On December 28, 2023, Italian Legislative Decree No. 209/2023 (Decree) on international tax reform was published in the Official Gazette No. 301.
This Decree was issued by the government and is part of a broader general framework for Italian tax reform announced over the past year.
The main changes relate to the following issues:
This Decree revises the criteria for determining the tax residence of individuals and companies.
The most significant impact is expected on individuals, as personal and family ties take precedence over economic interests, and the mere physical presence within Italian territory is considered a determining factor in Italy’s taxing power.
Currently, a company is considered resident if it has its legal base, substantial management or ordinary management primarily in Italy for the majority of the tax period. The Decree clarifies that “effective management position is understood as a continuous and coordinated basis for strategic decisions regarding the company or the entity as a whole.” Ordinary management refers to the continuous and coordinated performance of actions related to the ongoing management of a company or entity as a whole. ”
Foreign company management system
This Decree introduces simplifications for foreign-owned enterprises with the aim of aligning their taxation with the global minimum tax regime.
Under the new rules, if a non-resident controlled entity is subject to an effective tax rate of less than 15%, the financial statements of the non-resident controlled entity must be audited and certified by a certified professional. The managed foreign company system will apply if there is a foreign company. Foreign country of location. Alternatively, if there are audited and certified financial statements of the foreign controlled entity, the controlling entity may pay an alternative tax equal to 15% of his net accounting profit for the financial year.
In the case of foreign-controlled enterprises that do not have audited and certified financial statements, the controlled enterprise must pay an effective tax rate that is less than half the effective tax rate that would be levied if the non-resident-controlled enterprise were resident in Italy. You need to make sure you are eligible.
This Decree introduces a new promotion regime for economic activities that have been “transferred” to Italy (so-called reshoring), and has been implemented in Italy from the performance of business and related professional activities that were previously carried out in non-EU countries. It provides for a 50% tax exemption on income earned. And then I “migrated” to Italy.
If, within 5 tax periods (10 periods for large companies) after the end of the incentive program, the beneficiary relocates any part of the activity that was previously subject to relocation, the above benefits will be removed. Exit. In this case, the tax authorities will recover with interest the tax not paid during the lapsed promotional scheme.
The potential for tax base erosion and profit shifting will be reduced through an effective minimum tax, and in the implementation of Directive (EU) 2022/2523, adopted unanimously by Member States, major multinational corporate groups will be subject to a minimum corporate tax rate. Guaranteed to pay.
This Decree introduces a world minimum tax in Italy.
The global minimum tax is based on three tax levels:
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Domestic minimum tax. There are options for countries to implement under the Directive. This tax applies to multinational or domestic group companies and jointly controlled entities located in Italian territory, with an effective tax rate lower than the minimum rate of 15%.
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Additional minimum tax (AMT) imposed on the controlling parent company of a multinational company or national group located in Italian territory if it is, or has been, effectively taxed less than 15% in a particular financial year. A direct or indirect interest in a low-tax corporation or stateless corporation located in another country at any time during the fiscal year.
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Additional minimum tax imposed jointly and severally on all companies other than investment corporations located in Italian territory, if the controlling parent company is located in a third country that does not apply an equivalent additional minimum tax or is an excluded entity.
This Regulation incorporates all provisions regarding the calculation and substantive taxation of the relevant income to be taken into account for assessing the applicability of the tax and determining the tax rate.
Italy has chosen to introduce a national minimum tax, which is the only tax whose revenue effects are prudent.
AMT is payable by an Italian controlling entity only if the foreign jurisdiction in which the controlled entity is located does not introduce an equivalent domestic minimum tax.
Similarly, a supplementary minimum tax is based on two conditions: the country in which the multinational group company is domiciled does not have a qualified domestic minimum tax (qualified domestic minimum supplementary tax), and the country has a qualified domestic minimum tax. Applicable only under severe conditions and will generate income. The parent company does not apply his AMT.
Taxation system for foreign workers
This Decree replaces the old preferential tax regime for foreign workers with a new tax regime for foreigners starting from the 2024 tax period, reducing coverage and benefits.
From the tax period 2024, this system provides for income from dependent employment and similar sources, as well as income from self-employment generated by workers within Italy who have transferred their tax residence to the territory of the state. A 50% tax exemption is provided. The payments will be made up to a limit of 600,000 euros, subject to certain conditions, such as the high qualifications of the repatriated workers.
This benefit applies to the tax period in which the transfer of tax residence to the state territory occurs and for four subsequent tax periods. This system applies to Italian nationals registered in the Register of Italians Living Abroad and, if their names are not included in that register, resident in another state under a double taxation agreement for a period of three years abroad. Limited to Italians.
The worker must not have been tax resident in Italy during the three tax periods preceding the aforementioned transfer, but must undertake to be tax resident within the Italian territory for at least five years. not.