With the measure n. 165138 issued on August 28th, 2017, the Italian Revenue Agency approved the implementing provisions of the branch exemption regime, which has been introduced by the so-called \u201cInternationalization Decree\u201d and regulated by article 168 ter of the Italian Consolidated Tax Text (CITT).
\nThe Branch Exemption regime applies to resident companies operating in a foreign country through a permanent establishment and includes the exemption of profits and losses of the branch itself resulting from the financial statement drawn up in accordance with article 152 of the CITT.
\nThe option must be adopted in the first income tax return following the creation of the PE. In case of PEs already established before October 7th, 2015, the parent company can decide to opt for the exemption within the second tax year following the year the new regime entered into force (2015): in other words, within the deadline for the submission of the income tax return related to fiscal year 2017 (to be filed in 2018).
\nThe new Revenue Agency\u2019s measure regulates the \u201crecapture\u201d of the PE\u2019s losses achieved in the five years before the application of the option.
\nSubstantially, income generated by the branch is included in the determination of the parent company\u2019s taxable income up to the amount of net tax losses produced by the branch itself over the period. If, during the five years before the application of the regime, both PE and the parent company have incurred losses, the latter\u2019s ones are the those to be first used, in accordance to a priority principle.
\nIt is also specified that only losses actually used are relevant for \u201crecapture\u201d purposes, whereas their exceeding amount won\u2019t be relevant and not even carried forward by the parent company.
\nIn addition to that, recapture is not calculated on a global basis, as previously stated in the measure draft. The calculation, instead, is made State by State, considering the presence of a single PE in each country, even if there are several territorial dislocations.
\nPotential abusive behaviors, such as the anticipation of losses before the exercise of the option or the postponement of profits, will be examined according to article 10bis of the Italian Law no. 212\/2000.
\nFurthermore, this measure explains that the branch exemption option remains in force together with the neutrality principle in case of extraordinary operations, if the successor in title opted for the exemption or decides to opt for it within the submission of the income tax return related to the fiscal year the operation becomes legally effective. Assets and liabilities of the PE maintain the same fiscal value they had previously.
\nThe recapture remains in force too, even though the buyer decides to opt for the exemption in the tax return following the fiscal year when the extraordinary operation becomes legally effective. The capital gain or loss coming from the PE transfer is included into the remaining in force recapture, provided that the successor in title has the residence in Italy and opts for the branch exemption.
\nThe aforementioned measure also specifies that if the resident company distributes to its shareholders profits arising from an exempt PE located in \u201cblack list\u201d countries which are not subject to Cfc rules, then these profits will be included in the resident company\u2019s taxable income and not in the shareholders\u2019 one. Profits and losses not belonging to this class of PE (black list and no Cfc) won\u2019t be included in the resident company\u2019s taxable income.
\nFor any further information please contact our Firm.<\/p>\n","protected":false},"excerpt":{"rendered":"
With the measure n. 165138 issued on August 28th, 2017, the Italian Revenue Agency approved the implementing provisions of the branch exemption regime, which has been introduced by the so-called \u201cInternationalization Decree\u201d and regulated by article 168 ter of the Italian Consolidated Tax Text (CITT). The Branch Exemption regime applies to resident companies operating in […]<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[50],"tags":[],"_links":{"self":[{"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/posts\/6395"}],"collection":[{"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/comments?post=6395"}],"version-history":[{"count":0,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/posts\/6395\/revisions"}],"wp:attachment":[{"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/media?parent=6395"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/categories?post=6395"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/tags?post=6395"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}