On 22 December 2015 the Italian Parliament approved the Stability Law for 2016, which was published in the Official Journal of 31 December 2015.
The Stability Law has revised the relevant provisions of Italy's tax code relating to so-called 'black lists' on corporate taxation and Controlled Foreign Companies (CFC) rules. Of particular note, the 'black lists' on (a) the deductibility of costs and (b) CFCs have been abolished as of 1 January 2016. This means that Guernsey will not be listed on any Italian 'black list' from 1 January 2016.
As from 1 January 2016, the only general criterion for the application of Italy's CFC rules will be the low level of corporate taxation of the CFC. A rate of 50% lower than the Italian corporate tax rate (which is 27.5% for 2016 and will be 24% for 2017 onwards) is considered as a low level of taxation, both for general and special regime. This will mean that the CFC provisions will continue to apply as they will to all jurisdictions who meet the low level of taxation criteria but there will be no listing of these jurisdictions. The Italian authorities are informing the EU Commission of these changes and this should mean that Italy is not included among the Member States that are said to have a 'black list'.
In addition, in early 2016, via a Ministerial Decree, Italy's 'white lists' for the purposes of tax treatment of interest from government bonds and listed companies will be updated, taking into account the agreements on exchange of information, compliant with the international standards, that have entered into force. As Guernsey has a legal instrument in force allowing for the exchange of information with Italy, Guernsey will be included on the 'white list'.
The Guernsey and Jersey authorities together have made representations to the Italian authorities on a number of occasions, expressing the view that given the level of cooperation extended on tax information exchange both on request and automatically there was no justification for their being black listed. The changes now announced by the Italian authorities are therefore warmly welcomed.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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