For those who exercise the option, pursuant to art. 24-bis of the TUIR, the income produced abroad that can be subject to substitute tax is identified in accordance with Article 165, paragraph 2, of the TUIR, a rule that refers to the criteria referred to in Article 23 of the TUIR.
The following are therefore eligible:
- land income deriving from land and buildings located abroad;
- capital gains paid by foreign states or by non-resident subjects;
- the income from employment performed abroad;
- income from self-employment deriving from activities carried out abroad on a fixed basis;
- business income deriving from activities carried out by permanent establishments abroad;
- capital gains achieved as a result of the sale for consideration of equity investments in non-resident companies;
- miscellaneous income from activities carried out abroad and from assets located abroad.
Circular n. 17/2017 of the revenue agency (Agenzia delle Entrate) also specified that the regime in question also operates with reference to:
- income resulting from the possession, through a third party, of liquidity or real estate or from the exercise of other rights (part III, paragraph 2.2). The term “by proxy”, the circular specifies, refers to cases in which the taxpayer does not appear to be the holder of a legal property situation of any kind, while benefiting from the related legal effects;
- capital gains deriving from equity investments in companies resident in a State with a privileged tax regime (part III, paragraph 2.3). In this case, there is no obligation to report in the return provided for in Articles 47 paragraph 4 and 68 paragraph 4 of the TUIR in relation to capital gains and profits from countries with privileged taxation;
- to the income produced by the foreign subsidiary, in the event that the application requirements of paragraph 1 or paragraph 8-bis of article 167 of the TUIR are met and the Controlled Foreign Company is located in a State that is not excluded from the scope of the option referred to in Article 24-bis of the Tuir. In this case, therefore, the income produced by the foreign subsidiary is not taxed for transparency by the controlling shareholder who is not required to fill in part FC, nor to report in the return the investment in the foreign subsidiary (part III, paragraph 2.3).
As an anti-abuse function, the substitute tax is not applied to capital gains realized through the sale for consideration of qualified shareholdings (referred to in Article 67, paragraph 1, letter c), Tuir), realized in the first five tax periods of validity of the option, which therefore remain subject to the ordinary tax regime, with application of the substituted tax with a rate of 26%.
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