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Doing business in Italy

Free corporate's assets tax value uplift for companies migrating to Italy

Companies, as individuals, are not necessarily tax resident in the country they are nationals of. Indeed, a company may be governed by the corporate law of State A (on account of the fact that it was incorporated there or its registered office is there) but is resident for tax purposes in State B (on account of the fact that the place of effective management is situated there).

Should Italy be or due to become a place you are willing to invest your time in, you may want to consider moving here the tax residence of an existing company you are a director/manager of. 

In case you decide to move in such a direction, there is an interesting tax implication ahead: under current domestic legislation, the transfer (at least for tax purposes) of a foreign company to Italy determines the free realignment of its corporate assets’ tax and market values. In other words, irrespective to the fact that the State from which the relevant entity moves out applies or not an exit tax on unrealized capital gains, Italy allows the free uplift of its asset tax cost to current market values. As a result, future depreciations and capital gains shall be calculated with respect to such new values.

Tax efficient remuneration of managers, directors and key employees


Since 2017 “carried interest” benefits are also available to Italian companies and Italian branches of foreign companies.

The tax gist of a so called carried interest relies in the tax characterization of the income stemming therefrom. Managers, directors and key employees of limited liability companies and investment funds in general are normally remunerated by means of their salary that is accordingly treated when it comes to levying the relevant (progressive) income and social security taxes tax.

However, by structuring such remuneration as a carried interest, the tax characterization that follows is that of a dividend with the result that applicable tax is reduced to a flat 26% and no social security taxes apply.

To qualify as a carried interest, the participations (shares of quotas) allocated to the director, manager or employee must grant certain economic rights such as:

•     receive a profit that is not proportional to the number of shares or quotas held;

•     convert the carried interest into ordinary shares in a non-proportional manner.

Furthermore, a carried interest plan must be devised in a such a way that:

  • the actual overall investment commitment of all assignees is equal at least 1% of the issued share capital;

  • the carried interest is reimbursed subordinately to the capital repayment of the other shareholders and to the minimum pre-agreed return/yield on the capital invested;

  • the securities are held for at least five years or until the control of the limited liability company or of the investment fund changes.

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