Italy reinstates modified ‘step-up’ regime with 3% substitutive tax

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September 2020


As part of its response to the global pandemic, the Italian government reinstated the asset step-up regime in August.  The regime applies a 3% substitutive tax on assets accounted for as of December 31, 2019.  If a taxpayer elects the step-up, then the higher values shall be disclosed in the 2020 financial statements and can be deducted for direct tax purposes starting from the tax period that includes December 31, 2021.

The takeaway

Groups with significant built-in gains in their Italian assets should consider applying for the tax step-up, taking into account factors like prospective taxable income, possible tax savings, step-up costs, tax depreciation period of the stepped-up assets, and statutory financial statement implications.


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Bernard Moens

US Inbound International Tax Services Leader, PwC US

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