDATED FINANCIAL STATEMENTS
A consolidated company:
- which incurred a fiscal loss in the tax period or closed the financial year with balances down to 0,
- may transfer not only a possible fiscal loss of the tax period but also the share of non-deductible interest expense covered by EBIT in excess transferred by other companies participating to domestic or worldwide group taxation to the consolidated financial statements.
In such cases there is no risk that the prohibition to use fiscal losses incurred prior to group taxation is circumvented.
However, if the consolidated company achieved a positive result in the tax period, in partial derogation to the statements in newsletter 19/2009, it is assumed that the prohibition to transfer fiscal losses from previous years to domestic or worldwide group taxation is circumvented within the limits of the amount of said losses actually deducted at the time of determining the individual net result of the tax period (Italian tax authority, decision 67 as of 11 July 2019).
A merger leveraged cash out (MLCO), whereby the shareholders (individuals) of a company (target) reassess the value of participations for tax purposes and sell them to another company (vehicle) - in which one of the four selling shareholders and its two children (majority shareholders) are shareholders - and that subsequently is acquired by the target - is deemed elusive. Such a transaction would allow for a tax advantage that consists in zeroing the taxation of direct income (i.e. no reassessment and sale of equity investments) from profits by the sellers (Italian tax authority, Principio di diritto 20 as of 23 July 2019).