On July 2018 the Italian Supreme Court stated that A limited company may deduct interest expenses without assessing whether they are connected to the business activity.
This Circular is relevant for all the private equity firms, as it seems to protect newcos (and/or the company resulting from a merger between a newco and the target) from future denials of deductibility based on a lack of connection between the interest expenses and the business activity. However, there are still certain critical issues, for example in the potential event of objections based on abuse of law.
Our Private Equity Focus Team discusses here the impacts of Circular No. 19430 of 20 July 2018.