CMS Expert Guide to Holding Company Regimes in Italy

Italy offers a variety of tax benefits specifically for holding companies. The availability of these can depend on the business the holding company pursues – i.e. whether the company is an ‘industrial’ holding company or ‘financial’ holding company. ‘Industrial holdings’ are those which primarily hold participations in entities that are not ‘financial intermediaries’, while ‘financial holdings’ are companies who mainly hold participations in such ‘financial intermediaries’,

Tax benefits which may be on offer for holding companies established in Italy are summarised below.

• 1.20% corporate tax on capital gains arising from the sale of shares if the following requirements are met:
• a minimum continuous holding period of at least 12 months;
• the shares have been classified as fixed assets;
• the subsidiary entity is not located in a country with a ‘preferential’ tax regime;
• the subsidiary entity carries out a commercial activity (no real estate).
• 1.20% corporate tax rate for dividends received by holding companies and distributed by subsidiary entities, as a general rule.
• Option to apply for the ‘consolidated’ tax regime which grants the ability to determine corporate income tax on a consolidated tax base (thus taking advantage of any tax losses and tax credits of the group companies).
• Option to apply for the VAT Group regime which allows the group to operate under a single VAT number and as a single entity for VAT purposes, such that intra-group transactions are not VAT-relevant.
• 0% withholding tax on outbound dividends if the requirements provided by the EU Parent-Subsidiary Directive are met.
• 0% withholding tax on outbound interest & royalties if the requirements provided by the EU Interest & Royalties Directive are met.
• Full tax deduction for interest expenses for ‘financial holdings’ (those who mainly hold participations in ‘financial intermediaries’). This excludes particular categories of company: SGRs (asset management companies), SIM (securities investment firms) and insurance companies, which instead benefit from a 96% tax deduction.

The special tax features which are available for holding companies encourage tax efficiency within a group and minimise the ‘double layer’ of taxation, in particular by having a very low taxation on dividends and capital gains at the holding level.