Slides showing new tax law in Italy direct tax, VAT, rates and reliefs

1. Spring 2017
Italian Tax Update
Como, 17 March 2017
Avv. Colin Jamieson

2. Spring 2017
Italian Tax
Update
Cernobbio,
17 March
2016
2
1. Tax revenues of the Italian budget + Macroeconomic View
2. Personal Income Tax
• 2017 Finance Law Update
• IRE – new alternative tax on business income
• Special regime for non doms
3. Corporate Income Tax
• 2017 Finance Law Update
• Rate Change
• Reliefs and Incentives
• Controlled Foreign Companies (CFCs)
4. Other Taxes - Update
5. VAT Update
6. International Update
7. Anti-abuse, ATAD and GAAR (general anti avoidance rule) EU
round-up
8. Tax Impact of Brexit – potential tax issues for Italian subs/PE’s of
UK groups

3. IRPEF Receipts – Jan 15 to Jan 17
Mar May June AugJuly Sep Oct Nov DicFeb AprJan

4. ITALY - TAX REVENUES
8%
41%
2%4%
28%
6%
2% 3%
5%
IRES
IRPEF
SUBSTITUTE TAX
OTHER DIRECT TAXES
VAT
MINERAL OILS
TOBACCOS
LOTTERIES
OTHER INDIRECT TAXES

5. Regional taxpayers IRPEF (millions of Euro)
€ 13.6
€ 0.4
€ 30.6
€ 5.0
€ 3.5
€ 15.2
€ 3.9
€ 14.3€ 11.6
€ 2.7
€ 4.8
€ 16.6
€ 3.9
€ 0.9
€ 13.6
€ 11.0
€ 1.6
€ 5.1
€ 12.4
€ 4.5
PIEMONTE
VALLE D'AOSTA
LOMBARDIA
LIGURIA
TRENTINO
VENETO
FRIULI VEN. GIU.
EMILIA ROMAGNA
TOSCANA
UMBRIA
MARCHE
LAZIO
ABRUZZO
MOLISE
CAMPANIA
PUGLIA
BASILICATA
CALABRIA
SICILIA
SARDEGNA

6. REGIONS
7.77%
0.24%
17.39%
2.88%
2.05%
8.67%
2.26%
8.15%6.64%
1.54%
2.73%
9.46%
2.22%
0.52%
7.73%
6.26%
0.93%
2.90%
7.08%
2.58%
PIEMONTE
VALLE D'AOSTA
LOMBARDIA
LIGURIA
TRENTINO ALTO ADIGE
VENETO
FRIULI VENEZIA GIULIA
EMILIA ROMAGNA
TOSCANA
UMBRIA
MARCHE
LAZIO
ABRUZZO
MOLISE
CAMPANIA
PUGLIA
BASILICATA
CALABRIA
SICILIA
SARDEGNA

7. VAT evasion in Italy estimated at between
€ 35-40 Bn per year

8. Tax Evasion in Italy
Evaded income
every year (ISTAT
estimate) PIL
270
60
120
17%
18% Of Tax
revenue of the
state
Figures in billions of Euro
+
IVA & IRPEF
Other unpaid taxes
Lost revenue for the state
(revenue agency estimate)
Falsification of costs and
invoices

9. Tax Evasion Countries

10. Revenues collected by the Italian Revenue
Agencies (in Bn of Euro)

11. 2017 IRPEF rates
Income rates and brackets of income for FY 2017
Bracket of income Rate Amount
Up to € 15,000 23% € 3,450
Over € 15,000 and up to € 28,000 27% € 6,960
Over € 28,000 and up to € 55,000 38% € 17,220
Over € 55,000 and up to €75,000 41% € 25,420
Over € 75,000 43% surplus x 43%
11
The above does not include the municipal tax supplement from 0.1% to 0.9% nor the regional
tax supplement – from 0.70% to 3.33% depending on municipality/region
The solidarity contribution equal to 3% of income over Euro 300,000 – has not (yet) been
extended for FY 2017. It does apply for FY 2016.

