Italy: Disposal of Luxembourg holding company not subject to Italian capital gains tax (Milan tax court decision)
Holding companies had sufficient substance and could not be disregarded for tax purposes.
June 22, 2026
The Milan First Instance Tax Court held (decision no. 3525, dated September 5, 2025) that the taxpayer’s disposal of an intermediate Luxembourg holding company, which owned an Italian company operating in the pet care sector, was not subject to 26% capital gains tax in Italy because the holding companies had sufficient substance and could not be disregarded for Italian tax purposes.
The court carried out a substance-based assessment of the role and activities of the Luxembourg holding companies and concluded they could not be regarded as artificial arrangements. In particular, the court noted:
- The entities had an organizational structure, including premises and personnel, consistent with their holding activities.
- Governance processes were effectively implemented, including regular board and shareholder meetings.
- Key strategic decisions, including investment and distribution decisions, were made at the level of the holding companies and properly documented.
- There was no evidence of automatic income flows to the ultimate investor.
Read a June 2026 report prepared by KPMG’s EU Tax Centre