ITALY Law and Practice Contributed by: Francesco Dialti, Vincenzo Cimmino, Valentina Bombino and Lucrezia Ghezzi, CBA Studio legale e tributario
• subjective usury; and • objective usury, meaning applying interest exceed- ing the usury threshold independently of the nature or financial condition of the borrower. Regarding objective usury, Law No 108/1996 (the “Usury Law”) sets out the relevant formula, providing that the threshold rate is calculated based on the aver- age annual percentage rate (TEGM), as set out in a decree published quarterly by the Ministry of Finance (MEF). In turn, the TEGM, published by the MEF, is calculated based on a survey of the economic conditions applied in the previous quarter, conducted quarterly by the Bank of Italy. Subjective usury applies when both of the following conditions are met. • “Disproportion”: the agreement provides for dispro- portionate interest amount with respect to principal and the average interest rates applied for transac- tions of the same type (even if the usury threshold is not exceeded). • “State of difficulty”: this does not mean a “state of need”, but rather refers to both economic difficulty, based on a global evaluation of the borrower’s assets, and financial difficulty, which is a temporary lack of liquidity. Under Italian law, sanctions for usurious interest are twofold. • Civil sanctions: pursuant to Article 1815 of the Ital- ian Civil Code, no interest shall be due and the bor - rower shall be entitled to claim the reimbursement of all interest amounts already paid to the lender. • Criminal sanctions: pursuant to Article 644 of the Italian Criminal Code, criminal sanctions shall apply. The concept of “supervening usury” refers to cases where interest is below the usury threshold at the start of the loan but exceeds such thresholds at a later stage.
In this respect, the Italian Supreme Court has stated that compliance with the usury threshold is relevant only at the time of execution of the loan agreement, regardless of when payments are made. 3.11 Disclosure Requirements The prospectus of a tender offer must state whether external financing is required, and if so, it must provide details of the identity of the creditors and the bidder’s assumptions for servicing the debt (including whether the bidder is relying on the target company’s finan- cials). Similarly, any guarantees and security interests securing the bid must be disclosed and identified. No withholding tax is chargeable on interest payable on loans made to resident lenders. A withholding tax of 26% is chargeable on interest payable to non-Italian resident lenders (unless in cases of lending through an Italian branch to which the loan is effectively con- nected). The withholding tax can be reduced under the relevant provisions of the double tax treaty applicable between Italy and the country of residence of the beneficial owner of the interest. 4. Tax 4.1 Withholding Tax In addition, no withholding tax applies to interest paid on medium- or long-term loans if granted, inter alia, by credit institutions established in the EU and by insti- tutional investors subject to regulatory supervision and established in countries that allow an adequate exchange of information with Italy. 4.2 Other Taxes, Duties, Charges or Tax Considerations Substantial registration taxes may apply, depending on the nature of the security and the terms of the facil- ity agreement. However, a substitute regime (the substitute tax) may be available in order to reduce the indirect taxes that would ordinarily apply to the loan and the security package (eg, registration and mortgage taxes).
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