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March 9, 2022

Italy revamps opportunity to tax step-up participations and land

On 1 March 2022, Italy’s Law Decree n. 17, referred to as the “Energy Decree,” was published in the Official Gazette and entered into force on the same day. While immediately in effect, the Decree will have to be converted (with potential changes) into Law within 60 days from its publication to remain in force.

Among others, the Energy Decree revamps a one-off opportunity to elect a tax step-up of participations in unlisted Italian companies and land (both buildable and agricultural). Individuals and nonresident entities may elect the tax step-up of participations and land held as of 1 January 2022 by paying a 14% substitute tax.

The base of the substitute tax equals the tax value of the participation or land as of 1 January 2022 and needs to be certified by a sworn appraisal prepared by 15 June 2022.

The substitute tax may either be paid in full by 15 June 2022 or in three annual installments paid respectively by 15 June 2022, 15 June 2023 and 15 June 2024. An annual rate of 3% interest applies to the second and third installments.

This measure may represent an opportunity for nonresident companies who might derive Italian capital gains (generally taxable at 26%) on the disposal of Italian participations without tax treaty protection (e.g., US, Australian, Canadian, Israeli, and Mexican parents of Italian land-rich companies, French parents of Italian companies, and other non-treaty parents like the Cayman Islands and Bermuda).


For additional information with respect to this Alert, please contact the following:

Studio Legale Tributario, International Tax and Transaction Services, Milan

Studio Legale Tributario, International Tax and Transaction Services, Rome

Studio Legale Tributario, Bologna

Ernst & Young LLP (United Kingdom), Italian Tax Desk, London

Ernst & Young LLP (United States), Italian Tax Desk, New York


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