Thursday, 11 June 2015

Italian tax authorities provide guidelines for notional interest deduction anti-avoidance rules

The Italian tax authorities issued guidelines on June 3, 2015 which address the anti-avoidance rules that apply to the notional interest deduction (NID) regime.  NID is a notional deduction with respect to 'new equity,' which includes retained earnings and certain cash capital contributions over a particular equity-basis as of 2010.
The guidelines take the position that contributions are tainted when they are made directly or indirectly (look-through approach) by tax-haven-resident investors.  Based on the wording of the guidelines, the existence of a single 'black-listed' shareholder in the ownership chain potentially could taint the entire amount of the contribution, unless the funds are traced back to 'white-listed' (i.e., non-tax-haven investors).
This new stricter approach of the Italian tax authorities is likely to have a broad impact.
US multinational corporations and funds with Italian investments that have benefitted from the NID should ensure that the new look-through approach does not jeopardize this benefit.
Source & more info: PwC