The legislative decree no. 209 of December 27, 2023, implementing Article 3, paragraph 1, letters c), d), e), and f) of Law 111/2023 (delegated law on tax reform) concerning international taxation, has been published in the Official Gazette 301 of December 28, 2023.
It encompasses, in particular, articles 8 to 60 and includes the transposition of EU Directive 2022/2523 on global minimum taxation, introducing the so-called global minimum tax, which takes effect from the financial years starting from December 31, 2023, the deadline set for the directive’s transposition.
Entities subject to this regulation are large corporate entities located in Italy that are part of a multinational or national group with annual revenues equal to or exceeding 750 million euros, as shown in the consolidated financial statements of the controlling parent company in at least two of the four immediately preceding financial years.
The mechanism involves three forms of minimum tax:
Income Inclusion Rule (Iir): This is the supplementary tax due from a parent company concerning group companies that are subject to an effective tax rate lower than 15% in the country of residence. The Iir is applied starting from the top of the participatory chain.
Undertaxed Payments Rule (Utpr): If the supplementary tax is not collected through the Income Inclusion Rule, the Undertaxed Payments Rule serves as a backstop measure. It applies under specific circumstances where the supplementary tax is not or only partially collected through the Income Inclusion Rule.
Qualified Domestic Minimum Top-Up Tax (Qdmtt): This comes into play when companies operating in Italy within a group result in an effective tax rate below the minimum 15%. It is a discretionary measure allowed by the directive and applied by Italy, where countries can introduce a national minimum tax.
The mechanism operates in three phases: first, the supplementary tax is levied by the country where the multinational group’s companies are subject to low taxation, if that country has chosen to introduce a qualified national minimum tax (Qdmtt); second, the supplementary tax is levied by the country where the direct or indirect participant is located, taking into account any amounts collected through a national minimum tax (Iir); finally, the Undertaxed Payments Rule (Utpr) is applied by countries adopting Globe rules, where the multinational group is present with other companies, in cases where the supplementary tax due for companies subject to low taxation has not been collected or has been collected only in part.
The calculation is based on the net accounting profit or loss for the financial year, calculated in accordance with the accounting principles used by the controlling parent company for the consolidated financial statements, before consolidation adjustments. Various adjustments are made, and typical transfer pricing rules apply to transactions between entities in different states, as well as typical rules for the permanent establishment’s statement in relationships between the permanent establishment and its head office.
The annual declaration must be submitted within the fifteenth month following the closing of the financial year to which the declaration refers (transitionally within the eighteenth month for the first financial year). Therefore, entities subject to this regulation will submit the annual declaration for 2024 by June 30, 2026, and for 2025 by March 31, 2027. Payments are made in two installments, with 90% due within the eleventh month following the last day of the reference financial year, and the remaining 10% due within the month following the deadline for the annual declaration.