Italian Parliament Approves PM's Tax Reforms

by Ulrika Lomas, Tax-News.com, Brussels

08 November 2001

The Italian Parliament has passed the majority of the tax law amendments proposed by Prime Minister Silvio Berlusconi in June aimed at stimulating the economy. The amendments include changes concerning the Tremonti Incentive, the dual-rate corporate tax system, tax on real estate funds, foreign investments and the inheritance and gift tax rules.

Under the new Tremonti Incentive (TI) each Italian company will be requested to establish its average level of annual investment over the last five years. The company will then pay 50 per cent less tax on any profits that it invests over and above this level.

Parliament also approved the withdrawal of the dual rate corporate tax (DIT) system. Under the DIT qualifying businesses enjoyed a 10 per cent corporate tax rate instead of the usual 36 per cent rate.

With regard to real estate funds, the 25 per cent tax on funds' net income now no longer exists and the funds are exempt from income tax, although they are subject to a 1 per cent tax on their net accounting value. For foreign investments, Italian residents can declare funds and assets held abroad; by paying a 2.5 per cent tax of their value they are protected from paying any additional tax assessments up to that value.

The inheritance and gift tax rules were abolished and donations to parties not related to the deceased will only be taxed on a minimum sum of ITL180,000 for each beneficiary.

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