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The Tax Authority censures, for ethical purposes, outgoing shareholder reinvestment of in the context of an MLBO transaction

In response to advance tax ruling no. 22/2024, the Tax Authority confirms the previous position taken with legal principle no. 1 of 2019, whereby it deemed that the reinvestment made by the outgoing shareholders, in the absence of offsetting by the credit accrued from the transfer of the shareholdings, constitutes an undue use of the ACE benefit censurable pursuant to Article 10-bis of Law no. 212/2000, given (i) the circularity of the transaction i.e. its inability to produce appreciable economic effects beyond obtaining an undue tax advantage and (ii) the failure of the outgoing shareholders to introduce new financial resources into the company, but the mere circularity of the cash flow.

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The Council of Ministers’ meeting on 24 May 2024 definitively approved the text of the implementing decree of tax delegation containing penalty system reform.
The Tax Court of Second Instance of Lazio in Judgment No. 2403/17/2024, immediately applying the findings of the European Court of Justice in Case C-341/22 of March 7, recognized the right to a VAT refund of a company with a systematic loss, disapplying art. 30 of Law No. 724/1994.
As already discussed in a previous article (ed. March 5, 2024), with the introduction of Article 2506.1 into the Civil Code, a new form of partial corporate split-up known as demerger by demerger split has been included in our legal system, through which the demerged company assigns part of its assets to one or more newly established companies (or even for the benefit of pre-existing companies, as provided by Bill No. 209 of November 7, 2023 of the Milan Notary Council) receiving in exchange shares or quotas of said company.
Art. 38 of the PNRR Decree (Decree-Law 19/2024) introduced the new 5.0 tax credit for investments made in 2024 and 2025 in assets allowing for energy savings beyond certain percentage limits, to be recognised to an increasing extent according to the level of consumption reduction achieved.
Article 51 of Legislative Decree No. 19/2023 added Article 2506.1 to the Italian Civil Code, which introduced a new version of the demerger into the Italian legal system, called demerger by demerger split, through which the demerged company assigns part of its assets to one or more newly incorporated companies (or also to existing companies, as provided for by the Milan Notary Council's Maximum No. 209 of 7 November 2023) receiving shares or quotas of the same, continuing its business.
In response to advance tax ruling no. 22/2024, the Tax Authority confirms the previous position taken with legal principle no. 1 of 2019, whereby it deemed that the reinvestment made by the outgoing shareholders, in the absence of offsetting by the credit accrued from the transfer of the shareholdings, constitutes an undue use of the ACE benefit censurable pursuant to Article 10-bis of Law no. 212/2000, given (i) the circularity of the transaction i.e. its inability to produce appreciable economic effects beyond obtaining an undue tax advantage and (ii) the failure of the outgoing shareholders to introduce new financial resources into the company, but the mere circularity of the cash flow.
With the publication in the Official Gazette of Legislative Decree No. 209 of 27 December 2023, Italy formally implemented the provisions set forth in EU Directive 2022/2523, aimed at reducing situations of tax base erosion and profit shifting to States or territories with a favourable tax regime, through the provision of a global minimum tax (so-called Global Minimum Tax) to be applied to multinational or domestic groups with annual revenues, as resulting from the consolidated financial statements of the parent company, no lower than EUR 750 million in two of the four financial years preceding the current one.
Article 1 para. 59 of Law No. 213 of 30 December 2023 (Budget Law 2024) introduces paragraph 2-bis to Article 68 of Presidential Decree No. 917/1986 (TUIR) providing for the extension of the participation exemption rules to capital gains deriving from the transfer of qualified participations, having the same requirements applicable to resident entities, made by foreign companies (i) without a permanent establishment in Italy, (ii) resident in an EU or EEA State that allows for a proper exchange of information and (iii) subject to corporate income tax.
With ruling No. 3755, filed on 20 December 2023, the Superior Tax Court of Lombardy confirmed the decision ruled on by the trial court (ruling No. 3361 filed on 5 December 2022) on the VAT deductibility paid by a Special Purpose Vehicle (SPV) on transaction costs (notary fees, consultancy, due diligence, etc.) incurred in connection with a Merger Leveraged Buy-Out (MLBO) transaction.
According to the literal wording of the rule, “The provisions of this Article shall apply in favour of persons who transfer their tax residence to Italy starting from the 2024 tax period [...]” and, similarly, the previous regime is still applicable “[...] in favour of persons who have transferred their registered residence to Italy by 31 December 2023 [...]”.

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