12. Employee Deductions
Transfers for Business
Business Transfers – per day € 46.48 (Italy) € 77,47 (abroad)
Reduced by 1/3
If meals or accommodation
offered
2/3
If both meals and
accommodation are offered
Alternatively
Reimbursement against Receipts
Not Taxable
Relocation Allowance 50% Max €1,549.37 (Italy) € 4,648.11 (abroad)
Moving expenses Not taxable if documented
13

13. Special schemes for employees returning
to Italy - 1
• 90% exemption for university professors and research fellows
• Relief starts in first year of residence and following 3 years
• 50% exemption for highly specialized workers - EU nationals and
nationals of white list countries.
• Requirements:
• Hold a university degree.
• Have been employed or self-employed outside of Italy during the last 24 months
• Have studied abroad to obtain a university degree or postgraduate master degree
during the last 24 months.
• Applies now also to the self-employed
• Tax relief for 5 tax years
14

14. Special schemes for employees returning
to Italy - 2
• 30% exemption for highly specialized workers - EU nationals and
nationals of white list countries.
• Requirements:
• Italian tax residents
• Been non-Italian tax resident for the five years prior to the change in residence
• Remain Italian tax resident for the following two years.
• Perform an employment activity, mainly in Italy, for an Italian tax resident employer
• As an executive or highly specialized employee.
• Work in Italy under an employment contract with an Italian tax resident employer or
with a company of the same group as the Italian tax resident company.
• Tax relief for 5 tax years
15

15. 2017 Summary of Social Security
Contracts of Employment Employee Employer
9% 30%
Co.co.co 10.66 21.33%
Self Employed (INPS gestione
separata)
25%
For self employed registered
for VAT
32%
For non VAT registered
individuals
24%
Pensioners and individuals
alternatively insured
16

16. IRPEF
Update
1. Extension of Energy Saving Incentive • Extension (originally in 2015 Finance Law) of
deduction (65%/36%) for home energy
improvements.
• Extended tax breaks for building renovations on
common parts of condominiums (tax credit of 70%)
• Possibility of transferring tax credit to suppliers, for
non taxpayers.
2. Extension of tax breaks for purchase of home
furnishings, energy saving devices
3. Extension of tax break for building
reconstruction
• Tax deduction of 50 % of cost in ten instalments, max
Euro 96k
4. Extension (2017 and 2018) of tax credit for the
restucture of «strutture ricettive» premises used for
hospitality
• Tax deduction of 65%. Also includes «agriturismi»
Over two tax years.
17

17. IRPEF
Update
“Sisma bonus” 2017-2021 - 50% - 85% tax credit for expenses sustained, max Euro
96,000 per annum
“Bonus bebè” 800 Euro for new babies and help for nursury schools
up to Euro 1,000.
A new Italian Decree has introduced additional
regulations for seconded employees in the European
area, as required under the EU directive on posted
workers.
These include requirements to maintain documentation,
obligations concerning working conditions and rules
concerning remuneration. The new regulations apply to
all employees seconded to or within Italy.
18

18. IRPEF
The news about Irpef
Voluntary Discosure 2.0 • Deadline 31 July for filing request – payment end
September 2017.
19

19. Tax Management
Finance Law Measures
“Rottamazione” delle Cartelle Equitalia • Pending proceedings arising between 200 and 2016 can
now be closed
• Benefit means annulment of penalties
• Interest and capital to be paid
• Sums due to collection agency still remain payable
• Covers most types of tax and social security contributions
• Payment during 2017 – although up to 30% can be
deferred to 2018
• Deadline is 31 March
• Soppressione di Equitalia • Equitalia, the Italian tax collection agency will be
«suppressed» and replaced by a new public entity – Tax
Agency - Collections. This new agency will step into the
shoes of Equitalia
20

20. IRPEF
Special «non dom» regime for HNWI’s
• Italian substitute tax in an annual amount of Euro 100,000.
• resident outside Italy for nine of the ten preceding tax years
• exemption can further be extended to family members at a cost of Euro 25,000 per member per
annum
• the substitute tax regime does not apply to the disposal of significant shareholdings in the first five
years that the regime applies
• Application in annual tax return following a successful clearance application made to the tax
authorities
• Tacit renewal year on year, until revoked or expiry of the rules
• Does not apply to capital gains on disposals of significant shareholding in the first five years of the
regime
• Does it extend to social security?
• Definition of non Italian Income?
21

