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Italy: new law decree restricts relocation outside Italy where beneficial regimes are granted

Italy issues changes to the operation of country-by-country reporting

Law Decree 87 dated July 12 2018 (also known as the 'dignity decree' or 'decreto dignità') was approved by the Italian government in early July 2018 and finally converted into Law 96/2018 by Parliament. It entered into force on August 12 2018.

One of the main pillars of this new law – which is likely to have a major impact on multinational groups’ operating strategies – is to restrict the relocation overseas of high-value activities (including manufacturing) by legal entities operating in Italy. In fact, companies that received state support in Italy to start and run their business activities are committed to keeping their supported high-value operations in Italy for at least five years. If they do not, the state aid will be forfeited and administrative penalties levied.

As further provided in Article 5, Paragraph 1, of Law Decree 87/2018, Italian and foreign enterprises operating in Italy which received state aid subject to carrying out productive investments, will forfeit those benefits if the supported economic activity (or even part of it) is relocated outside the EU (with the exception of those countries belonging to the European Economic Area (EEA)) within five years from the conclusion of the supported initiative. In such a case, the state aid is forfeited and administrative penalties of between two and four times the subsidy amount are levied.

Moreover, and as provided by Paragraph 2 of the same article, Italian and foreign enterprises operating in Italy which received state aid subject to carrying out productive investments in a specific geographical area, lose their subsidies if the economic activity for which the state aid was provided are relocated outside the designated area (i.e. elsewhere in Italy, the EU or the EEA) within five years from the conclusion of the supported initiative or investment.

Therefore, in both cases, state aid received will have to be given back, including interest equal to that applicable at the time the subsidy was granted, plus 5%.

As anticipated, these law provisions entered into force on August 12 2018. They do not apply retroactively, and may be applied only to sales and relocations enacted after that date.

As a matter of fact, based on Article 5, Paragraph 4 of Decree 87/2018, state aid granted and supported investments that began before these new provisions entered into force (e.g. August 12 2018) are subject to the old regulations, including Article 1, Paragraph 60 of Law 147/2013.

As with the new provisions, the latter stated that Italian and foreign companies operating in Italy that had benefited from public capital grants, would forfeit this benefit and be obliged to repay the capital grants received if, within three years from the subsidy payment, those companies relocated outside the original designated area in a non-EU country, resulting in a personnel reduction of 50% or more.

Furthermore, specific provisions relating to occupation safeguards in enterprises benefiting from public aid are set forth in Article 6 of Decree 87/2018; and Article 7 relates to the forfeiture and retrieving of specific incentives such as 'hyper amortisation' in the case of the sale or relocation abroad of those assets which benefited from such preferential treatment.

Gian Luca Nieddu ( and Barbara Scampuddu (

Hager&Partners, Tel: +39 02 7780711


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