April 2023 – International Tax Focus

Legislative decree implementing Directive 2019/2121/EU on cross-border transformations, mergers and demergers
Social security treatment of employees’ activities performed abroad
Requirements for the dividend exemption on foreign securities
Requirements for the exemption on inheritance and gift tax to apply
Withholding exemption on outbound proceeds paid by Italian REIT
New threshold for the Italian flat tax regime approved by the EU
Implementation of the DAC 7 Directive
Vietnam joins the Multilateral Convention on Mutual Administrative Assistance

Legislative decree implementing Directive 2019/2121/EU on cross-border transformations, mergers and demergers

Legislative Decree no. 19/2023 (published in Official Journal no. 56, of 7 March 2023) was issued to implement Directive 2019/2121/EU on cross-border transformations, mergers and demergers.

Among the various amendments introduced by the Legislative Decree, the new Article 2510-bis of the Civil Code will allow the transfer of the registered office of an entity abroad to be carried out through the cross-border and international transformation, as regulated by the decree.

In addition, the new Article 2506.1 of the Civil Code introduces the possibility to carry out a demerger by spin-off, which is the operation by which a company assigns a part of its assets to one or more newly incorporated companies. However, the shares issued by the new incorporated companies are issued in favour of the contributing company instead of its shareholders, as usually occurs in a demerger.

This new kind of transaction it will constitute a viable alternative to contributions for companies willing to transfer assets and liabilities to other companies, provided that those companies are newly incorporated, and will not be allowed for companies in liquidation that have already begun to distribute their assets to the shareholders.

Social security treatment of employees’ activities performed abroad 

On 23 March 2023, the Italian National Institute for Social Security Affairs (INPS) has issued the circular letter no. 33. In this statement of practice, INPS has issued guidance with respect to the so-called “conventional wages” provided for by for employers which have hired employees which are subject to a conventional regime provided for by Art. 4 of DL 317/87 as implemented and supplemented also by the recent Decree issued by the Ministry of Labour on 28 February 2023.

Conventional wages are relevant for:

  • determining the employment income in accordance with the regime provided for by Art. 51(8-bis) of the TUIR. Such provisions is aimed at determining the employment income for employees working abroad continuously for a period longer than 183 days over a 12-month period;
  • calculating social securities due for compulsory insurance for Italian workers working abroad in non-EU countries which do not have social security agreements in place with Italy or Countries which do have social security agreements in place with Italy but only with respect to insurances which are not covered by such agreements.


Employers that in January, February and March 2023 have operated differently from what provided for the Circular may regularize their position, without additional charges, within 16 June 2023 by filling out the UniEmens report.

Requirements for the dividend exemption on foreign securities

With the ruling no. 256 of 17 March 2023 the Italian Tax Authorities have dealt with the classification and taxation of proceeds derived from securities issued by non-Italian resident entities.

In particular, the Italian Tax Authorities have clarified that the Italian dividend exemption (providing for a 95% exemption on the income received) may apply also with respect to dividends received by securities issued by non-resident companies to the extent that the remuneration paid under such security grants to the holder of the security a full participation in the issuer’s economic results, as provided for in Art. 44(2)a) of the TUIR.

In the case examined in the ruling, an Italian company was holding preference shares issued by a Dutch NV. The dividend distributed by such foreign company was dependent on the issuer’s having a positive economic result (indeed, the right to the dividend arose only in the presence of a positive economic result as approved by special shareholders’ meeting resolution) but the amount of the dividend was not calculated on the base of such economic result, but rather as a fixed return on the amount invested (similarly to an interest rate).

The Italian Tax Authorities pointed out that, for the dividend exemption to apply, it is necessary that the amount distributed under the relevant securities is connected to the economic results of the issuer both with respect to the right to receive the relevant distribution and to the amount of such distribution.

Requirements for the exemption on inheritance and gift tax to apply

In the decision no. 6082 published on the 28 February 2023 the Italian Supreme Court maintained that the exemption from inheritance and gift tax, provided for by Art. 3(4-ter) of the Legislative Decree no. 346/90, for the transfer of shares of companies requires both:

  • that the heir/done keep the control over the companies transferred for at least 5 years; and
  • that the transfer company operates/holds an enterprise.