21. Business Taxation
The news about Irpef
Superammortamento – super-depreciation Extended to 31 Dec 2017. Tax cost of business assets
increased to by 40%. No extension for company cars.
Iperammortamento – hyper ammortamento. Industria 4.0 50% uplift on cost for tax purposes.
Investment up to 31 Dec 2017.
For buisness assets with a significant technoligal content –
there is a listing in an attachment to the Finance Law
Tax Credit for Investment in R & D Extend to 31 December 2020
Cash basis for business using «simple accounting
regime»
Measure to help small businesseses. Taxable profits will be
based on income recevied and costs paid rather than
calcauted on an accruals basis.
22

22. Business Taxation
Corproate Tax Update
Extension of tax break for assignment of assets by
company to shareholders
Extended to 31 Dec 2017. Tax cost of business assets
increased to by 40%. No extension for company cars.
Extension of Legge Sabatini Soft loans for acquisition of plant and equipment to be used in
the business
Social Security Exemption for Businesses hiring students
or apprentices on open ended contract
Applies for three years. Max Euro 3,250 per annum
23

23. Business Taxation
IRI – company tax rates for unicorporated businesses
IRI – new business tax for IRPEF- payers IRI is an "optional" tax applicable to sole traders, individual
entrepreneurs, partnerships and transparent srl’s. It replaces
the normal income tax (IRPEF) that applies at scale rates up
to 43%.
Election applies for 5 years, can be renewed It is a substitute tax – therefore not creditable
The new IRI applies at the same rate as corporate income
tax (IRES) i.e. 24% from fiscal year 2017 onward.
Only applies to profit that have not been distributed
Need to check pros and cos
Social security contributions continue to be applied in the
normal way
IRPEF payable on profits that are «distributed»
24

24. Realignment of statutory and tax
values
• The 2017 Stability Law has extended the provisions regarding the
alignment of book and tax values of depreciable tangible and
intangible assets – excluding stock-in-trade. Applies to investment in
land and non quoted companies.
• Opportunity to step-up the tax value of assets to a higher book value,
through the payment of a substitute tax.
• 16% for depreciable assets, 12% for non depreciable assets 8% for
shareholdings and land
• For these taxpayers the increase in value deriving from the
alignment net of the substitute tax constitutes an untaxed
revaluation reserve that can be released by payment of a 10%
substitute tax.
25

25. IRES rate
• The 2016 Stability Law reduced the rate of IRES (corporate income
tax) to 24% starting with FY 2017.
• It also introduced a 3.5% IRES surcharge for certain credit and financial institutions. The
surcharge applies to the following taxpayers from FY 2017:
• banks;
• real estate investment trust management companies;
• holding companies of banking groups members of the banking association;
• securities intermediation companies (SIM, Società di Intermediazione Mobiliare):
• electronic money institutions;
• payment institutions;
• financial holding companies
• Does not apply to SGR’s.
• Tax deduction for interest expenses incurred by insurance companies and holding companies
of insurance groups will be restricted to 96% of the total payable starting from FY 2017
26

26. Non Operating Companies
What is a non operating company? Threshold for
Income and gains
Alternative
Minimum
Income
Shares, equities 2% 1.5%
Real Estate, Ships 4%-5%-6% 3%-4%-4.75%
Other tangible and intangible
assets, including finance
leases (plant, machinery,
patents, research costs, etc.)
15% 12%
27

27. Non Operating Companies
Corporate Income Tax Rate 34.5%
Other Consequences
Nols disallowed
VAT credits forfait
Exclusions
Listed companies, companies
controlled by listed companies
Companies > 10 employees
Ruling request
28

28. IRES and new Italian GAAP
• A modification inserted into the Milleproroghe Decree during the
process of conversion into law has allowed:
• The method of computation of taxable profits of IAS/IFRS adopters
to companies extended to companies that prepare financial
statements on the basis of the new national accounting standards
(OIC), with the exception of micro-enterprises.
• Interaction between presentation of financial information founded on
the principle of substance over form and tax rules
• For those affected by these changes the deadline for filing the
annual IRES/IRAP returns is also extended to 16 October 2017 (as
15 falls on a Sunday)
29

