The circular letter 6/E of March 30, 2016 has recognized the legitimacy of the “leverage buy-out” transactions (“LBO”). In particular, paragraph 3.4 outlines the tax treatment of dividends in Italy distributed by a “MergerCo” company (established in Italy and resulting from the merger of the NewCo with the Target company), to a foreign Special Purpose Vehicle (“HoldCo”, not established in Italy), through conduit intermediate structures. The purpose is to benefit from a reduction of the withholding tax on the outbound dividends (usually equal to 26 per cent) to the inferior one provided for by the applicable convention, or even to reduce it to zero, in case of qualified holding owned by a subject established in a EU Member State.
According to the Italian tax authority the intermediate vehicle can be rejected if it has no economic substance (4) - thus applying the full withholding tax as a consequence; such situation occurs, inter alia, in case of “light” organizational structures.
In such circumstances, the fact of considering a light organizational structure similar to a conduit entails the risk to include the concept of holding company in the notion of conduit, leading to the conclusion that all holdings would be considered in the same way as mere conduits. Such construction is legally unacceptable.
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