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Italy: Interest limitations, exit tax, CFC rules among ATAD provisions

Italy: Interest limitations, exit tax, CFC rules

A decree to implement the transposition of two EU Anti-Tax Avoidance Directives (ATAD) into Italian law was published in late December 2018 in the official gazette. There are two EU directives as part of the ATAD package now transposed in Italian law.

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The first directive—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) including:

  • 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. 

The decree implementing the two directives into Italian law generally reflects the provisions as included in the bill proposing these measures; however, certain changes were made to the interest limitation rules during the legislative process. 

The new measures under the decree generally are effective from the tax period following the one in progress on 31 December 2018 (that is, 2019 for calendar year taxpayers); however, the hybrid mismatch measures apply from 1 January 2020 or in the case of reverse hybrid measures from 2022.


Read a January 2019 report [PDF 197 KB] prepared by the KPMG member firm in Italy

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