In principle, a “takeover bid” means a public purchase offer, whether mandatory or voluntary, made to the holders of securities in a target company, aiming to take the control of the latter in accordance with national laws. As consideration, the acquiring entity may offer cash, securities, or a mix of both. If the consideration consists of:

  • cash, the takeover bid is defined as a ‘public purchase offer’ (Offerta Pubblica di Acquisto - OPA);
  • securities, the takeover bid is defined as a ‘public exchange offer’ (Offerta Pubblica di Scambio - OPS);
  • a mix of cash and securities, the offer is defined as a ‘public offer for the purchase and exchange of shares’ (Offerta Pubblica di Acquisto e Scambio - OPAS).

With the principle of law (principio di diritto) No. 10/2020 and the ruling (risposta ad interpello) No. 537/2020, the Italian tax authorities have clarified the treatment for income tax purposes of, respectively, the OPS and OPAS and, in particular, if and to what extent Art. 177(2) of the Italian Income Tax Act (IITA) applies.

Tax treatment of share contributions and share exchanges

Art. 177(2) of the IITA provides a sort of ‘tax neutrality’ regime for contributions of shares, based on the accounting treatment of these shares in the balance sheet of the receiving company. The provision states that: "shares or quotas received following contributions to companies, through which the receiving company (assignee) acquires control of a company pursuant to Article 2359(1)(1) of the civil code (...) are valued, for the purposes of computing the income of the contributing person, with regard to the corresponding fraction of the net equity accounted for by the receiving company (assignee) as a result of the contribution". 

The wording of the provision shows that:

  • the contribution of shares in the capital of another company constitutes a taxable event, i.e. it triggers a taxable event at the contributing person’s level, regardless of being a company or an individual (the provision encompasses individuals acting as contributing persons);
  • when determining the contributing person's gain, the value of the received shares by the contributing person (i.e. the former shareholder(s) of the contributed company) in exchange, is deemed equal to the increase in the receiving company's net equity due to the contribution;
  • therefore, the taxable gain becomes the difference between (a) the net equity increase (aumento di patrimonio netto) as accounted for by the receiving company; and (b) the tax base of the (contributed) shares or quotas at the contributing person’s level. Hence, ‘tax neutrality’ may be attained depending on the ‘accounting behaviour’ of the receiving company. In fact, if the net equity increase coincides with the tax base (relevant for Italian income tax purposes) of the (contributed) shareholding, the contribution does not trigger any taxable gain for the contributing person.

The provision clearly derogates from Art. 9 of IITA which provides with regard to contributions (par. 2) "In case of contributions to companies or other entities there shall be considered consideration received the fair market value (valore normale) of contributed assets and receivables". Art. 9 goes on to specify that (par. 4) "The fair market value is determined (...) a) for shares, bonds and other securities listed on a stock exchange or traded over-the-counter, on the basis of the average settlement price or the actual prices in the last quarter".

The tax treatment of the OPS

With the principle of law No. 10/2020, the Italian tax authorities have:

  • confirmed that Art. 177(2) of the IITA constitutes a derogation from the otherwise applicable fair market value principle provided for in Art. 9 of the IITA;
  • stated that Art. 177(2) of the IITA applies ex se upon satisfaction of the law-provided conditions. Therefore, the taxpayer is not allowed to choose between the two tax regimes;
  • stated that the determination of the value of the contribution pursuant to Art. 177(2) of the IITA applies only to capital gains and not to capital losses deriving from the contribution (unless such losses are determined at fair market value; in this respect the conclusion seems much more restrictive compared to that adopted pursuant to the ruling 38/E/2012);
  • clarified, in case the receiving company is adopting IAS/IFRS, that IAS 32 par. 37 – which provides that the ‘transaction costs’ of an equity transaction are accounted for as a deduction from equity – does not affect the determination of the net equity increase of the receiving company arising from the contributed shares (i.e. such increase is determined taking into account the share capital increase and share premium reserve increase only).

The tax treatment of the OPAS

With ruling No. 537/2020, the Italian tax authorities rejected the applicant's claim, stating that:

  • the substantial tax neutrality laid down in Art. 177(2) of the IITA is not applicable where the public offer also includes a cash payment for the contribution of shares;
  • it is not possible to consider the value of the shares received by the contributing person as equal to the increase of the receiving company's net equity resulting from the contribution because the share purchase component (the cash payment) does not affect the receiving company's net equity as a result of the contribution;
  • therefore, the fair market value principle provided in Art. 9(2) and (4)(a) - if the acquiring is a listed company - of the IITA applies. Therefore, the contributing person's gain is equal to the higher of the fair value of the contributed shares and the fair market value of the shares issued by the receiving company.


The Italian tax authorities' conclusions are somehow predictable. Unlike Art. 177(1) of the IITA concerning the exchange of shares under swaps arrangements, Art. 177(2) does not provide for any settlement in cash.

The inapplicability of the substantial tax neutrality regime under Art. 177(2) of the IITA makes the OPAS less advantageous for tax purposes for the contributing persons.

However, if the OPAS for the acquisition of an Italian company is made by an EU resident company, the provisions of Directive 2009/133/EC ("Merger Directive") may apply. Under Art. 178(1)(e) of the IITA – implementing the Merger Directive in Italy – share contributions between a resident company and companies resident in other Member States do not trigger capital gains or losses on the shares contributed if: (a) at least one of the persons contributing the shares is an Italian resident; and (b) the receiving company and the contributed company are residents of two different Member States. The tax value of the contributed shares is rolled over to the shares received from the contribution. Any ‘cash settlement’ - less than 10% of the contributed shares’ nominal value - integrally concurs to the formation of the recipients’ taxable incomes, unless the contributed shares meet the requirements of the participation exemption regime.

In this respect, neither the Merger Directive nor the Italian implementing rules are clear on the question whether the ‘cash payment’ should be given pro rata to all contributing entities. This aspect is particularly relevant for the OPAS as the ‘cash payment’ may assist in paying out minority shareholders who are to be excluded from the acquirer group.

Further clarifications are expected...