The New Italian CFC Rules: EU Holding Companies Challenge the ‘Artificial Arrangement’ Assessment

Abstract

The new Italian CFC legislation applies, in some circumstances, also to companies resident within ‘non-blacklisted’ countries, unless it is proved, through a compulsory advance tax ruling, that the controlled foreign company (CFC) does not represent an ‘artificial arrangement’ aimed at achieving an undue tax advantage. This article is focused on the case of European holding companies and, after highlighting the conditions that trigger the application of the CFC legislation, analyses some elements and factors that could be used to evaluate whether or not a company represents an ‘artificial arrangement’ in the perspective of European Court of Justice (ECJ)’s judgments. Finally, this article discusses if the compulsory advance tax ruling is fully consistent with the freedom of establishment guaranteed by the European Treaty.