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Jersey, Guernsey Welcome Italian CFC List Decision

by Jason Gorringe, Lowtax.net, London
07 January, 2016

Jersey and Guernsey have welcomed their removal from Italy's "black list" covering controlled foreign corporations (CFCs), which has now been abolished.

In statements responding to the development, the two governments highlighted that the Italian Parliament has approved the Stability Law for 2016, which has revised the relevant provisions of the Italian Tax Code on black lists on corporate taxation and the CFC rules. As a result, the Italian black list on the "deductibility of costs" has been abolished as from January 1, 2016, as has the black list on Controlled Foreign Companies (CFCs). Therefore, both Jersey and Guernsey no longer feature on either of these Italian black lists.

The governments explained that the only remaining general criterion for the application of the CFC rules (without list) will be the low level of corporate taxation of the controlled foreign company. It is considered as a low level of taxation, for both general and special regimes, a rate of 50 percent lower than the Italian corporate income tax (CIT) rate (which is 27.5 percent for 2016 and will be 24 percent for 2017 onwards).

This will mean that the CFC provisions will continue to apply as they will to all jurisdictions who meet the low level of taxation criteria, but there will be no listing of these jurisdictions.

In addition, from early 2016, the Italian "white list" for the purposes of tax treatment of interest from government bonds and listed companies will be updated, taking into account the agreements on exchange of information, compliant with the international standards. Since Jersey and Guernsey have legal instruments in force allowing for the exchange of information with Italy, the territories will be included on this white list.

Geoff Cook, the CEO of Jersey Finance, the promotional agency for the island's financial services industry internationally, said: "This is welcome news for our island, with Italy, a major EU country removing the blacklisting. It is testament to the determined and collaborative work between Jersey's government, industry and regulator on our tax transparency agenda that has helped result in this positive outcome for our future business opportunities."

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