Italian 2024 budget law

Participation exemption rules of non-resident companies and institutions

The Budget Law extends the applicability of the Italian participation exemption regime (Italian PEX) to companies and trade entities which are resident in an EU or EEA member State (that allows an adequate exchange of information) subjected to a corporation tax therein and with no permanent establishment in Italy.

Italian PEX is generally applicable to qualified participation, provided that all of the conditions below are satisfied:

• uninterrupted possession of the participation by the seller since the first day of the twelfth month preceding that of transfer;
• classification of the participation in the category of financial fixed assets in the first balance sheet closed during the holding period;
• tax residence of the transferred company in a State or territory other than those with a privileged tax regime; and
• the exercise by the transferred company of a business activity for at least the past three-year period (or the shorter period available from incorporation).

If all the above conditions are jointly achieved, capital gains arising from the sale are subjected to taxation limited to five percent of its amount. Specific rules apply to capital losses.

It is worth mentioning though that in most circumstances such taxation would be in any event excluded under the provisions of the double tax treaties entered into by Italy and the relevant EU/EEA Member State.

Postponement of the financial institutions and insurance companies credit loss deduction

The excess amounts of impairment and losses on receivables of credit and financial institutions and of insurance companies can be deducted as follows:

• one percent of the amount of negative income components for corporate tax (IRES) and for regional tax on productive activities (IRAP) purposes for 2024; and
• three percent of the amount of negative income components for corporate tax (IRES) and for regional tax on productive activities (IRAP) for 2026 are deferred to the fiscal years 2027 and 2028.

Step-up of the purchase value of land and equity investments

The purchase values of traded and non-traded equity investments, and of building land and land for agricultural use held on 1 January 2024 by individuals and certain other categories of taxpayers, can be redetermined by means of the payment of a 16 percent substitute tax on the recalculated values.

The substitute tax may be paid in up to three annual instalments of equal amount, starting on 30 June 2024, while interest is owed at an annual rate of three percent.

Capital gains on real estate

Capital gains arising from the disposal against consideration of real estate, subject to the restructuring works under Article 119 of the Italian Law Decree No. 34/2020 (i.e. the so-called superbonus 110%), where sale occurs within ten years from the end of such works, qualifies as other income, subject to a substitutive tax of 26 percent. 

Properties acquired by inheritance and those used as the main home of the seller or their family member for most of the period are excluded thereof.

If the disposal occurs within five years from the end of such works, the expenses related to such works shall not be taken into account to determine the cost of the property and the arisen capital gains as of the date of sale. Where the works have been completed for more than five years, 50 percent of the expenses for such works shall be taken into account.

Flat tax on short rental income 

The substitutive flat tax applicable on income arisen from short rentals applies at (i) 21 percent with reference to a sole property unit identified by the taxpayer at the time of filing the income tax return and (ii) 26 percent on all others.

Flat tax is also due to be paid by non-residents in Italy who carry out real estate intermediation services or operate online portals and collect the relevant fees or considerations, or are involved in the payment of such fees or considerations, withhold a tax thereupon and fulfil their tax obligations through a permanent establishment in Italy, if any or, if they do not have a permanent establishment in Italy by means of a fiscal representative. 

Tax on overseas properties (IVIE) – tax on financial assets held overseas (IVAFE)

IVIE is increased from 0.76 percent to 1.06 percent.

IVAFE is set forth at four percent per thousand annually at the value of the financial assets held in countries or territories with a privileged tax scheme (listed in the MEF Decree on 4 May 1999).

Loans to employees

As for 2023, regarding loans extended from employers to employees, the employee's fringe benefit is 50 percent of the difference between the interest using the official reference rate that is in force when (i) each instalment is due or (ii) the loan is granted, and the interest using the rate that the loan charges. 

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