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A more favourable tax treatment for project bonds

The very first measure introduced by the recently enacted decree aimed at the growth of the Italian economy – law decree No 83 of June 22 2012 (decree No 83) converted into law with amendments by law No 134 of August 7 2012 – is a new and more favourable tax regulation for project bonds. It is laid down in the first article of Decree No 83.

The inclusion of the new provisions in the first article of the Decree is not meaningless since it unveils the priority of the Italian government in pursuing the enhancement of the Italian economy and what could be seen as one of the main purposes of Decree No 83: to draw private funds and investments directing them to the development of infrastructures.

Project bonds are debt instruments issued by project companies in registered form in order to finance infrastructures and are transferable only to qualified investors.

Project companies are companies involved in the making of infrastructures and are regulated under legislative decree No 163 of April 12 2006 (the Code of Public Contracts).

The Code of Public Contracts already provides for a special regulation on project bonds according to which certain limits and rules relating to bonds issued by companies (as set forth under the Italian Civil Code) are not applicable to project bonds provided that such bonds are subscribed only by qualified investors.

Hence Decree No 83 has completed the regulation of project bonds from a tax point of view.

According to article 1 of Decree No 83, in fact, interest paid on project bonds benefit from the same tax regime as government bonds (which is more favourable).

The Decree also extends to project companies the favourable regime for the deductibility of interest provided for banks.

In addition, any guarantees granted in relation to project bonds, including any assignments of receivables entered into in relation thereto, are subject to registry, mortgage and cadastral taxes levied at a fixed rate (and not on a proportional basis as a percentage of the amount of the guarantee).

The above mentioned tax regime, however, is applicable only to project bonds issued within three years starting from the entering into force of Decree No 83.

According to the last paragraph of article 1 of the Decree, project bonds may also be issued in order to re-finance the indebtedness previously incurred by project companies for the making of the infrastructure.

Susanna Beltramo and Bruno Zerbini

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