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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.
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Author:Nuthall, Keith
Publication:International News
Date:Apr 1, 2006
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