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Italy: Tax relief measures for individuals and family businesses (COVID-19)

Italy: Tax relief measures

Certain measures introduced by the Italian government in response to the coronavirus (COVID-19) pandemic have implications for individual taxpayers and their business activities.


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Under existing law, there is a special tax regime for dividends paid to non-commercial partnerships, and this provides that dividends must be taxed on a look-through basis to the partners. However, some aspects were not expressly regulated and remained unclear. This uncertainty has been addressed by article 28 of Law Decree no. 23 of 8 April 2020 (the so-called “Liquidity” decree). The Liquidity decree has extended the look-through regime to instances when dividends received by non-commercial partnerships are distributed by non-resident companies and entities, including trusts. Also, it has been clarified that if the partners of the non-commercial partnership are resident non-commercial entities, the dividend is fully taxable, and that the 26% or 1.20% withholding tax will apply if the partners are not resident in Italy. Finally, the measures clarify that the new look-through taxation regime will apply to dividends received as of 1 January 2020.

A transitional regime is available for distributions approved by 31 December 2022 and made by companies/entities subject to IRES (corporate income tax) and from profits generated up to the fiscal year in progress on 31 December 2019. These profits will be subject to the rules predating the 2018 Budget Law.

Other measures in the Liquidity decree provide a temporary safeguard with respect to loans made by shareholders to their companies between 9 April 2020 (the effective date of the decree) and 31 December 2020. In general, Italian civil law provides that repayments of shareholder loans can only be made after the claims of other creditors have been satisfied. Also, if a loan is repaid in the 12-month period before a declaration of bankruptcy, the repayment must be returned to the company. The relief provided by the Liquidity decree allows for shareholders to make loans to their companies without running the risk that their claims will be ranked lower than those of other creditors or that the shareholders may even have to return any loan repayments made to them in the 12 months before bankruptcy is declared.

Other measures in the so-called “Cure Italy” decree introduce special tax relief to encourage donations to be used to address the pandemic in Italy. The tax relief that is made available for such donations by individuals and non-commercial entities allows a deduction of 30% of the amount of the donations subject to a cap of €30,000. However, businesses can deduct from their taxable business income the amount of donations made in 2020 (in cash or in-kind support).

Read a May 2020 report [PDF 211 KB] prepared by the KPMG member firm in Italy

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