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New anti-avoidance provisions
Law no. 248 of 4 August 2006 introduced several anti-avoidance provisions in the area of direct taxation.
Among other provisions, the Law establishes for new statutory presumptions in determining the tax residence of foreign entities controlling Italian subsidiaries.
In particular, the new provisions establish a rebuttable presumption that a nonresident entity holding a controlling interest in an Italian subsidiary is tax resident in Italy where
- it is directly or indirectly controlled by an Italian resident, or
- a majority of its board of directors (or a similar managing body) are Italian residents.
Consequently, the burden of proof that a foreign company is not resident for tax purposes in Italy is shifted to the foreign company. In this respect, the Government stressed that the place of effective management is decisive for determining whether or not the foreign company is resident in Italy for tax purposes.
Note that the above circumstances must exist at the fiscal year-end of the foreign entity.