Newsletter. Legal - Tax Company law and taxation. Inside this issue. no Liberalisation Decree 2. Settlement of over-indebtedness crises 2

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1 Newsletter Legal - Tax Company law and taxation Inside this issue Liberalisation Decree 2 Settlement of over-indebtedness crises 2 Taxation of the protected financial assets and capital held abroad 3 VAT changes introduced by EU law 3

2 Liberalisation Decree On 24 January 2012 a legislative decree was issued containing urgent provisions for competition, infrastructure development and competitiveness (known as the liberalisation decree ). The changes, although already partly in force, are not yet definitive as the decree is currently being examined by Parliament for conversion into law. Some of the main changes are described below. First of all, the decree provides for a reduction in the administrative obligations of companies, which is added to the measures previously introduced in August The following rules for the start-up of a new business have been repealed in order to liberalise business activities : limits on numbers; authorisations; licenses; permits; or, more generally, preventive approvals by the authorities that do not have a general, constitutionally-relevant, interest that is compatible with European Community law. By 31 December 2012, the Government must adopt one or more regulations to identify the activities for which the preventive approval of the authorities is still required, identifying the legal and regulatory provisions that will be repealed. The Authority for Competition and the Market will be consulted for this purpose. Private transport, financial and communication services, and activities specifically subject to the regulation and supervision of an independent regulatory authority, are excluded from the area of application. Another important change regards court sections specialised in industrial and intellectual property rights, which have now been assigned exclusive responsibility, in relation to joint stock companies and partnerships limited by shares, for cases: a) between shareholders of a company, including those whose shareholder status is disputed; b) relating to the transfer of shareholdings and any other trading of shareholdings or related rights; c) challenging the resolutions and decisions of company bodies; d) between shareholders and companies; e) concerning shareholder agreements; f) against members of administrative or supervisory bodies, liquidators, general managers or persons in charge of drawing up company accounting documents; g) concerning liability action brought by the creditors of subsidiaries against the holding company; h) relating to corporate groups and governance and supervision relationships; i) Public tenders and contracts, whose amount exceed the relevant UE standard prices ( soglie comunitarie ), entered into by joint stock companies and partnerships limited by shares. One aspect concerning judicial costs should be highlighted: the court fee payable by the party bringing the legal action is quadrupled compared with the amount that would be due based on the value of the petition. The decree in question has also introduced a new type of company: the simplified limited liability company. The simplified limited liability company may be established with a contract or unilateral document by persons under thirty five years of age on the date of incorporation. The deed of incorporation must be drawn up in a private document and the capital cannot be lower than one Euro, fully paid in. When the shareholder no longer meets the age requirement, the shareholders meeting may resolve on the transformation of the company. Otherwise the shareholder is legally excluded. If the age requirement ceases to be met by any of the shareholders, the shareholders meeting must resolve on the transformation of the company, otherwise the company must be wound-up. Finally, the decree has updated the concept of professional services, changing the rules on the calculation of fees to be paid to the professional. On the one hand, fixed professional tariffs have been removed. As regards fees decided by a judge, for example in the event of a dispute with a client, the decree law makes reference to a decree issued by the competent Minister, who will be responsible for formulating parameters. On the other hand, the client may ask for the fee estimate to be agreed in writing. Art. 1, D.L. 24 January 2012, n. 1 Art. 2, D.L. 24 January 2012, n. 1 Art. 3, D.L. 24 January 2012, n. 1 Art. 9, D.L. 24 January 2012, n. 1. Settlement of overindebtedness crises With Law 3/12, Parliament introduced a procedure that allows an agreement to be stipulated with creditors to avoid situations of over-indebtedness which are not regulated by the bankruptcy law. In particular, the new rules apply to businesses that can prove they meet the following requirements: total assets not exceeding three hundred thousand Euros per year, for the three FYs prior to filing the petition for bankruptcy or from the start of operations, if shorter. to have generated, in any way, gross revenue not exceeding two hundred thousand Euro per year, in the three FYs prior to filing the petition for bankruptcy or from the start of operations, if shorter. to have debts, even if not yet due, not exceeding five hundred thousand Euros. Over-indebtedness is considered to mean a continuing imbalance between the obligations undertaken and the liquid assets available to meet them, as well as a definitive inability on the part of the debtor to correctly meet his obligations. The initiative must be taken by the debtor, who must submit a debt restructuring proposal to the court for approval. The debtor may be assisted in drawing up the proposal by crisis settlement bodies, i.e. entities registered on a special register kept by the Justice Ministry, or by a professional or notary appointed by the Court President. The debt restructuring plan must ensure that creditors not entering into the agreement are duly paid, including the holders of preferential debts, which they have not even partially waived, and must establish the deadlines and payment terms. 2

