Italian 10% Additional Tax on Bonuses and Stock Options: the Tax Authorities extend the Application to Managers of Holding Companies

March 9, 2011

The Italian tax authorities issued official guidance on the application of the 10% additional tax on variable compensation paid in the financial services sector (see Para. 13 of Circular No. 4/E of February 15, 2011).

The additional tax was implemented with Article 33 of Law Decree No. 78 of May 31, 2010 (effective as of that date) and provides for the application of a 10% additional levy on the portion of any variable compensation paid to certain executives in the financial services sector exceeding three times the fixed component of the executives’ remuneration.

The official guidance issued by the Italian tax authorities clarifies some of the many contentious aspects of the new rule (specifically addressing, for example, the method for calculating the relevant taxable base).

However, the most interesting aspect of Circular No. 4/E is the intention of the Italian tax authorities to extend the application of the 10% additional tax also to variable compensation paid to executives of holding companies not operating in the financial sector.

Should you have any questions regarding the above, please contact any of your regular contacts at the firm.