ITALY Law and Practice Contributed by: Maurizio Marullo, Giorgio Vagnoni, Claudia Marongiu and Pasquale Ambrosio Cepparulo, LAWP Studio Legale e Tributario
Tax Incentives Italy offers various tax incentives that can be rele - vant for JVs, especially those in specific sectors or engaged in R&D. • R&D tax credits: JVs investing in research and development can benefit from tax credits. • Patent box: this incentive provides a tax exemption on income derived from the use of certain intangi - ble assets, such as patents and trade marks. • Special economic zones (SEZs): JVs located in cer - tain SEZs in southern Italy may be eligible for tax credits and other financial benefits. 3. JV Regulation 3.1 Legal Framework and Regulatory Bodies Main Regulators The key regulatory authorities are: • the EU, which establishes the legal framework concerning specific sectors, such as, antitrust and anti-money laundering; • the Italian Competition Authority, which possesses broad investigative powers in relation to competi - tion within the national market; • the Italian government, which holds veto power over transactions involving companies engaged in strategic activities or holding assets strategic to the national interest; • Consob, which regulates and supervises the orderly functioning and integrity of Italian financial markets; • the Bank of Italy, which oversees regulation and supervision of financial intermediaries and ensures their compliance with applicable laws; and • the Italian Tax Authority, which ensures tax compli - ance by overseeing the collection of tax revenues. Main Statutory Provisions Contractual JVs lack specific establishment regula - tions. The JV agreements, as civil law contracts, are regulated by the statutory provisions of the Italian Civil Code on obligations and contracts (Articles 1173 to 1986 of the Italian Civil Code).
• assess the financial needs of the project and the relevant forms of financing (equity, third-party financing, public grants, etc); • determine whether the JV will operate under a lim - ited or unlimited liability regime, depending on the risks involved; • establish the governance structure; • review the competitive landscape to ensure the JV activities do not conflict with the partners’ existing businesses; • clearly identify and agree upon the contributions (financial, operational, technical, etc) that each co- venturer will bring to the JV; and • determine the nature and duration of the project ‒ contractual JVs are typically more suitable for short-term projects, whereas corporate JVs are preferred for long-term initiatives. Moreover, it is crucial to analyse the potential tax impli - cations of the JV to ensure efficiency and compliance with applicable tax laws. The primary consideration is the distinction between a contractual JV and a cor - porate JV, as their tax treatments differ significantly. Corporate JVs (eg, S.p.A, S.r.l.) are treated as a sepa - rate legal entity for tax purposes and are subject to standard Italian corporate taxes. • IRES (corporate income tax): the current rate is 24%, applied to the company’s profits. • IRAP (regional tax on productive activities): a regional tax on net production value, with a stand - ard rate of around 3.9%, which can vary by region. • Dividends distributed by the JV to the co-venturers are subject to taxation at the shareholder level. For corporate shareholders in Italy, a significant portion of the dividend is generally exempt from IRES under the participation exemption regime. For foreign shareholders, tax treaties and EU directives may provide for reduced withholding tax rates. In contractual JVs, the income pertaining to each JV member constitute its direct taxable income. This structure does not create the “double taxation” effect that can occur in a corporate JV (once at the company level and again on dividends).
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