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Italian entry tax in merger operations

Gian Luca Nieddu and Barbara Scampuddu of Hager & Partners explain the latest clarifications on entry tax associated with mergers by incorporation in Italy.

In the case of a merger by incorporation of a non-Italian entity into an Italian entity, there is a need to determine the entry tax values of assets and liabilities that flow into the Italian acquiring company. 

Resolution no. 92/E issued by the Italian Revenue Agency on November 5 2019 provided clarifications regarding entry tax as per Article 166-bis of the Presidential Decree no. 917/1986 (Income Tax Code (ITC)) with reference to a merger by incorporation which occurred in 2018 of a company residing in a country included in the white list (please refer to Article 11, paragraph 4, letter (c) of Legislative Decree no. 239/1996).

Namely, Article 12 of Legislative Decree no. 147/2015 added Article 166-bis to the ITC, setting forth the tax regime applicable to inbound immigration of non-resident companies to Italy, even in the case of a M&A operations. Under Article 166-bis, in the case that non-resident companies immigrate to Italy from countries included in the white list and become tax residents in Italy, the assets and liabilities of such companies have to be recognised at their market value, even if they have been subject to any exit taxation in the country of their origin. 

The application of the market value criterion ensures neutrality with respect to the business events that took place in the foreign country, including the payment of an exit tax. In fact, the mandatory application of the market value criterion avoids the fact that the assets’ values were predetermined in the foreign country for the purposes of the exit tax due therein, and still have automatic recognition for Italian tax purposes or may have relevance for tax purposes in Italy by means of appraisals.

Please note that in the case at stake, the goodwill derived from a merger that had be accounted for in the balance sheet of the acquiring company as an intangible asset. In this regard, it should be noted that the previous version of Article 166-bis was in force until December 31 2018 and therefore applied to the case at stake, and did not provide for the valuation of goodwill. Accordingly, Resolution no. 92/E stated that goodwill does not account in the balance sheet of the foreign entity that transfers its residence to Italy by means of a merger operation. Such items are registered in the financial statements of the Italian acquiring company when the merger is completed.

More recently, Legislative Decree no. 142/2018 amended Article 166-bis in order to:

  • clarify that the ‘market value’ is the arm’s length value of the transferred assets that would be determined for transfer pricing purposes; and
  • expressly provide that the goodwill value can be recognised for Italian entry tax purposes in respect to the operations which have occurred from January 1 2019.


Gian Luca Nieddu 
T: +39 02 7780711

Barbara Scampuddu 
T: +39 02 7780711



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