29. Assignment of assets to shareholders
• Extension of the relief for
• assignment of assets to members or shareholders
• the transformation of real estate management companies (general
partnerships, limited partnerships, limited liability companies, joint stock
companies and limited partnerships, real estate management companies) into
simple partnerships.
• Any such entity which by 30 September 2016, assigns or sells to
shareholders:
• real property (land and buildings), except those defined by their intended use
as operating assets used in the business, or
• assets recorded in public registers, which are not used in the conduct of the
company's business,
• Substitute tax in the place of regular income tax and IRAP
amounting to 8% (10.5% for non operating companies)
30

30. IRES reliefs
• Tax credit for the purchase of new business assets to be used in
production facilities located in the “Mezzogiorno” 1 January 2016
up to 31 December 2019.
• 20% for small enterprises.
• 15% for medium-sized enterprises;
• 10% for other enterprises.
• Patent Box - Part of total profits exempt from tax - from 2017 -
50%
• Tax Credit For R & D – 25%/50% of “supplemental costs”
32

31. Assistance for economic growth - ACE
• The ACE facility is a tax incentive for the capitalization of
companies that finance themselves with risk capital.
• ACE grants a deduction, based on the notional return of new
capital injected into an enterprise from 1 January 2011, in
computing net taxable profits.
• The notional return on new equity that can be deducted from
the net total income amounts to:
• 4.75% for 2016.
• 2.3% for 2017
• 2.7% for 2018
• Extended to sole traders, Snc’s and Sas’s
33

32. Assistance for economic growth - ACE
34
Year Description Increase Decrease
30-Apr-11 Transfer to reserves of profits of Euro 15,000 15,000
30-Apr-12 Transfer to reserves of profits of Euro 10,500 10,500
30-May-13 Distribution of reserves Euro 20,000 20,000
30-Apr-14 Transfer to reserves of profits of Euro 7,000 7,000
30-Apr-14 Transfer to reserves of profits of Euro 12.000 12,000
30-May-15 Distribution of reserves Euro 10.000 10,000
30-Apr-16 Distribution of reserves Euro 25.000 25,000
69,500 30,000
For FY 2016 the increase in capital is Euro 69,500-30,000 = 39,500
Assuming the net equity is more than Euro 39,500
The ACE deduction to taxable profits is equal to Euro 39,500 x 4.75% = Euro 1,876

33. 40% increase in ACE base for listed
companies
• companies whose shares are listed on a regulated market or
multilateral trading system in the EU or a European Economic
Area Member State, for the tax period when they are so
admitted to these markets and the following two periods, the
variation to the increase of shareholders' equity compared to
the amount shown for each period prior to those in progress in
the aforementioned tax periods increased by 40 percent
• The increased benefit is reserved for companies whose
securities are admitted to listing and trading after 25 June 2014
35

34. New Investment Ruling
36
Advance tax ruling intending to realize long-lasting and relevant investments within
the Italian territory, can obtain the advance opinion from the Italian Tax Agency
about the tax treatment applicable to a business plan and related extraordinary
transactions.
Open to resident and non-resident in Italy investors (companies/trusts)
Investment in Italy with significant and long lasting impact on employment
Worth at least Euro 30 million
First ruling was issued on 17 January 2017 – a logisitcs hub did not consitute a PE

35. 37
Clarifications on (merger) leveraged buyout transactions
Circular letter 6/2016 explains that an Italian acquisition vehicle (SPV) may deduct interest
expenses (subject to company law limitations and transfer pricing provisions) incurred in
the context of MLBO/LBO acquisitions both in the case of a subsequent merger with the
Italian target or in the case of an election for tax consolidation.
On merger of the SPV with the target, NOL limitations and non-deductible interest cost
concerns may be superseded by obtaining a positive tax ruling
If a parent company borrows to lend to SPV set up to acquire a target, the parent company
should be regarded as providing a service to the SPV with the latter paying an arm’s length
fee to the former
Allocation to the SPV or to the target of a portion of deal fees should be performed carefully
in order to avoid tax deductibility issues
IRES

36. IRAP
Standard rate is rate is 3.9% except
Many increased rates, reduced rates, exemptions etc.
e.g. (Lombardy):
Imprese Concessionarie - 4.2% (3.28% for start up period)
Banks and Financial Institutions – 5.57%
Insurance Businesses – 6.82%
Agricultural and Small Fishing Businesses – 1.9%
Public Administration and Entities – 8.5%
IRAP is a regional tax therefore need to check the website for the region
Lombardy
MEF
38

