Italy: Tax measures enacted in 2016 budget law

Italy: Tax measures enacted in 2016 budget law

Italy’s 2016 budget law includes changes to the tax law, with these tax measures generally being effective 1 January 2016.

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Among the tax changes affecting business taxation are the following:

  • A reduction in the rate of the corporate income tax (IRES) beginning in 2017—the rate will be reduced to 24% (down from 27.5%) effective for the tax year that follows the one in process on 31 December 2016 (or 2017 for calendar year taxpayers)
  • A corresponding reduced rate of withholding tax on outbound dividends
  • Effectively no changes to the rate of corporate income tax for credit and financial institutions (an increase by an additional 3.5% for banks and financial institutions means they will continue to be subject to tax at the 27.5% rate)
  • An additional 40% increase in depreciation available for certain tangible assets
  • A reduced amortization period of five years for goodwill and trademarks in certain business reorganizations
  • Repeal of the “black list” cost rules for intercompany transactions, meaning that the costs may be fully deductible if shown to be at arm’s length
  • Changes to the controlled foreign corporation (CFC) regime
  • Country-by-country reporting implementation rules
  • Measures to address international tax avoidance, to be provided in regulations by the tax authorities
  • Amendments to the patent box regime, intended to broaden its scope
  • A step-up basis of business assets for Italian entities that adopt domestic GAAP

There also are measures that phase in an increase of the rates of value added tax (VAT), with the standard VAT rate to increase from 22% to 24% (effective 2017) and to 25% (effective 2018).


Read a February 2016 report [PDF 298 KB] prepared by the KPMG member firm in Italy: Italy – Tax highlights of the 2016 budget law

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