Tax Planning and Compliance Management: Why Choices Should Be Assessed in Advance

A company’s tax burden is usually perceived as the result of a calculation performed when the tax return is filed, whereas in fact it has largely been determined in the preceding months by decisions that, at that point, can no longer be changed. This is where the difference between compliance management and tax planning becomes clear: the former looks to the past and is limited to correctly determining the taxes due on events that have already occurred, without being able to change their substance; the latter looks ahead and consists of comparing, before a transaction is carried out, the alternatives offered by the legal system and their tax, economic and organisational effects. It follows that the ability to influence the tax burden is exhausted at the moment the decision is taken, and that what has not been assessed beforehand can hardly be corrected afterwards.

Choices that, if assessed in good time, legitimately reduce the tax burden

The legitimacy of these choices is recognised by the law itself: Article 10-bis of Law No. 212 of 27 July 2000 (the Taxpayers’ Bill of Rights) safeguards the taxpayer’s freedom to choose between different optional regimes and between transactions involving a different tax burden. A very topical example is the Biennial Preventive Tax Agreement (concordato preventivo biennale), which taxpayers may join for the 2026-2027 two-year period by 2 November 2026: those who join are taxed on an income agreed in advance with the Italian Revenue Agency, so that any excess income is not taxed, but taxes remain due on the agreed amount even if the business performs worse than expected.

Since this is a commitment made on results not yet achieved, joining should be preceded by a number of checks: a comparison between the proposal and a realistic estimate of income for 2026 and 2027, bearing in mind that the second year is the most uncertain; quantification of the benefit of the substitute tax, ranging from 10% to 15% depending on the ISA score, on the portion of agreed income exceeding 2025 income and up to EUR 85,000; the transactions planned during the two-year period, since mergers, demergers and contributions of going concerns bring the agreement to an end; and, finally, the risk of forfeiture, which deprives the agreement of effect for both years while still leaving taxes due on the agreed income, if higher than actual income (on this point, please refer to our previous article Biennial Preventive Tax Agreement 2026-2027: What the New Circular No. 8/E Clarifies).

An advance assessment is equally necessary to decide how a shareholder who manages their own company should draw the resources it generates. Dividends bear corporate income tax (IRES) at 24% at company level and a 26% withholding tax at shareholder level, for an overall tax burden of 43.76%, whereas directors’ fees are deductible for the company but subject, in the hands of the director, to progressive personal income tax (IRPEF) and social security contributions; the choice therefore depends on the shareholder’s income and social security position and must be made during the financial year, because, in order to be deductible, the fees must be resolved upon and actually paid within the year (Article 95(5) of the Italian Income Tax Code – TUIR).

The most significant benefits, however, are obtained through a corporate reorganisation, in particular by setting up a holding company that centralises the shareholdings in the operating companies. Contributing the shares under the “controlled realisation” regime (Article 177(2) and (2-bis) TUIR) allows them to be transferred without triggering taxable capital gains and, from that point on, dividends received by the holding company bear an effective tax rate of 1.2% rather than 26% (Article 89 TUIR), while capital gains on the disposal of the shareholdings benefit from a similar 95% exemption (Article 87 TUIR). The 26% becomes due again when the holding company distributes profits to its shareholders, but in the meantime resources can be reinvested within the group without being reduced by more than a quarter; added to this are unified management of the companies and a more orderly generational transfer, also facilitated by a lower taxable base for inheritance and gift tax purposes (on this point, please refer to our article Doppio conferimento e holding multilivello: quando il Fisco apre alla pianificazione, available in Italian).

When tax savings are not enough

Freedom of choice does, however, have a limit, set by Article 10-bis itself: transactions lacking economic substance that essentially achieve undue tax advantages constitute abuse of law, and the tax authorities may disregard those advantages. What can be challenged is therefore not the saving itself, but a transaction that has no other justification, whereas a transaction supported by sound, non-marginal non-tax reasons remains legitimate; according to the Ministry of Economy and Finance’s policy guidance document ref. no. 7 of 27 February 2025, such reasons exist where, in their absence, the transaction would not have been carried out.

The holding company offers the clearest and most recent example. If it centralises the management of the group or prepares the generational transfer, it meets genuine needs, whereas the so-called “static” holding company, which merely holds shareholdings and retains dividends indefinitely, is exposed to the risk of an abuse challenge based on the sine die deferral of taxation at shareholder level: a view held by some commentators and disputed by others, who point out that there is no obligation to distribute profits. In a framework that is not yet settled, the difference certainly lies in the functions actually performed by the holding company and in the ability to demonstrate its reasons through documents prepared before the transaction, not reconstructed after the fact.

Conclusions

Paying more tax than necessary and saving it in a way that can be challenged are two consequences of the same mistake, namely deciding without having first assessed the alternatives and their rationale. Choices with significant tax effects should therefore be examined with one’s advisers before they are made, when it is still possible to compare the options, verify their consistency with the business’s needs and document their rationale; in the most uncertain cases, the Taxpayers’ Bill of Rights also allows a ruling request (interpello) to be submitted to the Italian Revenue Agency in order to obtain its assessment in advance.