37. IRAP – Taxable Base
Industrial and commercial companies
The IRAP tax base of capital companies carrying on industrial or commercial
activities is determined as the difference between gross income and cost of
production
Rules make reference to standard format financial reports per Civil Code –
new rules to reflect new Italian financial reporting standards:
• extraordinary expenditure now deductible for IRAP (except disposal of
business/division)
• external foreign exchange rates
• bad debt reserves
39

38. Regional tax on production activities -
IRAP
• Summary of IRAP deductions available – private sector
40
IRAP taxable base Deductible amount (starting from the
2014 tax period)
Tax base not exceeding EUR
180,759,91
8,000
EUR 180,759,91 to EUR 180,839.91 6,000
EUR 180,839.91 to EUR 180,919.91 4,000
EUR 180,919.91 to EUR 180,999.91 2,000

39. VAT rates
• Standard rate 22%
• Reduced Rates 4% 5% 10%
41

40. VAT provisions
• The main changes over the year include:
• Spesometro quarterly – communication of VAT data (invoices issued
and VAT invoices received every quarter instead of annual – in detail.
• has been met by protest and opposition by business groups
• Annual Vat section of Tax Return abolished and replaced with a special
VAT return
• Clarification of Bitcoin transactions – VAT exempt (art 10 VAT code)
where effected by a business
42

41. History of Italian VAT
Period Rate
From 01.01.1973 to 07.02.1977 12%
From 08.02.1977 to 02.07.1980 14%
From 03.07.1980 to 31.10.1980 15%
From 01.11.1980 to 31.12.1980 14%
From 01.01.1981 to 04.08.1982 15%
From 05/08/1982 to 31.07.1988 18%
From 01.08.1988 to 30.09.1997 19%
From 01.10.1997 to16.09.2011 20%
From 17.09.2011 to 30.06.2012 21%
From 01.07.2012 to 31.12.2016 22%
2017 22%
2018 24-25%?
43

42. Italian international international
taxation update
• 2016 saw significant changes in the field of international
taxation:
• the deductibility of expenses and negative components of income
involving black listed suppliers;
• controlled foreign companies (“CFC’s”);
• the regulation of transfer pricing and in particular the reporting
obligations for multinational groups as a result of BEPS.
• New white list
• New international ruling
44

43. Deductibility of expenses paid to black listed
suppliers
• The regime which previously provided for the non tax-
deductibility of expenses and negative income components
arising from transactions with suppliers located in States or in
non-EU territories defined in a “black list” has been abolished.
• Due to the changes, those costs thus become deductible,
subject to ordinary rules:
• inherent to the business carried on by the company.
• arm’s length value (for transactions with related parties)
45

44. 46
New White List – 22 August 2016
Albania, Alderney, Algeria, Anguilla, Argentina, Armenia, Aruba, Australia, Austria,
Azerbaijan, Bangladesh, Belarus, Belgium, Belize, Bermuda, Bosnia and Herzegovina,
Brazil, British Virgin Islands, Bulgaria, Cameroon, Canada, Cayman Islands, China,
Colombia, Congo Republic, Cook Islands, Costa Rica, Croatia, Curacao, Cyprus, Czech
Republic, Denmark, Ecuador, Egypt, Estonia, Ethiopia, Faroe Islands, Finland, France,
Georgia, Germany, Ghana, Gibraltar, Greece, Greenland, Guernsey, Herm, Hong Kong,
Hungary, Iceland, India, Indonesia, Ireland, Isle of Man, Israel, Ivory Coast, Japan, Jersey,
Jordan, Kazakhstan, Kirghizstan, Kuwait, Latvia, Lebanon, Liechtenstein, Lithuania,
Luxembourg, Macedonia, Malaysia, Malta, Mauritius, Mexico, Moldova, Montenegro,
Montserrat, Morocco, Mozambique, Netherlands, New Zealand, Nigeria, Norway, Oman,
Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russia, San Marino, Saudi
Arabia, Senegal, Serbia, Seychelles, Singapore, Slovak Republic, Slovenia, South Africa,
South Korea, Spain, Sri Lanka, St. Maarten, Sweden, Switzerland, Syria, Taiwan,
Tajikistan, Tanzania, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Turks
and Caicos Islands, Uganda, Ukraine, United Arab Emirates, United Kingdom, United
States, Uzbekistan, Venezuela, Vietnam and Zambia.
International

