Italy: Branch exemption, implementing regulation - KPMG Global
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Italy: Branch exemption, implementing regulation

Italy: Branch exemption, implementing regulation

A “branch exemption” regime that allows Italian resident enterprises to elect an exemption for the profits (and losses) of their foreign permanent establishments (branches)—an alternative to ordinary tax treatment with a tax credit system—has been effective since 2016. Because there have not been any implementing regulations, the branch exemption regime has not been available.


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The Italian tax authority in late August 2017 published a regulation—no. 165138—that contains measures to implement the branch exemption regime. The implementing regulation includes among other items:

  • Guidelines on when and how to elect the branch exemption regime
  • Rules for how enterprises with pre-existing branches can participate in the regime
  • An explanation of what is the effect on all branches of an election for the exemption regime
  • Measures on when the regime no longer applies (in general, the election is not revocable but it can cease to apply following a sale or after certain corporate reorganizations)
  • Transitional rules and measures on the recapture of tax losses
  • Rules for attribution of profits to exempt branches


Read a September 2017 report [PDF 193 KB] prepared by the KPMG member firm in Italy

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