Discipline of systematic loss-making companies repealed


published on 18 October 2022 | reading time approx. 2 minutes

Article 9 of Decree-Law No. 73/2022 (“Tax Simplification” Decree-Law) repealed, as of the tax period in progress as of 31 December 2022, the rules on companies with systematic losses set forth in Article 2, paragraphs 36-decies et seq. of Decree-Law No. 138/2011.

These rules qualified as shell companies, and thus subjected to the resulting penalties, companies and entities that had declared tax losses in all five years preceding (originally three) the one being declared or four times a tax loss and once an income below the minimum calculated on the basis of the rules for non-operational companies.

With effect from the financial year following the one in which the prerequisites were met, for these companies 
  • was imputed a minimum taxable income (and a minimum tax base for IRAP purposes) determined presumptively by applying profitability percentages to the value of the assets;
  • the applicable IRES rate was increased by 10.5 per cent;
  • any losses realised in the tax period for which the status of shell companywas applicable were precluded from being carried forward; in addition, past losses could only be offset against the portion of income exceeding the presumed minimum taxable income;
  • was precluded the refunding  or offsetting against other taxes of the annual VAT credit.

This was the case regardless of whether or not they passed the tests provided for in the “sister” discipline of non-operational companies, based on the company's revenues and assets.

The original purpose of the legislation was to penalise companies that were repeatedly loss-making, since, in the legislator's view, the continuation of negative results constituted behaviour lacking in entrepreneurial logic on the part of the taxpayer and could therefore be considered an indication of tax infidelity.

As also acknowledged by the explanatory report of the draft law converting Decree-Law No. 73/2022, this approach has inevitably been overtaken by events: in the opinion of the drafters of the measure, “there is no reason [...] to introduce automatic mechanisms that, precisely because of their nature, may prove to be unfairly penalising, especially in periods of enduring economic crisis such as the current ones”.

The regulatory change was therefore welcomed by operators, although many would have wished for a more comprehensive revision of the discipline of shell companies, which would also involve the discipline of non-operational companies. 

The elimination of systematic losses provided for by Decree-Law No. 73/2022 will take effect as of the financial year in progress as of 31 December 2022 (2023 Redditi form), therefore in the 2022 income tax return, companies that have realised tax losses in all financial years from 2016 to 2020 (or four tax losses and a taxable income below the threshold for shell companies) will continue to have to apply the provision.

For the past few years, however, there has been the possibility to disapply the provision unilaterally, after reporting it in the declaration but without the need for a prior  request for ruling, so that “bona fide” taxpayers are not automatically penalised and can possibly prove to the tax authorities that they are operating during an audit. 



Contact Person Picture

Irene Menegon

Senior Associate

+39 02 6328 841

Send inquiry


Deutschland Weltweit Search Menu