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Abstract
On November 27 2003 the Italian government approved extensive reforms of the corporate income tax system that entered into force as of January 1 2004. The government intends the reforms to align the Italian legislation with that of the most advanced systems of the west European countries and implement the guidelines provided by Law 80, April 7 2003. One of the most significant changes in the corporate tax law is the introduction of restrictions on the deductibility of interest paid to both resident and non-resident shareholders by an Italian resident corporation. Indeed, until the end of 2003 the Italian legislation did not contain specific limitations to the deduction for the cost of interest. The legislation on corporate tax law provided the rule that interest is not deductible up to the ratio between the total amount of revenues of the company and the revenues that are subject to taxation.