The top three corporate tax changes introduced by the Italian Budget Law 2016 are the following.
Country by Country reporting
Italy introduced the so-called Country by Country (CbC)reporting, in accordance with BEPS Action 13.
Companies subject to reporting
The Italian tax resident companies subject to CbC reporting are:
Data to be reported
The CbC report shall contain the following in regard to each jurisdiction in which the MNE Group operates: (i) an identification of each entity of the MNE Group, (ii) revenue, (iii) profit/loss before income tax, (iv) income tax paid, (v) income tax accrued, (vi) other information which indicates a substantial business activity.
A penalty from EUR10K to EUR 50K applies in case of omission or inaccurate filing.
An implementing decree will be issued in order to clarify the technical aspects.
Corporate income tax rate reduction:
The corporate income tax (imposta sul reddito delle società, IRES) rate will be decreased from 27.5% to 24%, with affect from tax year 2017.
Modification of the statute of limitations:
The Tax Authorities have five years from the end of the year in which the tax return was filed to send a tax assessment. The statute of limitations is seven years if no tax return was filed. In comparison to the previous rule, the terms shall not be doubled if the taxpayer’s action constitutes a criminal offence. Such modification gives more certainty to the taxpayer.
The key opportunity for multinationals is to invest in a tax environment, which is more in line with the OECD BEPS actions (CbC reporting), attractive (CIT rate reduction), and certain (modification of the statute of limitation).