Global site

Italy: 2014 Budget

On 27 December 2013, the Italian 2014 Budget was approved by the Italian parliament as well as published in the official gazette. The 2014 Budget contains several changes, some of which may affect internationally active companies that operate in the Italian market.

On 27 December 2013, the Italian 2014 Budget was approved by the Italian parliament as well as published in the official gazette. The 2014 Budget contains several changes, some of which may affect internationally active companies that operate in the Italian market.

Firstly, the notional interest yield has been increased. As of fiscal year 2011 a notional interest deduction is available for Italian companies. The deduction is calculated by multiplying the notional interest yield (which has been at 3% for the past three years) with the increase in the qualifying book net equity as shown in the financial statements. The 2014 Budget has set the notional interest yield at 4% for fiscal year 2014, 4.5% for fiscal year 2015 and 4.75% for fiscal year 2016.

Secondly, as of 1 January 2014, the 2014 Budget has created the opportunity for Italian individuals and non-resident entities to step up the taxable basis of unlisted participations and land. There are two criteria: a formal valuation of the participations (or the land) should be obtained from a qualified appraiser and a substitute tax must be paid – both before 30 June 2014. The substitute tax equals 2% of the step up on non-qualifying participations and 4% of the step up on qualifying participations and land.

Finally, as of 1 July 2014, a new – yet already controversial – tax measure will enter into force. Under this new tax measure, Italian companies will be forced to purchase their online advertisement services and their sponsored web links in search engines from entities that are VAT-registered in Italy. To ensure the efficiency of this new tax measure, it will also apply on online advertisement services and sponsored web links purchased through third party operators. A traceable method of payment revealing the identity of the beneficiary must be used, e.g. a bank payment or postal wire transfer.

The goal of this new measure is to force multinationals to register for tax purposes in Italy – instead of selling their online advertisement services through third party operators in countries with favourable tax regimes. However, because questions about its compatibility with European law have been raised, the Italian government will consult with the European Commission. Therefore, the implementation of the measure has been postponed from 1 January to 1 July 2014.

Region(s): 

How can we help you?

Contact us by phone

T: +44 207 601 1080

 or submit your questions, comments, or proposal requests.

Email us