According to the Supreme Court, should the second requirement not be fulfilled, there would be the risk that  exemption will facilitate the transfer of shareholdings in companies without a real going-concern (i.e. companies only holding, for instance, money, buildings, land and real estate values). This outcome will be contrary to the rationale of Art. 3(4-ter) of the Legislative Decree 346/90 which is to ensure the integrity of the going-concerns in the generational transition, preventing the tax burden from forcing the heirs to sell all or part of them.

Therefore, transfers, occurring by inheritance or gift, of shares in real estate companies not engaged in a real business activities are not eligible for relief as the mere holding of real estate assets do not qualify as a going-concern. In relation to that, the Italian Supreme Court further observed that, as the exemption does not apply to the transfer of real estate assets, it will not be coherent to apply it to companies merely holding such kind of assets.

Withholding exemption on outbound proceeds paid by Italian REIT

With the ruling no. 265 of 21 March 2023, the Italian Tax Authorities have clarified that the exemption from withholding tax applies with respect to the proceeds distributed by an Italian-resident real estate fund to a Luxembourg-resident company which is, in its turn, owned by three investment funds that managed by a company listed on the New York Stock Exchange (NYSE).

In particular, in the case analysed by the ruling, the exemption under Article 7(3) of the Law Decree no. 351/2001 may apply as a consequence of:

  • what already stated in ruling no. 78/2017, i.e. that that funds managed by advisors subject to the provisions of the Investment Adviser Act of 1940 and subject to the supervision of the Securities and Exchange Commission (SEC) have the same substantive requirements as well as the same investment purposes as Italian funds;
  • the general partners and the advisor of the funds are both subject to SEC supervision.
New threshold for the Italian flat tax regime approved by the EU

The Italian Budget Law 2023 (Law no. 197/2022) has increased the maximum threshold of revenues to benefit from the 15% forfeit regime to 85,000.00 euros. The raise of such threshold (which was previously set at 65,000.00 Euros) called for the approval of the EU Council. The positive reply from the EU Council arrived trhough the decision No. 664 of 21 March 2023.

The decision applies from 1.1.2023 to 31.12.2024. As a result, the previous EU Decision no. 647 of 11 May 2020, which previously authorized the flat tax regime to be applied up to 65,000.00 Euros, has been repealed.

Implementation of the DAC 7 Directive

The Legislative Decree no. 32 of 1 March 2023 aimed at implementing in Italy the provision of the Directive 2021/514/EU (DAC 7), concerning procedures for automatic exchange of data held by operators of digital platforms, has been published in the Italia Official Journal no. 72 of 25 March 2023.

The provisions of the decree related to transactions brokered by the platforms begins applies on 1 January 2023 and the first exchange of information between the relevant Administrations will occur as of 2024.

The aim of the DAC 7 provisions (as implemented by the Legislative Decree no. 32 of 1 March 2023) is to monitor businesses offering services through internet platforms. However, some exceptions will apply as, for instance, companies providing real estate rental services for which, during a given year, a platform has brokered more than 2,000 rents for each “Property Listing” (real estate unit placed at the same address) are excluded from the monitoring rules.

To this purpose, the platform located in one Member State collects the data of the persons residing in a second Member State and it then forwards them to its local tax authorities; the latter, at a later stage, will share them with the tax authorities of provider’s State of residence. When it comes to real estate rental services, the data of the relevant activity are also forwarded to the tax authorities of the Member State where the property is located.

Vietnam joins the Multilateral Convention on Mutual Administrative Assistance

On the 22 March 2023 the Deputy Ministry of Finance of Vietnam has signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. This Convention it is the world’s most important widest-reaching international treaty for multilateral tax co-operation.

After Vietnam has joined, the number of jurisdictions which have signed the Convention is equal to 147.

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Fazzini Holzmiller & Partners

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