Brief notes on "Thin Capitalization"
12 of 2003 December 344, published in the Official Gazette 16 of 2003 December 291, significantly changed the rules on business income provided for by Presidential Decree 917/86 introducing, in particular, as of from the tax period starting after 31.12.2003, the new corporate income tax (IRES), and at the same time abolishing the corporate income tax (IRPEG).
From the analysis of the regulatory framework of the IRES it is clear that the new corporate tax is based, in a nutshell, on some important cornerstones:
- the instrument of domestic or global consolidation, which allows the intersubjective offsetting of taxable income within a group of companies;
- the institution of participation exemption, which allows the exemption from income of capital gains realized in the sale and purchase of qualified shareholdings;
- the introduction of the option right for taxation for transparency, borrowing the same discipline as for partnerships;
- the elimination of the mechanism of the tax credit on dividends received from joint stock companies, offset by the provision of a substantial tax exemption regime;
- the legislation on combating thin capitalization of companies, which provides for penalties on the deductibility of financial charges for companies with financial debt lines that are not compatible with their assets (thin capitalization or THINCAP).