International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

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

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 (gianluca.nieddu@hager-partners.it) and Barbara Scampuddu (barbara.scampuddu@hager-partners.it)

Hager&Partners, Tel: +39 02 7780711

Website: www.hager-partners.it    

more across site & bottom lb ros

More from across our site

With the M&A market booming, ITR has partnered with correspondents from firms around the globe to provide a guide to the deal structures being employed and tax authorities' responses.
Xing Hu, partner at Hui Ye Law Firm in Shanghai, looks at the implications of the US Uyghur Forced Labor Protection Act for TP comparability analysis of China.
Karl Berlin talks to Josh White about meeting the Fair Tax standard, the changing burden of country-by-country reporting, and how windfall taxes may hit renewable energy.
Sandy Markwick, head of the Tax Director Network (TDN) at Winmark, looks at the challenges of global mobility for tax management.
Taxpayers should look beyond the headline criteria of the simplification regime to ensure that their arrangements meet the arm’s-length standard, say Alejandro Ces and Mark Seddon of the EY New Zealand transfer pricing team.
In a recent webinar hosted by law firms Greenberg Traurig and Clayton Utz, officials at the IRS and ATO outlined their visions for 2023.
The Asia-Pacific awards research cycle has now begun – don’t miss on this opportunity be recognised in 2023
An intense period of lobbying and persuasion is under way as the UN secretary-general’s report on the future of international tax cooperation begins to take shape. Ralph Cunningham reports.
Fresh details of the European Commission’s state aid case against Amazon emerge, while a pension fund is suing Amgen over its tax dispute with the Internal Revenue Service.
The OECD’s rules may be impossible for businesses to manage, according to tax experts from companies including Shell.