The Italian Tax Authorities issues clarifications on the DAC 7
Clarifications on the custom code reform
The Italian Supreme Court analyses beneficial ownership requirements
Italian provision on the Pillar Tw0 SBIE
Frontier wors regime cannot apply in the lack of an employment relationship
Entry tax rules do not apply to funds merger
New VAT measures enacted in Italy
Announced provisions that might be included in the 2025 Budget Law
EU amends its non-cooperative jurisdiction list
The OECD guidelines on TP are not to be considered as law provisions
Announced provisions that might be included in the 2025 Budget Law
The Italian Tax Authorities issues clarifications on the DAC 7
With its statement of practice no. 3 of 3 October 2024, the Italian Tax Authorities have provided clarifications on the definitions of “platform” and “seller” with reference to the reporting and exchange of information obligations of digital platform operators. These obligations are governed by Directive 2021/514/EU (“DAC 7”) which was enacted to combat the tax erosion fact patterns emerging from the digitalisation of the economy. With regard to the definition of “platform”, the tax authorities have confirmed that a website that allows sellers to sell their products online according to an operating model in which the sale is carried out by the site operator in his own name and on behalf of the user-sellers is considered to be a “platform” even in the absence of any relationship/communication between the user-sellers and the user-buyers (e.g. by reason of a commission contract or mandate). The definition of “seller” also includes users who are not actually registered on the website (i.e. who do not have an account on the platform), but use such platform throughout the transaction.
Clarifications on the custom code reform
The Customs and Monopolies Agency has issued its Circular Letter no. 20 of 4 October 2024, which analyses the amendments brought by the Legislative Decree 141/2024, on the customs regulations and the penalty system on excise duties and other indirect taxes on production and consumption. In particular, the above-mentioned document highlights:
• the differences between import VAT and “internal” VAT, and the related penalties;
• the exclusion of VAT from duties not paid at customs pursuant to the to the application of the VAT warehouse or the “42” regime, for simultaneous intra-community supply;
• the circumstance that the direct representation still subject to the issue of a specific qualification (except for customs agents, C.A.D. and AEO);
• the distinction between criminal and administrative offences, based on an objective criterion related to the amount of the duties due (10,000.00 euros for duty orVAT, separately considered), making the system more consistent with EU legislation.
The Italian Supreme Court analyses beneficial ownership requirements
The Italian Supreme Court, with its decision no. 14 October 26640, has ruled on the meaning of the concept of beneficial owner for the purposes of the applicability of the reduced 10% withholding tax on royalties referred to in Art. 12 of the tax treaty entered into between Italy and Luxembourg. The Italian Supreme Court, after having analyzed the main traits of the concept of “beneficial owner” stated, in accordance with certain previous decisions it issued, that three tests need to be met in order for a person to qualify as the beneficial owner of the income, being:
• the “substantive business activity test” (performance of an effective economic activity, in this case, exploiting the trademarks and licensing them to third parties);
• the “dominion test” (right to dispose of the royalties without the obligation to pass them on to third parties);
• the “business purpose test” (the reason why the recipient was involved in the transaction).
Italian provision on the Pillar Tw0 SBIE
The Ministerial Decree containing certain implementing provisions for the determination of the substance-based income exclusion (or SBIE) for Pillar Two purposes has been published on 11 October 2024. The SBIE represent an amount that reduces the excess profits of the entities part of a MNE Group in-scope of Pillar Two and located in a certain jurisdiction. The implementing Ministerial Decree, in particular:
• lays down general rules governing the SBIE (Articles 1 and 2), specifying, for example, any SBIE amount excess that cannot be used in a given fiscal year cannot be carried forward;
• provides technical rules for the calculation of the two SBIE components being salary expenses (Articles 3 and 4) as well as to tangible assets expenses (Articles 5 and 6);
• sets certain rules needed to determine the SBIE amount for permanent establishments and flow-through entities (Articles 7 and 8).
