The Legislative Decree No. 209/2023 has reformed the conditions for the application of the Controlled Foreign Companies (CFC) regime pursuant to Article 167 of the TUIR, introducing:
1. A simplification in the calculation of the effective tax rate of the non-resident controlled company.
In light of the aforementioned simplification, the CFC regime now apply to foreign controlled companies that:
- Generate more than one-third of income classified as so-called passive income.
Regarding this, passive income includes dividends, interests, royalties, as well as:
i. proceeds from transactions involving goods with low or negligible added economic value, carried out with entities belonging to the same group of companies;
ii. proceeds from service provisions with low or negligible added economic value, provided to entities belonging to the same group of companies;
- Are subject to an effective tax rate lower than 15%.
In this regard, effective tax refers to the ratio between the sum of current taxes due, deferred and anticipated taxes recorded in the financial statements of the foreign controlled company, and the pre-tax profit resulting from the aforementioned financial statements.
2. An optional substitute tax regime that allows avoiding the calculation of the effective tax rate for the foreign controlled company.
Under such optional regime, the Italian controlling shareholder may opt for the payment of a substitute tax at the rate of 15% of the net accounting profit earned by the foreign controlled company (as recalculated according to specific criteria).
The simplified calculation of the effective tax rate of the foreign controlled company and the optional substitute tax regime are applicable provided that the financial statements of the foreign controlled company is subject to audit and certification, and that the outcomes thereof are utilized by the auditor of the Italian controlling shareholder.
Our services
The National and International Taxation Department of Bacciardi Partners can assist your company in evaluating the applicability of the CFC regime to your economic activities conducted abroad, also in light of the news introduced by the International Tax Reform that best meets your needs.
Therefore, we invite you to contact us directly at +39 0721 371139 or via email at segreteria@bacciardistudiolegale.it for further information or clarifications regarding the new criteria for applying the CFC regime introduced by the Reform.