Italian Law n. 208/2015, having its effect starting from Year 2016, introduced important changes with regard to the Countries considered as “Offshore Financial Centres” or “Tax Heavens”: instead of referencing to the listings issued by the Ministry (which identified the list of Countries considered as Offshore Financial Centres” or “Tax Heavens” as blacklisted Countries), now a more general criteria is applicable, based on the assumption that Countries or Territories are considered as “Offshore Financial Centres” or “Tax Heavens” when the nominal level, even special, of taxation is lower than 50% of the taxation presently applicable in Italy.

The rules about the Controlled Foreign Companies (C.F.C.), pertain to Countries and territories which are NOT part of the U.E. and/or of the EES (now EEA) (Economic European Space  - later Economic European Area – SEE for Italy) with agreements for exchange of information, and consequently pertain to companies fiscally resident in Italy having controlled companies located in territories possibly considered as “Offshore Financial Centres” or “Tax Heavens”.

Hence companies fiscally resident in Italy have now to directly verify, and for each single fiscal year, if their controlled companies in countries outside the UE and/or outside the EEA have a “favoured” tax system, being located in “Offshore Financial Centres” or “Tax Heavens” countries,  by identifying such “favoured” system with a nominal level of taxation lower than, as explained above, the 50% of the level of taxation applicable in Italy.

Since 2017 the nominal rate applicable in Italy on companies’ taxable income is the sum of IRES at 24% and IRAP at 3,90%, hence all Countries and territories outside the UE and/or EEA which have a level of nominal taxation lower than 13,95% are considered as “Offshore Financial Centres” or “Tax Heavens”, i.e. countries with favoured tax systems.

The implementation of such rule is not so immediate and it is expected that the Ministry would again intervene about this topic, with particular reference, among other, to the dividends distributed by the Controlled Foreign Companies with income accrued in years preceding the coming into effect of the Italian Law 208/2015.

These problems do not rise in case companies fiscally resident in Italy would control other companies located in Countries within the UE and/or EEA, except the case where such companies’ income is made up by passive income and intra-group services for more than the 50% and the actual taxation of that European country would be lower than 50% of the Italian taxation.

In case an Italian company would have received dividends from a controlled company located in a Country within the UE and/or EEA and/or in a extra-UE Country but with a tax rate higher than 50% of the applicable level in Italy, the taxation will be calculated by applying IRES only (since 2017, tax rate at 24%) on 5% of the dividends received (hence taxation on dividends distributed by companies fiscally resident in Countries within the UE and/or EEA and/or extra UE without a ”favoured” tax system as defined above will be at an actual tax rate of 1,2% of the dividends received).