Italy: New direct lending opportunities in Italy

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: New direct lending opportunities in Italy

foglia.jpg

emma.jpg

Giuliano Foglia


Marco Emma

Italian companies are facing domestic banks' resistance to grant financing (the so-called credit crunch). The Italian government is therefore pursuing a long-term project aimed at supporting access to alternative forms of financing and opening up direct lending in Italy to new financial players. The last step in this respect has been taken with Law Decree no. 91 of June 24 2014, which set forth new tax incentives and regulatory measures for such purposes. First, the Decree introduces an exemption from withholding tax for interest paid by Italian borrowers on medium/long term loans to the following foreign lenders: (i) EU banks, (ii) insurance companies established and authorised under EU member states' legislation, (iii) unleveraged undertakings for collective investments set up in a 'white-list' EU or EEA member state. Although certain requirements to apply such exemption still seem uncertain, such measure is very welcome by Italian market. Before the Decree, in fact, interest paid on loans granted by foreign lenders were subject to Italian withholding tax (recently increased to 26% unless a tax treaty lower rate applies) which usually represents an additional cost for Italian borrowers due to the standard 'gross-up' clauses.

Consistently, also the scope of application of the 0.25% optional substitute tax applicable – in lieu of ordinary documentary taxes – to medium and long-term financings (see our June 2013 update) has now been extended. In particular, under the new rules it now applies to loans granted by (i) securitisation vehicles, (ii) insurance companies established and authorised under EU member states' legislation, (iii) undertakings for collective investments set up in a 'white-list' EU or EEA member state, whereas only Italian banks and Italian permanent establishments of foreign banks were previously admitted to such regime. In addition, such substitute tax now applies also to any transfer of financing agreements on the secondary market, to assignments of receivables and relevant security package, previously subject to taxation.

As for the corporate bonds, the first step was taken with the 2012 measures intended to boost access to bond-financing for non-listed companies, provided that bonds are listed for trading either on a regulated market or on a multilateral trading platform of an EU or EEA white-listed member state. Now the Decree admits non-listed companies to the same tax regime (and to the related withholding tax exemption for non-Italian white-list noteholders qualifiying as beneficial owners) also in relation to non-listed bonds, to the extent that such debt securities are held by one or more white-list 'qualified investors'. Such measure would permit Italian companies access to bond-financing without bearing significant listing expenses. However, certain procedural issues may arise. Moreover, the exemption now applies to bond interest paid to EU undertakings for collective investments and/or Italian securitisation vehicles provided that (i) more than 50% of their assets consist of such securities and (ii) their investors are 'qualified investors' only.

The measures enacted by the Decree are in force as from June 25 2014.

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

Tax advisers in Brazil are rising above the country’s notoriously complex tax system to deliver high-quality advisory services, ITR’s exclusive in-house data reveals
ITR’s data has highlighted the US firm’s ambition to become America’s ‘premier’ tax player via a concerted partner recruitment strategy
Jaap Zwaan’s arrival continues a recent streak of A&M Tax investing in the region; in other news, the US and Japan struck a deal that significantly lowered tariff rates
In a world where international tax concepts rely on human activity, Leonard Wagenaar poses existential questions about the future of such ideas when AI is ever-present
France v Axa provides a practical illustration of how the burden of proof is applied in TP matters under French law, ITR also heard
In an exclusive interview with ITR, Ian Gary calls for a central public CbCR database and bemoans the US’s lack of involvement in international tax transparency
Reckitt Benckiser is to divest its Essential Home business, which includes more than 70 brands, to private equity firm Advent International
In the first of a new series of weekly opinion pieces, ITR Editor Tom Baker reflects on the OECD’s attempts to sanitise the US’s brazen pillar two negotiations
The threat of 50% tariffs on Brazilian goods coincides with new Brazilian legal powers to adopt retaliatory economic measures, local experts tell ITR
The country’s chancellor appears to have backtracked from previous pillar two scepticism; in other news, Donald Trump threatened Russia with 100% tariffs
Gift this article