3 The proposal may be accepted when the debtor: is not subject to established insolvency proceedings; has not, in the previous three years, taken advantage of crisis settlement procedures. Debts may be paid in any way, even by transferring future income. Where the debtor s assets or income are insufficient to ensure the feasibility of the plan, the proposal must be signed by one or more third parties who permit the transfer, even as a guarantee, of sufficient assets or income to allow the implementation of the agreement. Together with the proposal and the list of all the creditors, with an indication of the amounts due, the assets and any disposals made in the last five years, income tax returns for the last three years must also be filed, along with the certificate of feasibility of the plan and a list of the current expenses required to sustain the debtor and his family. A debtor who carries on a business must also submit accounting records from the last three FYs. If the proposal meets the requirements, the judge will fix a hearing and suspend the individual enforcement proceedings. If the proposal is accepted by creditors representing at least 70% of the debts, the judge may approve the agreement. From that moment any payments and disposals of assets carried out in violation of the agreement and the plan will be considered null and void. If the debtor does not comply with the agreement obligations, the guarantees are not met or the agreement cannot be implemented for reasons not attributable to the debtor, each creditor has the right to ask the court to resolve the case. Criminal penalties, both in terms of custody and fines, are applicable in the following cases: when a person increases or decreases his liabilities, or deducts or conceals a significant part of his assets or intentionally feigns inexistent assets, in order to obtain access to the procedure; when a person provides fake or modified documentation, or removes, hides or destroys, partly or totally, the documentation relating to his debt status or accounting records, in order to obtain access to the procedure; when a person, during the course of the procedure, makes payments not planned in the agreement, other than the regular payment of creditors not involved in the plan; when a person worsens his debt position, after having submitted the debt restructuring proposal, and for the duration of the procedure; when a person intentionally fails to respect the rules of the agreement. L. 27 January 2012, n. 3. Taxation of protected financial assets and capital held abroad The Salva-Italia act introduced a special stamp tax, effective from 2012, on financial assets declared on the basis of provisions regulating the Scudo Fiscale (tax shield) act from 2001 onwards. The new tax will apply to taxpayers who took advantage of the tax shield in the past and decided to keep the declared assets segregated. These assets will be subject to a special annual stamp duty of 0,4%. Provisionally, and for 2012 and 2013 only, the tax will amount to 0,10% and 1,35% respectively. According to the regulation, the tax must be paid by 16 February each year on the basis of the value of the assets at 31 December of the previous year. However, the deadline for payment may be extended due to difficulties in applying the regulation. For payments due in 2012 only, the asset value is that at 6 December The levying and payment of the tax are made by the intermediary in charge of the segregation. If the intermediary is not able to obtain payment of the tax, he must report the name of the taxpayer directly to the Revenue Agency. In turn, the Agency will collect the tax by registering the debt on the list of tax debts. In the event of failure to pay the tax, a fine equal to the unpaid tax amount will be imposed and the taxpayer will lose his right to anonymity. On the other hand, taxpayers who renounce their right to anonymity must, in 2012, pay a tax of 0,10% on the value of the financial assets returned to Italy and segregated as at 6 December The act also provides for a tax on financial assets (securities, shareholdings, current accounts, life insurance policies, etc.) held abroad by persons who are resident in Italy for tax purposes. These financial assets will be taxed at a rate of 0,1% for 2011 and 2012 and 0,15% from 2013, based on their market value at the end of each calendar year. Capital held abroad, usually declared in the RW form of the Unico tax return, must be indicated, for calculation purposes, also in the RM form of the 2012 Unico. D.L. 6 December 2011, n. 201, converted to Law 22 December 2011, n VAT changes introduced by EU law Law n. 217/2011 (European Union law 2010) contains a series of provisions for the adjustment of domestic law in line with European Union law. In particular, the main VAT changes regard: the date of supply of generic services, according to art. 7-ter of Presidential Decree no. 633/72, performed with non-resident VAT subjects (EU and non- EU); the introduction of the obligation to supplement invoices for generic services, pursuant to art. 7-ter stated above, received from EU suppliers; interim VAT refunds. These changes will apply to operations performed from 17 March Changes in the date of supply of services provided/received to/from non-resident suppliers (EU or non-eu) Supplies of generic services as per art. 7-ter of DPR 633/72, provided by a VAT subject based in Italy to non-resident subjects 3

