Tax transparency option

The tax transparency is a system by which the company transparency is is not taxed in respect of the company itself, but is attributed to each shareholder, irrespective of its actual distribution, in proportion to their share in the profits.

The system is optional and the option has to be exercised by all the shareholders.

The requirements for exercising the option are as follows:

  • the shareholders must all be limited liabilities companies with share capital, cooperative companies or mutual insurance companies resident in Italy;
  • each shareholder must hold a percentage of voting rights at the general meeting and profit-sharing of minimum 10% and maximum 50%.

These conditions must be met from the very first day of the tax period of the subsidiary in which the option is exercised and remain in force until the end of the option period.

The option period is a 3-year period.

Under certain conditions, this system may also be applied if one or more shareholders are non-resident.

In the event of the distribution of dividends, consisting of profits acquired during the periods included in the period of validity of the option, dividends will not be taxed. This system is also applicable to S.r.l. or cooperatives, provided that:

  • all the shareholders are natural persons only, up to 10 for an S.r.l. or 20 for cooperative societies;
  • the subsidiary has an income not exceeding EUR 7,500,000;
  • the company does not have participations within the participation exemption requirements.

 

 


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