With Legislative Decree no. 209 of 27 December 2023, the Italian Government has finally made changes to the regulations on the so-called Controlled Foreign Companies with reference to the calculation of the level of effective foreign taxation, coordinating it with the new provisions on Pillar Two and Global Minimum Tax.
The Controlled Foreign Companies (“CFC”) regulations referred to in art. 167 of Presidential Decree 917/1986 (TUIR) was initially conceived with the aim of making the profits of foreign subsidiaries which jointly:
(i) were located in a State with effective taxation (“ETR”) lower than 50% of the Italian one (i.e., a country with privileged taxation);
(ii) they held at least 1/3 of the proceeds as passive income (interest, royalties, income from financial activities, etc.); And