45. CFC regulations
• On 4 August 2016, the Italian Tax Authorities (ITA) issued Circular
n. 35/E (the Circular), providing extensive clarifications on the Italian
Controlled Foreign Companies (CFC) regime.
• The Circular also summarizes the recent changes to the CFC rules
introduced by 2015 and 2016 Budget Laws (Law n. 190/20141 and
Law n. 208/20152) as well as by Legislative Decree n. 147/2015
(Internationalization Decree3).
• Among the various issues addressed:-
• CFC black list countries and black list income
• Definition of special tax regimes
• Computation of the CFC income
• Foreign Tax Credit (FTC)
• Procedural aspects – ruling no longer mandatoryy
47

46. CFC regulations
• Jurisdictions with tax regimes, including special regimes, in
which the nominal level of taxation is lower than 50% of the
applicable Italian rate will be treated as tax havens.
• Move away from black-list approach
• Abolition of compulsory ruling for the disapplication of the
regime
• Separate indication in Annual Tax Return of CFC Investments
48

47. CFC regulations
49
Up to 31 Dec 2014 From 1 Jan 2015 to 31 Dec 2015 After 1 Jan 2016
Jurisdictions listed in the Ministry Decree of
21/11/2001 (black list) with:
Jurisdictions listed in the Ministry Decree of
21 Nov 2001 (black list) (as amended) with:
Nominal tax rate lower than 50% of the
Italian tax rate
a) Taxation lower than 30% of the Italian tax
rate
a) Taxation less than 50% of the Italian tax
rate
Special tax regimes (nominal tax rate lower
than 50% of the Italian tax rate)
EU and EEA Countries are excluded
b) Lack of an adequate exchange of
information
b) Lack of an adequate exchange of
information
c) Equivalent criteria Special tax regimes with:
a) Taxation lower than 50% of the Italian tax
rate; or
b) Taxation formally higher than 50% of the
Italian tax rate but substantially lower by
virtue of special privileged tax treatment
EU and EEA Countries are excluded

48. Transfer Pricing - CbCR
• The Stability Law 2016, implemented the provisions of the Final Report on the
Action 13 of the OECD base erosion and profit shifting project (BEPS) "Transfer
Pricing Documentation and Country-by-Country Reporting (CbcR) " introducing
specific reporting obligations for larger multinational groups.
• EU Directive 2016/881 25 May 2016 introduces automatic information exchange
between member states for CbCR
• On 8 March 2017 A minsiterial decree has been issued implementing CbCR
process for Italian entities which form a Multinational group.
• Country-by-country reporting has been introduced for resident parent companies
of group that are obliged to file consolidated financial statements, with
consolidated revenues in previous year at least of Euro 750 million. Revenues,
profit before tax, tax paid, etc. should be disclosed.
50

49. Transfer Pricing - CbCR
• Italian subsidiaries are required to file a CbC reprot if the foreing parent entiuty is resident
(i) has not implemented the CbCR; or (ii) does not have a Qualifying Competent Authority
Agreement in place with Italy for the automatic exchange of information contained in the
CbC report; or (iii) has incurred a systemic failure to exchange the information contained in
the CbC report received by the parent company resident in its jurisdiction.
• The MNE Group may designate another entity of the MNE Group to file the CbC
report in its own jurisdiction on behalf of the parent company. Filing by the SPE
relieves the requirement for local filing if certain conditions are met.
• The CbC report must be filed with the Italian Competent Authorities within 12 months from
the end of the reporting period. The Italian Tax Authorities will then exchange the CbCR
with the EU Member States and any other jurisdiction with which Italy has a Qualifying
Competent Authority Agreement within 15 months (18 months for the first reporting period)
from the last day of the fiscal year to which the CbCR relates.
• No correlation with Italian Transfer Pricing Documentation Rules
51

