A merger between two non-resident companies, one of which holds a shareholding in an Italian company, does not trigger any capital gain taxation in Italy because of the tax neutrality of the merger under Italian law. Such principle, which was already affirmed in the past, has been recently confirmed by the Italian Tax Authority (“ITA”) in its ruling No. 294/2023.
The case examined by ITA involved the merger between two Israel resident joint stock companies, Delta, the absorbing company, and Alfa, the absorbed company. Both companies were wholly owned by Beta (which was resident in Israel as well) and did not have a permanent establishment in Italy. Alfa held the 95% of the shares of Gamma, a limited liability company resident for tax purposes in Italy. The residual part of Gamma’s shares was owned by Delta. As a result of the merger at stake, Delta owned the totality of Gamma's shares.
This article was originally written by the Intl. Taxation Observatory team, to which we refer for the full text.
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