Italy mulls bigger tax deductions for companies that list shares

ROME, June 9 Mon Jun 9, 2014 10:01am EDT

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ROME, June 9 (Reuters) - The Italian government is considering boosting tax breaks for companies planning initial public offerings, to make the Milan bourse more attractive and encourage alternative ways of funding cash-strapped domestic firms, a government source said.

Under a draft bill now being prepared by the government of Prime Minister Matteo Renzi, companies that plan to list their shares for the first time will be offered a tax deduction of 6 percent on the capital raised, lowering the overall tax burden.

Previous plans envisaged a tax deduction of 4 percent in 2014, 4.5 percent in 2015 and 4.75 percent in 2016.

"The government is working to find sufficient financial resources. The cost of the measure is around 200 million euros a year," said the government source. He added that Italy's cabinet should discuss the tax breaks either on June 13 or June 20.

The measure, known as allowance for corporate equity, or ACE, is one of several the government is working on as it tries to make Italy more attractive to foreign investment, which has shrunk by 58 percent to 12.4 billion euros ($16.9 billion) since 2007.

The ACE, introduced by Mario Monti and initially set at 3 percent, levies tax on business income as conventionally measured. But it provides a deduction calculated according to the equity raised by the listing. That compares with the deduction allowed for interest paid on a business's debt, a move aimed at making stock-market listing more attractive.

After years of stagnation, a raft of Italian companies are preparing to debut on the domestic stock market, with credit management group Cerved, UniCredit's online bank Fineco and shipmaker Fincantieri all lined up to list over the next couple of months.

($1 = 0.7345 Euros) (Reporting by Giuseppe Fonte; Writing by Lisa Jucca; Editing by Larry King)

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