The article describes the impact of the decision of the European Court of Justice 'National Grid Indus' on Italian rules regarding exit taxation.
The former Italian legislation prescribed the immediate taxation of unrealized capital gains, except if a Permanent Establishment (PE) is maintained in Italy, without distinguishing between the establishing of the amount of taxes and their recovery. In the meantime, the European Commission opened an infringement procedure against Italy with regard to the rules on exit tax. In January 2012, such rules have been modified in compliance with the principles established in National Grid Indus, allowing Member States to tax corporations on latent capital gains at the time of the transfer of the place of effective management to another Member State, but deferring the collection until the actual realization of the assets. This change carries out a series of problematic aspects concerning the scope of application of the new provision with regard to the transfer of permanent establishments of foreign enterprises in Italy, the tax basis of the assets transferred and, in particular, the interaction with the Merger Directive.EC Tax Review