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Italy: Advance ruling for new investments in light of the recent clarifications provided by tax authorities

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Michele Vannucci

Aurelio Massimiano

Circular No. 25/E, issued by the Italian tax authorities, has provided further clarifications on the advance ruling on new investments introduced by Legislative Decree No. 147 provided on September 14 2015, confirming its remarkable appeal for Italian and foreign investors.

Firstly, the Circular (which was issued on June 1 2016) has provided an extensive interpretation of the notion of eligible investors that includes individuals, partnerships, companies, trusts or other entities carrying on business activities.

Moreover, the Circular specified that individuals and other entities which do not carry on business activities may also apply for the new ruling provided that the investment implies the carrying out of a business activity or results in the participation in the equity of an Italian business entity (i.e. via asset deals or share deals). Furthermore, the Circular expressly includes collective investment vehicles subject to surveillance as well as groups of companies including, among the others, joint ventures, consortia and business districts.

It is also worth noting that the Circular has expressively extended the notion of eligible investment to leveraged buy-out acquisitions and has provided further clarifications relevant to the investment requirements. In particular, as regards the value of the investment, the Circular has clarified that the threshold of €30 million may be met in more than one year. Whereas, as regards the requirement that the investment must have a significant and long-lasting impact on employment levels, the Circular has specified that the requirement is met also where the investment secures already existing job positions threatened by financial crisis.

The appeal of the new ruling also relates to its comprehensive nature. By means of a single advance ruling, taxpayers may now obtain certainty on the tax treatment applicable to investment plans, on the absence of any abusive behaviors, on the fulfilment of requirements needed to exclude the application of anti-avoidance provisions or on the eligibility for specific tax regimes.

In this regard, the Circular clarified that taxpayers may also seek confirmation that the investment does not constitute a permanent establishment, both for direct tax and VAT purposes. Transfer pricing is not included in the scope of the new ruling, meaning taxpayers must apply using the ordinary APA procedure.

In terms of procedural rules, the tax authorities shall answer to the ruling request within 120 days as from its submission or, should additional documentation is requested, within 90 days as from such documentation is collected. If no answer is given within such deadlines, the interpretation proposed by the taxpayer is deemed to be accepted.

Furthermore, the ruling outcomes are binding on the tax authorities and may not be amended (barring certain conditions). Finally, taxpayers conforming to the ruling outcomes may also take advantage of the cooperative compliance regime irrespective of their turnover threshold.

Michele Vannucci (m.vannucci@maisto.it) and Aurelio Massimiano (a.massimiano@maisto.it)

Maisto e Associati

Tel: +39 02 776931

Fax: +39 02 77693300

Website: www.maisto.it

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