Financing and Financial Products

Cross-Border Financing and Financial Products

Multinational enterprises engaged in cross-border financing transactions now face various types of earnings stripping and anti thin-capitalization or avoidance rules adopted in most countries around the world, and must properly deal with them in order to avoid undesired tax consequences.

Italy has enacted its own version of anti thin-capitalization rules in 2004, which were repealed and replaced with a new limitation on deduction of interest in 2008.

Financial products, designed correctly, provide competitive returns to purchasers and, on the issuer side, they aid in risk management and collection of funds for corporate growth and development. In the international setting, their value is enhanced through the use of hybrid entities and hybrid transactions (which means, entities and transactions characterized differently for domestic and foreign tax law purposes), with increased possibilities of double dips and tax efficient structures. A completely new set of rules on tax characterization and treatment of financial products was also enacted in Italy in 2004. With the growth in this area has also come more intense scrutiny at the legislative and administrative level, with the enactment and enforcement of anti-abuse and tax shelter rules, thus making it even more important that a financial product or transaction is carefully designed from the outset.

We advise clients in evaluating financial products offered by others, designing financial products and correctly structure their cross-border financing deals to maximize tax benefits and avoid risks of non compliance, unfavorable tax audit and assessments. Our services in this area include:

  • evaluating existing financial products;
  • assisting in structuring financial products or cross-border financing deals in a tax efficient manner;
  • preparing relevant transactional documents;
  • preparing and filing documents to organize appropriate issuing entities;
  • advising on regulatory and corporate law requirements connected with issuance of financial products;
  • advising on the applicability of anti-avoidance and tax shelter provision
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