Tax professionals in Italy have filed a complaint with the European Commission asserting that the Italian controlled foreign company (CFC) regime—in particular, provisions applicable to CFCs that are not located in “black list” countries—is contrary to standards under the EU Treaty.
The complaint against the CFC regime was filed after a December 2015 decision of the Italian Supreme Court, in which the high court found that the Italian CFC regime is compliant with the EU freedom of establishment principle.
The CFC regime, under Italian tax law, provides that an Italian resident taxpayer is subject to tax on income realized by certain CFCs in which the Italian taxpayer directly or indirectly holds the majority of votes or exercises a dominant influence. The CFC regime applies to
There are provisions that allow for a taxpayer to be exempt from the CFC regime, and to prove that it is eligible for exemption from the CFC regime under safe harbor provisions.
The case decided by the Italian Supreme Court in December 2015 involved an Italian company with a subsidiary located in Cyprus (which, at that time, was a “black list” country). The Italian taxpayer asserted, among other contentions, that the CFC regime infringed on the EU principle of proportionality and that the CFC regime contravened the permanent establishment provision under the Italy-Cyprus income tax treaty.
The Supreme Court concluded that the Italian CFC regime was compliant with EU standards and did not contradict the income tax treaty provisions.
Following the high court’s decision, a complaint was filed in March 2016 with the EC against the Italian CFC regime.
Read an April 2016 report [PDF 527 KB] prepared by the KPMG member firm in Italy: Italian CFC regime compliant with EU law and double tax treaties
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.
KPMG's new digital platform