Frontier wors regime cannot apply in the lack of an employment relationship
During the question time no. 5-02237 in the Italian Parliament it was clarified that persons resident in Italy who hold non-portfolio shareholdings in Swiss Limited Liability Companies (SAGLs) and are working for the same SAGLs cannot benefit from the frontier workers regime, as they do not meet the requirements to be qualified as employees
Entry tax rules do not apply to funds merger
According to the ruling no. 206 of 18 October 2024, Article 166-bis of the TUIR, which regulates the tax value of assets
of enterprises entering Italy (also improperly referred to as “entry tax”), is not applicable to the cross-border merger of sub-funds of a Luxembourg SICAV by incorporation into an Italian fund. The reason this rule does not apply in similar cases is that funds do not carry out business activities while the abovementioned article only applies with respect to assets held by enterprises.
New VAT measures enacted in Italy
On 29 October 2024, the Italian Council of Ministers approved the legislative decree transposing Directive 2020/285/EU and Directive 2022/542/EU regarding certain VAT measures. The main changes provided by the above-mentioned Directives are as follows:
• the introduction of the cross-border exemption regime for VAT purposes, divided between the exemption regime to be applied in Italy by persons established in other EU Member States and the exemption regime applied in other EU countries by national operators;
• the possibility, for VAT taxable persons benefitting from the Italian flat-tax regime, to issue invoices through a simplified procedure even for amounts exceeding the 400.00 Euros limit established by the Ministerial Decree of 10 May 2019;
• the amendment of the B2C VAT territoriality criterion for the “supply of services relating to cultural, artistic, sporting, scientific, educational, recreational and similar activities, including fairs and exhibitions, the supply of services by the organisers of such activities, as well as the supply of ancillary services”, to be considered territorially relevant in the State of domicile of the nonVAT customer if the aforementioned activities are streamed or rendered on line.
and supervisory rules provided for by the Member State’s regulations in adherence to the EU ones, and
Announced provisions that might be included in the 2025 Budget Law
The 2025 Budget Law might introduce some amendments in connection to conventional wages for frontier workers, capital gains on crypto-assets, the subjective scope of the digital service tax and deductions for dependent family members. In particular:
• with regard to the provisions on frontier workers, a retroactive provision clarifies that the circumstance that the relevant worker weekly returns home would not affect the ability of such worker to benefit from the conventional wage regime;
• with regard to capital gains on crypto-assets, the substitute tax rate is expected to increase from 26% to 42%;
• with regard to the web tax, the subjective scope is amended by providing for the elimination of the current double requirement referring to the amount of total revenues and those deriving from digital services;
• with regard to the deductions for dependent family members, it is envisaged that they will be granted only to the extent that such dependents family members are tax resident in Italy.
EU amends its non-cooperative jurisdiction list
The Council of the European Union, document no. 14269/24, has approved the periodic updating of the list of non-cooperative countries for tax purposes. This list is relevant to identify the jurisdictions falling within the scope of the Italian black-list cost regime, provided for by Art. 110, (9-bis) to (9-quinquies) of the TUIR. This regime provides that expenses deriving from transactions with companies resident or located in such list might be deducted within the limits of their fair market value. Since the revision, the list now includes Anguilla, Fiji, Guam, U.S. Virgin Islands, Palau, Panama, Russia, Samoa, American Samoa, Trinidad and Tobago, and Vanuatu. On the other hand, the State of Antigua and Barbuda was eliminated due to the negative assessment of the rules relating to the exchange of information upon request. The next update of the list is scheduled for February 2025.
The OECD guidelines on TP are not to be considered as law provisions
The Italian Supreme Court, in its decision no. 26432 of 10 October 2024, has stated that “OECD recommendations do not qualify as regulations or laws, but provide aids and operational methods (technical standards) for the specific implementation of legislative provisions”, such as the one on fair market value referred to in Art. 110(7) of the TUIR (through which the OECD transfer pricing regulation has been introduced in Italian domestic law). It is therefore up to the taxpayer to choose “the calculation method most adherent to the concrete case” among the ones proposed by the OECD and to the court has to assess whether the reasons for this choice are consistent and not logically flawed.
Announced provisions that might be included in the 2025 Budget Law
According to the European Court of Justice (decision C585/22), Article 49 of TFEU (which provides for the freedom of establishment) must be interpreted as not precluding a national provision which limits the deductibility of interest paid on an intra-group loan relating to the acquisition (or increase) of a shareholding in another entity which, as a result of that transaction, becomes a related entity.
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