Italy is about to grant a 50% tax exemption on re-shored business

With the aim of re-shoring business activities, the draft tax reform relating to international taxation, which is still under evaluation by Parliament, provides an exemption from income and regional taxes. Specifically, under the scope of income taxes reference is made to the income tax on individuals (the so called IRPEF) and to the corporate income tax (the so called IRES) for corporations. 

The exemption provides that 50% of the income derived from business activities previously carried out in a foreign country not belonging to the European Union or the European Economic Area and then transferred to the Italian territory in 2024 or subsequent years will not be considered to be part of the taxable base. To avoid the abuse of the envisaged measure, re-shored business must have not been carried out in Italy in the 2 years previous to the reshoring. For this reason, to determine the portion of the income excluded from the taxable base, the taxpayer will be required to keep separate accounting evidence.

The exemption is provided in the tax period at the time in which the reshoring takes place and for the subsequent five tax years.

The reform also provides for forfeiture of the exemption, which is lost in the case of transfer abroad of the relevant asset/business. In particular, the benefit of the tax regime will be lost if in the five tax periods following the expiration of the exemption (or ten in the case of large corporations, as set out in the Recommendation 2003/361/EC of Commission dated 6th May 2023), the beneficiary transfers, even partially, outside the Italian territory, the previously re-shored assets/business. In this case the tax authority will collect, with the addition of interest, the unpaid taxes as the exemption did not apply.
The effectiveness of this appealing incentive is subject to the authorization of the European Commission.

F&A International tax department ; Edoardo Belli Contarini ; Daniele Di Prospero ; Giulio Chiarizia ; Cristina Periti ; Raffello Fossati
Fantozzi & Associati
Rome, Italy