Reshoring and Global Minimum Tax: call for clarification

by Andrea Petracca, Chiara Vetulli

In Circular n. 4 of 2024, the Association of Italian Joint Stock Companies, Assonime, clarified reshoring discipline and pointed out some discrepancies with the Global Minimum Tax rules, which provide for a global minimum group taxation of 15%.

Legislative Decree No. 209/2023, implementing Directive (EU) 2022/2523, introduces regulations on Global Minimum Tax, aimed at guaranteeing a minimum tax level of 15% for multinational or domestic groups exceeding the revenue threshold of EUR 750 million (these are the so-called Globe Rules developed in implementation of the so-called Pillar 2).

In particular, Italy has opted for the introduction of a minimum domestic tax for all companies resident in Italy (the Qualified Domestic Minimum Top Up Tax - "QDMTUT"). Summarising, because of these rules, if the group companies located in Italy do not reach a level of effective taxation equal to 15%, the group will have to pay an additional tax in order to reach this threshold.

Specifically, the effective tax rate (ETR) consists of a comparison of the relevant taxes with the corresponding net income of all companies operating in the same country. In calculating the ETR, the effects of incentives that result in downward changes in the tax base that are permanent are relevant. Since reshoring is a tax incentive that results in a downward permanent change in the tax base, it may affect the ETR.

Article 6 of Legislative Decree No. 209/2023 provides that the transfer to Italy of economic activities previously carried out in non-EU and non-EEA countries is subject to a tax deduction of 50% of the taxable income for the tax period in which the transfer takes place and for the five subsequent tax periods.

Thus, a combined reading of these two different disciplines shows how, as a result of the 50% tax deduction, a reshored business could potentially fail to reach the 15% threshold provided for by the QDMTUT. In this case, the domestic group to which the business transferred to Italy belongs would have to pay the national minimum tax, if the conditions are met. Assonime advances two different hypotheses in this regard:

  • If only IRES (Italian corporate income tax equal to 24%) were included in the calculation of the covered taxes (the taxes relevant for the calculation of the ETR), the tax rate differential to be paid by the Group would be 3% (15-(24/2));
  • If this calculation included not only IRES but also IRAP (regional tax on productive activities, which is 3.9%), the tax rate differential would be 1.05% (15-(27.9/2)).

A further issue could arise from the subsequent application of recapture, as the current discipline does not provide for mechanisms to ensure the refund of any national minimum tax that may have been paid during the period of application of the favourable tax measure.

It seems clear that legislative coordination between these two different disciplines would be appropriate in order to remove doubts and allow foreign investors to transfer their business to Italy without the risk of unexpected repercussions.