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Italy: Bill to transpose EU anti-tax avoidance directives into law

Italy: EU anti-tax avoidance directives

Provisions to transpose, into Italian tax law, the EU directives on anti-tax avoidance (ATAD) are pending before the Italian parliament. During the parliamentary consideration, measures under the bill could possibly be amended before the legislation’s final approval (expected by the end of 2018).

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There are two EU directives as part of the ATAD package.

ATAD 1 (EU Council Directive 2016/1164 of 12 July 2016) contains anti-abuse rules to address tax evasion by multinational companies (that is, the anti-avoidance principles drawn from the OECD’s base erosion and profit shifting (BEPS) project). 

ATAD 1 introduces new rules to be adopted by all EU Member States in five areas: 

  • Interest limitation rules
  • Exit taxation rules
  • General anti-avoidance rules (GAAR)
  • Controlled foreign company (CFC) rules
  • Hybrid-mismatch rules

 

The second EU directive—ATAD 2 (EU Council Directive 2017/952 of 29 May 2017)—modifies ATAD 1 as regards hybrid mismatches with third countries. 

In general, the proposals in the Italian legislation would replace the tax rules on interest deduction for corporate entities, the exit and entry tax rules, and the CFC rules. A report accompanying the bill clarifies that there is no need to implement the GAAR as set out in ATAD 1 because Italian domestic law is already aligned with these measures. However, by contrast, Italy lacks an anti-hybrid measure. 

Once enacted, the new rules generally would apply from the fiscal year following the year “in progress” on 31 December 2018 (i.e., from 2019 for calendar year taxpayers). The effective date for the measures concerning hybrids would be postponed. The bill also provides for certain transitional measures. 

 

Read an October 2018 report [PDF 220 KB] prepared by the KPMG member firm in Italy

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