4 (EU and non-eu), or received from such subjects, are now considered performed on the date of payment of the fee or on the earlier date the invoice is issued. With effect from 17 March 2012, the above services will be considered performed when the service is completed or, in the case of periodic services, when the fee is accrued. If the fee is paid, either in full or partly, before such events occur, the services will be considered supplied on the date of payment. Where services are received, the changes remove the value of issuing an early self-invoice, which would previously have signalled the moment of supply of the service and therefore the moment the tax was collectible (even if the transaction was neutral for financial purposes). In other words, it will no longer be possible to bring forward the date of supply by issuing a self-invoice. It will now be necessary to wait until one of the events indicated by the new rule (completion of the service, accrual of the fee, early payment) takes place before issuing a self-invoice. 2. Obligation to supplement invoices received from EU suppliers in relation to the supply of services relevant in Italy under art. 7-ter Supplies of services under art. 7-ter DPR 633/72 provided by a taxpayer based in another EU country to a VAT taxpayer based in Italy, are currently subject to VAT in Italy via the reverse charge mechanism, or by issuing a self-invoice under art. 17, paragraph 2, DPR 633/72. Despite the regulation, the Revenue Agency has often allowed taxpayers to integrate the invoices of EU suppliers (as occurs in the case of intra-eu purchases of goods). With effect from 17 March 2012, the integration of an invoice is no longer an option but rather an obligation. Therefore, the mechanism for paying the tax on intra-eu purchases of goods, provided for by art. 46 of D.L. 331/93, is extended to supplies of generic services under art. 7-ter. The new obligation makes the invoice issued by the EU supplier particularly important since it determines the moment in which the tax is payable, which coincides with the receipt of the supplier s invoice (which must therefore be registered specially). Once the invoice is received, tax must be applied by integrating the document, and the time limits for recording in the VAT register apply based on articles 46 and 47 D.L. 331/93. In particular, invoices issued by an EU supplier must be supplemented to indicate the VAT rate and the tax amount, and must be recorded in the sales and purchase registers within the month of receipt, or even later, but within 15 days of receipt (but calculating the VAT in the month of receipt of the invoice). The date on which the invoice is received must be carefully monitored by the Italian client for another reason too: in the event of failure to receive the invoice by the end of the month after the service is performed - which may coincide with the completion of the service, the accrual of the fee or the early payment - the client must regularise the transaction within the following month (i.e. within 2 months of the transaction being effected), by issuing a single invoice (failure to comply with this rule will lead to the application of a fine equal to 100% of the tax not applied). This invoice must be recorded in the VAT registers applying the same methods and within the same timeframes as intra-eu purchases of goods. On the other hand, no change applies to supplies of services under art.7-ter, provided by non-eu suppliers. Self-invoices will continue to be issued for these services pursuant to art. 17, paragraph 2 of DPR n. 633/ Interim VAT refunds The Legislator has extended the right to request an interim refund of VAT to a wider number of individuals. This benefit has been extended to taxpayers who, since they predominantly perform transactions that are outside the scope of VAT due to the absence of the condition of territoriality, have carried out the following supplies of services, to non-resident taxpayers and for an amount 50% higher than all the operations performed: works on moveable tangible property; transport of goods and related intermediation services; services relating to the transport of goods and intermediation services; transactions under art. 10, paragraph 1, from number 1) to 4) of DPR 633/72, (but, in the case, only if performed with non-european Union subjects) or regarding assets to be exported outside the EU. Law 15 December 2011, n. 217 (Community Law 2010). 4

5 Contact details Milan - Headquarters Via della Moscova, Milan Tel Fax info@crowehorwath.it Milan Caldera Via Caldera, Milan Tel Fax Rome Largo Chigi, Rome Tel Fax Turin Corso V. Emanuele II, Turin Tel Fax Crowe Horwath - Studio Associato Servizi Professionali Integrati Crowe Horwath - Studio Associato Servizi Professionali Integrati is a leading Italian professional services firm offering legal, tax and labour law consultancy. With more than 120 professionals and offices in Milan, Rome, Turin and Venice, the Firm offers high-level professional consultancy, integrating varied professional experience with sector specialisations. The Firm's strategy is to focus on the highest-standard specialisations in the different areas of law, whilst maintaining an interdisciplinary spirit of teamwork amongst its professionals. This approach enables us to provide clients with timely responses aimed at resolving specific problems. The Firm is a member of Crowe Horwath International - one of the top 10 global networks - and a privileged partner of FIS-Antex group, which provides Human Resource and Finance & Administration services in outsourcing. Crowe Horwath International Crowe Horwath International, one of the top 10 global accounting firms, is an International Network with more than 140 independent accounting and advisory services firms with 590 offices and 28,000 professionals and staff in more than 100 countries around the world. Crowe Horwath International's member firms are committed to impeccable quality service, highly integrated service delivery processes and a common set of core values that guide our decisions daily. Each firm is well-established as a leader in its domestic market and, thanks to the in-depth knowledge of local laws and customs of its professionals, supports clients undertaking new ventures or expanding into other countries. Venice Viale Ancona, Venice Tel Fax Legal - Tax Newsletter Registration no. 343 of 17July at Court of Milan 5