Since its inception, the Firm has been advising clients with an international focus, on tax, legal, and accounting matters and whilst the firm has grown considerably since its formation, many of its people have been with the firm since its early years. Umberto Belluzzo comments: “Foreign investors in Italy face with the particularities and complexity of the Italian business framework together with the dominant ‘family business’ structure of Italian Industry. We work alongside these investors to bridge and facilitate their understanding of Italian industry.”
“The various issues that our clients face and the multi-faceted nature of our own service offering, led the business to evolve into the functional structure that it is today, with eight departments each of which, is led by an associate.” says Luigi Belluzzo, managing partner of the Firm.
Overseas office
The Firm has strong experience in assisting Italian companies with the process of internationalisation. The Firm soon identified a need for an overseas office an opened an office in London’s St James’ headed by Alessandro Belluzzo. From this base in London, Alessandro Belluzzo consults on Internationalisation and, on Foreign Investments in Italy, commenting: “From London we coordinate an international network of 100 correspondents in major markets and business centres around the world and work with European and Asian Private Equity , looking to invest into Italy and the Italian brand.”
The Firm maintains a classic tax&legal approach which enables the international investor to achieve results in the Italian market, also advising on legal matters such as contracts, company law, tax law and M&A operations.
“Our understanding of the Italian market, the family businesses that preside over much of it, and our strong relationships in Italy are of relevance to foreign investors who upon entering the Italian market, need to consider cultural factors and the existing driving forces in place as much as the pure logistics.” Francesco Lombardo who leads Corporate Law Counselling department says.
Having worked on numerous deals with foreign investors, private equity funds and Italian investors, Luigi Belluzzo says “Our policy is to maintain strict privacy; we seek to ensure where possible, that deals emerge when clients wish them to” adding further: “Perhaps today more than for many years, the way a Firm behaves in Italy and the trust it is able to command, is of fundamental importance. We pride ourselves on the high standing that we have built over time with our colleagues, banks and financial institutions as well as other professionals and entrepreneurs within industry.”
The Firm’s professionals are highly trained and have strong capabilities and qualities that they bring to the firm. We encourage involvement in the wider community through publishing of opinion and articles and teaching activities. Many of the firm’s associates are linked with Universities and professional bodies (eg IFA, STEP) and regularly publish articles in the key trade and industry journals on tax&legal matters, M&A, Estate Planning and more.
The Italian Budget 2008
The following measures announced in the recent Italian Budget can be seen as having created a more favourable tax environment in Italy:
Corporate taxation: For tax periods starting from 1st January 2008 onwards, the corporate tax rate (IRES) is reduced to 27.5 percent (previously, 33 percent), and the regional income tax rate (IRAP) is reduced from 4.25 percent to 3.9 percent
PEX Regime: From 2008, the exempt portion of capital gains on shares realized on years starting from 1st January 2008 onwards is increased to 95 percent (previously 84 percent). The holding period requirement is reduced from 18 months to 12 months.
Extraordinary transactions: The proposed rule, relating to the applicability of a substitute tax of 18 percent payable on goodwill derived from extraordinary transactions, has been amended as follows; in the case of contribution of going concern, the receiving company may elect to apply a substitute tax in order to obtain the step-up of the fiscal value of the assets received. The step-up is available also on the assets received by way of merger or de-merger. The substitute tax applies at the rate of 12 percent, 14 percent and 16 percent depending on the amount of the revaluation: up to €5m, from €5m to €10m, more than €10m, respectively.
The revaluation is disregarded if the stepped-up assets are disposed before the end of the subsequent four years. The new provision applies for tax periods starting from 1st January 2008 onwards.
Application of IAS: The 2008 Budget introduced a new provision, applicable to companies drafting their financial statements under the IAS, stating that the criteria set forth by International Accounting Standard (IAS) are relevant for IRES purposes. In particular, the qualification, timing of accrual and classification of items pursuant to IAS is valid also for IRES.
Stefano Barone, head of Accountancy, Tax and Compliance Advisory, comments: “This measure can be regarded as a positive move for foreign investors into Italy and I am optimistic that we may see further such enhancements in the future”.
Emanuele Lo Presti who leads the M&A, Governance and Corporate Reorganization team comments further on the Budget 2008: “Systematic (fiscal) changes aside, there are still some challenges for the domestic Italian market namely, in opening up to a more international and global environment. This is where we seek to assist clients both Italian and overseas clients by both making the ‘unknown’ more familiar in both a cultural and practical sense, and crucially providing the tax, legal and accounting framework to facilitate cross border deals.”
Investments and trusts
During the last year new rules have been introduced which have modified the Italian stance on the taxation of trusts. The most important of these, was the new legislation regarding the residence of some international trusts that are administered in countries ‘blacklisted’ under Italian tax law (e.g. Guernsey, Jersey etc.), with Italian resident settlors and beneficiaries.
What this means is that where an Italian resident is asked to prove that the trust’s main activities are indeed managed in the country where that trust is resident, there is a potential loss of confidentiality. Where the residence status of the trust is not sufficiently proven, the trust would be treated as ‘Italian resident’ with Italian tax rules therefore applicable.
Alessandro Belluzzo comments: “This change is significant not least because the Trust is commonly used to hold real estate property or Italian companies. We have advised several clients on the impact of these new rules some of whom, have taken the option of moving the trust’s residence to a ‘white-listed’ country in order to avoid the potential requirement for exchange of information and loss of privacy.”
Even given this change though, Italy is by no means a hostile environment for trusts. Indeed, another very notable recent statement on the taxation of trusts was the clarification of the direct tax-exempt status of distribution capital received from a trust, by an Italian resident beneficiary. This was the first time that this had been explicitly clarified and this move, together with a low (between 4-8 percent) indirect rate of tax on distributions by a trust, represents a favourable tax environment for trusts in Italy.
Luigi Belluzzo comments; “There have been considerable moves to take up Italian residence in recent times. The above development in the taxation of trusts, together with the generally low taxation (12.5 percent in some cases) on financial income for Italian residents represents a welcome environment. Any less than positive changes in other tax regimes in Europe – the recently proposed taxation changes for non-domicile in the United Kingdom being one example – may add further to Italy’s attractiveness in this respect.”
