"NEWS of the June 23, 2016-fusion between European companies with permanent establishments in Italy"

Posted by on Jun 23, 2016


Article 179, paragraph 6, of the tax code provides that consider themselves made it to normal goods forming part of the undertaking which has been the subject of one of the operations referred to in letters a-d) of paragraph 1 of article) to 178, namely mergers, divisions, transfers of business, between persons resident in Member States of the European Union, when they don't come together in the complex of assets belonging to a permanent establishment of the foreign entity – which is the successor in title-Italian State. Similarly, the hammer price than normal value occurs when, after the completion of the operations, the components delivered in Italian permanent establishment are diverted.

You can check the case of two resident companies in other European countries, each of which has its own establishment in Italy. If between the two companies to create a merger by incorporation of the first into the second, what happens to the permanent establishment of incorporated? And in particular, the International Fusion salvage effects of property of the permanent establishment of incorporated in accordance with the aforementioned regulatory?

Recall first that the merger of two societies living in two different States belonging to the EU is one of the steps to the letter a) Article 178, paragraph 1 of the tax code, subject to the provisions of chapter IV of the tax code, the use of the conditions listed therein.

The letter d) of paragraph 1 of article 178 of the tax code then adds to transactions subject to the discipline of chapter IV of the tax code – among which is, as said, even the merger "within the community" – the case of the merger between non-residents in Italy with permanent establishment in Italian territory.

Must then be verified are two conditions:

  • a "formal", namely the existence of the subjective conditions to access the legislation in question: EU residence, belonging to one of the categories of companies listed in a special annex of the tax code, tax liability in your state of residence to one of the taxes listed in the annex of the tax code;
  • a "substantial", that is, whether it's "fusion" in legal terms, and that in the presence of swap transactions, any cash withholding for the benefit of owners of incorporated does not exceed 10% of the nominal value of the entries received.

The use of these conditions, you can then apply the principle of neutrality of the melt, as confirmed by the tax authorities in the resolution specifically n. 175/2009.

Then, the permanent establishment of the foreign company incorporated will feed values into continuity in heritage in permanent establishment of incorporating.

The dissolution of the permanent establishment, as a result of the merger of the foreign company, will not cause then the realisation of capital gains on assets if and insofar as the components of the company's corporate complex flow into another permanent establishment set up in Italian territory.

Fabio Lad