New simplified Italian tax regulation for Exchanges of Shares through Contribution

The last "Delega Fiscale" concerning extraordinary operations will, once in effect, intervene, inter alia, (as referenced in the Explanatory Report) to "eliminate the irrational and distortive effects currently arising from the rules governing the discipline of business contributions under Article 176 of the Consolidated Income Tax Act (TUIR) and the exchanges of shares through contribution under Article 177 of the same code."

Specifically, the draft decree, while preserving the principle of tax neutrality underlying business contributions and the principle of tax neutrality typical of share exchanges through contribution, will expand the discipline provided by Article 177 of the TUIR:

·       to include contributions or exchanges of shares where the exchanged or contributing companies are fiscally non-resident in Italy, expressly referring to Article 73, paragraph 1, letter d) of the TUIR. This amendment will facilitate reorganization processes in which shares of companies fiscally non-resident in Italy, held by resident individuals, are contributed to a resident company, operations that, until now, have been considered as “taxable events” for the purposes of direct taxation;

·       by rationalizing and simplifying contributions of companies that are already holding companies. Specifically, the current minimum 20% shareholding threshold required by paragraph 2-bis to benefit from tax neutrality will, in the future, be relevant only for shareholdings directly held by the holding company and for those held indirectly through a subsidiary that qualifies itself as a holding company (with the threshold no longer relevant for those shareholdings indirectly held through operating companies that do not qualify as holding companies). Furthermore, the threshold will be limited to shareholdings whose overall book value exceeds half of the total book value of the shareholdings under consideration, thereby preventing insignificant shareholdings from unjustifiably precluding the entrepreneur's ability to benefit from the controlled realization regime.

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