Group taxation is achieved with the total algebraic sum of the taxable total through the aggregation of data in a single summarizing declaration.
The national consolidation does not require the consolidation of the whole group but follows an optional two-way system, i.e. the option must be exercised jointly by the reporting company and the subsidiary.
The option is irrevocable for three years, except in the absence of control requirements.
The law states that the holding company must be in possession of shares which are at least equivalent to those required to exert control, either direct or indirect, as set out in article 2359 of the civil code.
The controlling company and subsidiary which decide to use this option must be resident or have a permanent establishment in Italy.
The result of the algebraic sum of total taxable income will be:
Taxable income (100-50) = 50
Taxes (30%) =15
The consolidated taxable income is determined from the reporting company’s declaration of revenue through
the algebraic sum of all the taxable income calculated by the individual companies involved in the option.
The adjustment of that amount as a result of consolidation procedures.
The taxable income is taken as a whole, regardless of proportion of shares held.
In this way any intra-group profit or loss is immediately and fully compensated for.
Corporate groups wishing to use the consolidated tax return option must communicate the fact digitally to the Revenue & Customs office before 16 June 2010 for the start or renewal of taxation regime for the period 2010-2012.
The application of this option must take into consideration the changes introduced by the Finance Act 2010 (IRES reduced from 33 to 27.5% and the calculation of the limit for the deducation of interest).
tax losses attributable to a participant in the consolidated mechanism can be used to reduce group taxable income;
dividend exemption in place of the ordinary 5% taxation;
assets can be transferred between participating companies without triggering tax on any gain;
profits in one company can be reduced by losses in another;
greater possibility of passive interest deduction.
Passive interests and similar charges are deductible up to the amount of active interests and income.
The excess is deductible to the extent of 30% of its ROL (AB excluding amortization and lease finance). If a company has interests that exceed 30% of its ROL, the excess can be assigned to another company whose 30% of ROL is greater than its passive interest.
If the situation is different from the above, the excess which is not deducted cannot be recovered in future years from ROL available to all companies that participated in national consolidation.
An extension of the group taxation system is also available to non-resident companies and organisations.
The international consolidation system is optional but once undertaken it cannot be revoked for at least five years. Control requirements remain unchanged.
Involves the participation of all non-resident subsidiaries: it is not practical to consolidate only some of the subsidiaries and ignore others.
International tax consolidation only requires the controlling company to be resident in Italy.
Consolidation only applies to that portion of the taxable income that corresponds to the proportion of controlling interest held.
We refer to the Fiat group as an example of First Time Application and calculation of anticipated and deferred taxes.
We use the Luxottica group to illustrate First Time Application and calculation of anticipated and deferred taxes.
The Mediaset group provides an example of First Time Application and calculation of anticipated and deferred taxes.
3. Consolidation and its scope
4. Assessment of excluded investments. Corporate case studies
5. Governance and strategic framework. Corporate case-studies
9. Consolidation of investments
11. Consolidated financial statements
13. Tax effects of transition to IAS, IFRS
14. National and International tax consolidation