Italy reverse takeover tax illegal ECJ.
CAPITAL duties should not be levied on reverse mergers within the
European Union (EU) if those deals only receive regular taxation at a
marginal rate of up to 0.5%, the European Court of Justice (ECJ) has
ruled. In an Italian case, judges declared illegal a national law that
insisted reverse mergers, (where subsidiaries takeover a parent), should
attract a proportional registration duty of 1% of the transaction value,
regardless of their direct taxation. This is because under Italian tax
law, these deals are taxed up to 0.5% where a parent is transferred to a
EU-based subsidiary that is being formed or is already in existence.
These circumstances invoke the 0.5% rate ban on capital duties written
into EU directive 69/335 on indirect taxes on the raising of capital,
which therefore "precludes the charging of a proportional
registration duty of 1%", said the ECJ. As usual, the ruling is a
precedent for similar cases across the EU.