A Comparative Look at Regulation of Corporate Tax AvoidanceItaly
A Comparative Look at Regulation of Corporate Tax Avoidance: Italy
Garbarino, Carlo
2011-10-27 00:00:00
[The legislature adopted a GAAR in 1990. This provision finds tax avoidance when the following components exist: tax saving, lack of valid business purpose, use of abnormal legal arrangements, and specific intent. The GAAR is not of general application, applying to seventeen listed transactions. A six-step approach is used to determine whether a transaction violates the anti-avoidance rule. A transaction must be identified as one on the GAAR list. The tax saved as a result of the transaction must be greater than if a normal, non-circuitous arrangement had been used. If the transaction lacks a valid business purpose, the taxing authority may disregard the transaction and deny the expected tax benefits. A judicial anti-avoidance doctrine has developed so that the courts may address transactions not specifically covered by the GAAR. Support for the development of this anti-abuse principle was derived by the courts initially from European Court of Justice case law protecting the fundamental freedoms secured for community members, but more recently support has also been found in the Italian Constitution. Development of the judge-made abuse of law doctrine has led to efforts to reform and expand the GAAR.]
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A Comparative Look at Regulation of Corporate Tax AvoidanceItaly
[The legislature adopted a GAAR in 1990. This provision finds tax avoidance when the following components exist: tax saving, lack of valid business purpose, use of abnormal legal arrangements, and specific intent. The GAAR is not of general application, applying to seventeen listed transactions. A six-step approach is used to determine whether a transaction violates the anti-avoidance rule. A transaction must be identified as one on the GAAR list. The tax saved as a result of the transaction must be greater than if a normal, non-circuitous arrangement had been used. If the transaction lacks a valid business purpose, the taxing authority may disregard the transaction and deny the expected tax benefits. A judicial anti-avoidance doctrine has developed so that the courts may address transactions not specifically covered by the GAAR. Support for the development of this anti-abuse principle was derived by the courts initially from European Court of Justice case law protecting the fundamental freedoms secured for community members, but more recently support has also been found in the Italian Constitution. Development of the judge-made abuse of law doctrine has led to efforts to reform and expand the GAAR.]
Published: Oct 27, 2011
Keywords: Italian Constitution; Presidential Decree; Circular Letter; Joint Venture Agreement; Italian Legal System
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