The Italian Budget Law for 2018 (Law no. 205 of 27 December 2017) published on 29 December 2017 and entered into force on 1 January 2018. Some of its most significant corporate tax measures are summarized below:

Dividends: Dividends from companies resident of low-tax jurisdictions are generally subject to corporate tax on their full amount when received by companies that are tax resident of Italy. For these purposes, a low-tax jurisdiction is a jurisdiction that (i) is not an EU or EEA member State and (ii) has a nominal tax rate lower than 50% of the Italian nominal tax rate (or grants a preferential tax regime to the distributing company leading to taxation lower than 50% of the Italian nominal tax rate). As this definition refers to the level of taxation in the foreign country, a jurisdiction may qualify as low-tax in a given year and then as non-low tax in a subsequent year.

Capital gains: Non-resident entities will now be subject to a final 26% substitute tax on capital gains realized on substantial shareholdings in Italian resident companies, unless a double tax treaty prevents Italy from taxing the gain. The new measure applies to capital gains realized from 1 January 2019.

Incentive for Industry/manufacturing: Enterprises may benefit from a tax credit equal to 40% of personnel expenses incurred for certain training activities, related to the Industry Plan 4.0 promoted by the government and agreed through corporate or territorial collective agreements, up to a yearly amount of EUR 300,000 per enterprise.

Enterprises may also benefit from a tax credit equal to 50% of contributions, up to EUR 40,000, made to restore public sports facilities, up to 0.3% of their annual revenues.

Incentive for small business: Additionally, small and medium-sized enterprises (SMEs) may benefit from a tax credit, up to EUR 500,000, equal to 50% of advisory expenses incurred until 31 December 2020 in order to obtain a listing in a regulated market or multilateral trading facility established in a EU Member State or in an EEA country.

Permanent establishment rule: The budget law includes a broader definition of permanent establishment (PE) in order to make it fully consistent with that proposed by the OECD in the BEPS Action 7 Final Report. The amendment extends the agency PE definition and makes the ‘negative’ list conditional on the taxpayer proving the preparatory or auxiliary nature of the activities. It also includes the ‘anti-fragmentation rule’. Moreover, the amendment introduces an additional definition of a fixed-place PE.

Tax returns: The deadline for submitting the corporate income tax return, the regional tax on productive activities return and the withholding tax return for tax year 2017 has been postponed to 31 October 2018.

Statute of limitations: The statute of limitations period is reduced by 2 years for taxpayers that guarantee the traceability of payments made and received for amounts exceeding EUR 500.