Italy’s Ministry of Economy and Finance announced that the Decree of 11 October 2024, which provides implementation rules on the substance-based income exclusion (SBIE) to be applied when calculating the due amount of top-up tax and is being published in the Official Gazette.
The decree takes into account the clarifications provided in the Commentary to the OECD Rules and the Administrative Guide “Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two)”, approved by the Inclusive Framework on BEPS on 13 July 2023, regarding the amount of income that can be excluded from supplementary taxation because it is attributable to the performance, in a given country, of substantial economic activity.
To calculate top-up tax for a multinational or large domestic group, net income for a jurisdiction is reduced by income from substantial economic activity. This deduction includes a payroll carve-out (5% of eligible payroll costs) and a tangible asset carve-out (5% of the carrying value of eligible tangible assets) for each constituent entity.
