European Commission Probes Italian Tax Incentives For Newly Listed Companies

by Ulrika Lomas, for LawAndTax-News.com, Brussels

19 March 2004

The European Commission on Tuesday announced that it has launched an in-depth probe into tax incentives offered by the Italian government to newly listed companies.

In an attempt to boost the country's flagging economy, the Italian authorities, as part of the 2004 budget package, introduced an incentive scheme for newly listed companies which allows them to take advantage of a 20% corporate tax rate, rather than the 33% which is usually applicable to businesses in Italy.

This reduced rate is intended to apply for the three fiscal years following the stock exchange listing of the company in Europe. Additionally, newly listed companies will be able to deduct the costs incurred in obtaining a listing. This includes the cost of executing due diligence, the cost for consultants' advice and the regulatory cost of listing a company on the stock exchange.

Only companies that increase their net capital by at least 15% as a result of their initial public offering (IPO) qualify for the special tax treatment. In addition, only companies that obtain their first listing on an European stock exchange qualify. According to the Italian authorities, only ten companies are expected to qualify in 2003. No exact figures on the companies expected to qualify in 2004 have been submitted at this stage.

The EC explained this week that its interest in this particular incentive package is justified by the concern that the incentives in question might be specifically targeted at strategic sectors of the Italian economy and could therefore distort competition.

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