50. BEPS actions status
52
Action
1. VAT on digital services EU directive implemented
2. Hybrids Already implemented
3. CFCs Already implemented
4. Interest Deductions Italy already has a fixed interest rule (30
EBITDA) – some modification required
5. Harmful Tax Practices Ongoing
6. Prevent Treaty Abuse Statutory Anti Avodiance Rule 2015
Beneficial Ownership Clamp-Down
7. PE status Ongoing – Investment Ruling Procedure
8-10, 13 Transfer Pricing CbCR rules issued. Documentation rules
already issued. Some work still
necessary
8. Disclosure of Aggressive Tax Plans No action as yet
14. Dispute Resolution Work done on ruling procedures and
dispute resolution per mutual
agreement procedures

51. Anti-Tax-Avoidance Package
• On 21 June 2016, the Council agreed on a draft directive addressing tax
avoidance practices commonly used by large companies.
• The directive is part of a January 2016 package of Commission proposals
to strengthen rules against corporate tax avoidance. The package builds on
2015 OECD recommendations to address tax base erosion and profit
shifting (BEPS).
• The directive will ensure that the OECD anti-BEPS measures are
implemented in a coordinated manner in the EU, including by 7 member
states that are not OECD members. Furthermore, pending a revised
proposal from the Commission for a common consolidated corporate tax
base (CCCTB), it takes account of discussions since 2011 on an existing
CCCTB proposal within the Council.
53
COUNCIL DIRECTIVE (EU) 2016/1164 of 12 July 2016

52. Anti-Tax-Avoidance Package
• Lays down anti-tax-avoidance rules in five specific fields:
• Interest limitation rules. The draft directive sets out to discourage profit
shifting via interest deductions by limiting the amount of interest that the
taxpayer is entitled to deduct in a tax year.
• Exit taxation rules. Exit taxation prevents tax base erosion in the state of
origin when assets that incorporate unrealised underlying gains are
transferred, without a change of ownership, out of the taxing jurisdiction of
that state to another state.
• General anti-abuse rule. A general anti-abuse rule therefore enables tax
authorities to deny taxpayers the benefit of abusive tax arrangements.
• Controlled foreign company (CFC) rules.
• Rules on hybrid mismatches.
54

53. 55
Abolition of article 37bis D.P.R. n. 600/1973
• Article 1 of D.lgs 5 August 2015 amends the Taxpayers' charter
with a new art. 10-bis, thus providing codification in law the notion
of abuse of law, deriving from the case law and repealing article.
37-bis of Presidential Decree 600/1973.
• Abuse of law arises in the presence of one or more transactions
which, although in formal compliance with tax rules, are devoid of
economic substance and allow the taxpayer, who effects the
transaction(s), to achieve an undue tax advantage.
Abuse of Law and Italy’s GAAR

54. 56
Corporate Taxation
Tax Directives – nil withholding on dividends, interest and royalties.
• UK has limited withholding tax anyway compared to most European partners
• Double treaty rates not always nil
• Timescale for renegotiation new treaty with EU/changes
Other directives/regulations – mutual co-operation, mergers, anti-avoidance, succession
Other initiatives – Common Consolidated Tax Base/Uniform Response to BEPS
UK Double Tax Treaties remain unaffected – BUT limitation of benefits clauses for flow
through – e.g. UK Holding company
Preferential treatment under domestic law – many EU nations have non-
discrimination/preferential treatment for nationals/residents of EU Member
UK has been obliged to bring domestic law into line with EU law e.g.
• group relief, tax credits
• UK personal allowances
Brexit – Impact on Tax

55. 57
Indirect Taxation
VAT - UK law derives from EU law.
• UK will be free to to decide but likely to keep VAT. Unless otherwise agreed
• One stop shop mechanisms
• Triangulation
Customs & Excise Duties
• UK will be free to determine its own absent new arrangements.
• Possibility of duties being applied on UK exports into EU.
• Loss of deferment arrangements.
Indirect taxes
• On financial products – EU member states will be free to impose discriminatory tax
rates on UK financial products
• Capital Duties
Brexit – Impact on Tax

56. 58
Other Tax Issues
• Financial Reporting standards
• Social security & Pensions
Brexit – Impact on Tax

57. Guernsey
Branch
59
Case Study
Albachiara
(Italy)
CCI SA
(CH)
CCI Inc
(US)
CCI
Canada
CCI
Ireland