On September 22^nd, 2015, was published the Legislative Decree No. 147 of September 14^th, 2015, containing “measures for the internationalization of companies”.

As is well known the measure amends the previous Decree of the President of the Republic of September 29^th, 1973, No. 600, and has as its principal objective the definition and the strengthening of the role that the tax authorities should play in support of the internationalization of companies through two modes: the first involves reduction of cross-border transactions; the second regards the creation of regulatory certainty for investors.

Besides ensuring the certainty of the rules, the national legislator needs to adapt the domestic legal system to the developments of the OSCE Community and to the jurisprudence of the European Court of Justice.

 

Changes made by the executives are addressed to: foreign companies that invest or conduct business in Italy, Italian companies with transnational activities and Italian companies that perform internal activities.

 

The renewed regulatory package will offer a number of benefits.

Noteworthy is the possibility provided for by Article 13 to deduct losses on receivables.

The legislator, speaking on Article 101 c. 5 Income Tax Code (TUIR), states that "it is possible to deduct losses on receivables, not only when the debtor is subject to bankruptcy proceedings or the losses result from certain and precise elements (which still exist in the event of cancellation of the credits from the financial statement – made in application of accounting principles – or in case of small claims), but also when the debtor is “subject to equivalent foreign procedures” in countries with which there is an adequate exchange of information (from the date of the subjection) or has concluded an appropriate plan to allow the restructuring of the company’s debt exposure and to ensure the rebalancing of its financial situation”.

The loss deducibility is permitted in the period of budgetise even if this budgetise occurs in a tax period following that in which occur the certain and precise elements or the subjection of the debtors to a bankruptcy proceeding.

 

However, the most important and daring objective of the Decree is to increase the competitiveness of Italian companies; in this context, more relevant is the introduction of the so-called “Branch exemption”, i.e. the possibility that the profits and the losses made by foreign permanent establishments of an Italian company do not become fiscally relevant for the latter. This provision could eliminate the competitive disadvantage of Italian companies compared to international competitors.

 

The measure confirms the provisions on the strengthening of international ruling. There are prior agreements between the tax authority and the Italian companies who hold international activities in the following main areas of operation:

·    the regulation of the intercompany transfer prices,

·    the allocation of profits and losses to permanent establishments,

·    the prior assessment of the conditions for a permanent establishment in the Italian territory,

·    the identification of the rules concerning the distribution or the perception of dividends, royalties, interest and other income to or from non-residents.

 

The legislator’s intention to attract investments of foreign companies operating in Italy through a simplified tax treatment and a certainty in the timing, should be interpreted very favorably.