Italy: Companies migrating to Italy: New ‘internationalisation’ decree introduces rules to determine assets and liabilities’ tax basis

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Italy: Companies migrating to Italy: New ‘internationalisation’ decree introduces rules to determine assets and liabilities’ tax basis

Foglia-Giuliano
Emma-Marco

Giuliano Foglia

Marco Emma

The 'internationalisation' decree (formally, legislative decree No 147 of September 14 2015) has been recently published on the Official Gazette and is now effective.

The decree introduced different measures aimed at removing uncertainties and providing a more definite and stable tax legal framework, with a view to attracting foreign investors. Above all, the decree introduced, for the first time, a clear provision in relation to the corporate income tax effects for foreign companies migrating to Italy. Italian tax law did not previously cover such case.

According to article 12 of the decree, the transfer of tax residence from a white-list country to Italy involves the step-up of the tax basis of foreign company's assets and liabilities at fair market value, regardless of the application of an 'exit tax' in the state from which assets are transferred. In case of 'inbound' migration from a non-white listed country, the above mentioned step up is subject to the conclusion of an international ruling (APA) with the Italian tax authorities. If no ruling is obtained, the 'non-white list' company shall assume the lower between the acquisition cost, the book value or the market value as tax basis of the assets 'relocated' to Italy, while the tax basis of the liabilities will be the higher among such values.

Such provision, effective from fiscal year 2015, represents an impressive step forward, compared with the previous situation of uncertainty. Due to the lack of any provision in this respect, in fact, it was widely debated before the internationalisation decree whether transferred assets had to be valuated according (i) to the market value or alternatively (ii) to the acquisition cost method. Even if the market value principle seems to prevail (as implicitly confirmed now by the new decree), the Italian Revenue Agency occasionally took the position that the tax step up of assets relocated to Italy was allowed only provided that the state from which the assets were transferred applied an 'exit tax'. Difficulties arose where an exit tax in principle applied but a specific exemption regime was granted by the exit state on certain assets (for example, the participation exemption regime).

In this context, not only does the new provision fill a legislative gap in the Italian tax framework, but it also represents an alluring occasion for foreign investors to step up the tax basis of their assets.

Interesting tax opportunities, in particular, may arise in relation to intellectual properties held by non-Italian resident companies from the combination of the new 'inbound' migration step up possibility with the partial corporate income tax exemption available under the new Italian Patent Box regime. In a nutshell, the Patent Box allows a 50% corporate income tax exemption in relation to income deriving from direct or indirect use of certain IP rights (currently including commercial trademarks). Such optional regime applies, under certain circumstances, on the basis of the ratio of a) R&D expenses borne to maintain, increase and develop the intangible asset, and to b) total expenses sustained for the creation of such IP right.

Giuliano Foglia (foglia@virtax.it) and Marco Emma (emma@virtax.it)

Tremonti Vitali Romagnoli Piccardi e Associati

Tel: +39 06 3218022 (Rome); +39 02 58313707 (Milan)

Website: www.virtax.it

more across site & shared bottom lb ros

More from across our site

Thanks to operational slickness and sheer force of will, A&M Tax will continue hoovering up talent across the globe
Setu Kamal became the first practising barrister to be added to the UK’s tax avoidance promoter list; in other news, UHY expanded its network in Canada
US President Donald Trump’s tariffs may get thrown out by courts in the future and taxpayers should already be planning for that possibility, BDO’s Dustin Stamper tells ITR
Awards
ITR is delighted to reveal the first shortlisted nominees for the Middle East Tax Awards
The firm has appointed Deloitte’s former tax leader for Thailand to lead the new operation, which builds on considerable Asian investment in recent months
The Donald Trump administration could use legislation from 1930 if the Supreme Court blocks its tariffs; in other news, China has updated its VAT refund procedures
Braun gives ITR an exclusive insight into WTS Digital’s UK launch of its AI product, which can free up more than 1,500 hours per month by reducing routine tasks
Long tells ITR about her varied role, why curiosity is a key characteristic for the tax professional, and what she’d be doing if she wasn’t working in tax
The choice facing governments is not whether to adopt AI in taxation, but how to do so in a way that upholds the principles of tax fairness, writes Neil Kelley
As ITR’s client data reveals discontent with German tax advisers’ cost management, Grant Thornton’s local TP head insists it’s a two-way street
Gift this article