Controlled Foreign Companies (CFC)

The income produced by businesses, companies or other entities, resident or established in a black list country, which is controlled directly or indirectly by a resident person (individual, company, etc.), is attributed directly to the resident person, in proportion to the participation held. These rules also apply if the subsidiary has a permanent establishment in one of the countries previously mentioned. The above rules also apply to associated foreign companies, i.e. to participations exceeding 20% (10% if the company is listed). Taxable income is therefore determined according to specific rules.

CFC rules do not apply where a positive advance ruling is given by the revenue authorities, which is intended to prove specific conditions are satisfied.

CFC rules also apply to controlled entities established in non-blacklist countries if:

  • they are subject to tax rates less than 50% of the effectiveItalian tax rate; and
  • more than 50% of the income earned is passive income (i.e. interests, dividends, royalties and services provided to related parties).

Advanced ruling for exemption is available.


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