Legislative Decree 84/2025 introduces significant provisions concerning the transfer of losses in extraordinary operations, setting out important changes to the limitations on tax loss carryforwards.
1. Extraordinary operations between entities not belonging to the same corporate group
Under Article 84 of Italy’s Consolidated Law on Income Tax (TUIR), as amended by Legislative Decree 84/2025, the limit on the carryforward of tax losses is determined based on the net equity of the company carrying the losses forward, calculated according to one of two alternative methods: either the estimated economic value or the book value as reported in the financial statements. The choice is left to the taxpayer, with distinct rules and implications depending on the method selected.
This reinforces the principle that only tax losses genuinely linked to the company’s own historical and autonomous productive capacity may be carried forward over time. The legislation therefore limits so-called “loss trafficking” practices — that is, the acquisition of loss-making companies by profitable entities for the sole purpose of offsetting profits, without any real business continuity.
2. Intra-group extraordinary transactions
Another key amendment deals with intra-group transactions. The newly introduced Article 177-ter of Italy’s Consolidated Law on Income Tax (TUIR) provides that the limitations and conditions on the carryforward of tax losses do not apply to transactions — now including capital contributions — between companies belonging to the same group, as defined under Article 2359 of the Italian Civil Code. This rule applies to losses accrued during the periods in which the company was part of the group.
In summary, the new provision allows for the unrestricted offsetting of “intra-group” losses — that is, without the limitations related to the company’s “vitality” or net equity — where such losses were incurred during tax periods in which the participating companies already belonged to the same group. This condition is met where one company controls the other(s), or where all participating companies are under common control by the same entity. The waiver of these limitations also applies to losses incurred in prior periods, provided such losses have been “validated” (per the Explanatory Report accompanying the Legislative Decree) by passing the quantitative and vitality tests either upon entry into the group or subsequently, at the time of the group’s acquisition of control over the loss-generating entities (Article 84, paragraph 3 of the TUIR), or through the group’s inheritance of the losses as a result of mergers or demergers (as further clarified in the Explanatory Report).
3. Business contribution transactions
A second significant amendment introduced by the Decree relates to business contribution transactions. Previously, these transactions, although subject to fiscal neutrality, were not subject to the same limitations applicable to mergers or demergers. This resulted in a regulatory inconsistency: whereas in the case of mergers or demergers the beneficiary company was required to comply with defined restrictions on the carryforward of losses, in the case of business contributions such limitations were absent, despite these operations often producing economically and fiscally equivalent consequences.
With Article 2 of Decree 84/2025, the legislator formally extends to business contribution transactions the same limitations applicable in the case of demergers, thereby equating the receiving company to the beneficiary company in a demerger.
4. Implementation of the new provisions
The same rules applied to tax losses also apply to excess non-deductible interest and to excess ACE amounts (Article 172, paragraph 7-ter, of the TUIR).
The entire new framework applies, for taxpayers with a fiscal year coinciding with the calendar year, starting from the 2024 tax period. Pre-existing losses, ACE excesses, and interest expense carryforwards (up to 2023) continue to be governed by the previous rules.
