Taxation and internalization: tips by Antonio Vitali

If an Italian fintech startup wants to face the process of internationalization, it must also think about what will happen at the taxation level. This is not an easy topic we chose to address during a session of our mentorship program for community startups with the contribution of Antonio Vitali (Tremonti Romagnoli Piccardi and Associates), an expert who gave us a picture of the current situation. Here it is.

From 1 to 10 how much do taxation issues affect the speed of internationalization of an Italian startup and why?

It depends on a series of factors that vary from case to case, but I think that tax issues have a certain influence. In general, we can say that these issues are often relevant and the tax system tends to be very complicated. The complexity increases when you move into a transnational context. Startups may not always find it easy to spend time and resources on tax issues during the internationalization phase. This may result in a slowdown in the process.

Do you think startups give the right weight to this or underestimate it?

These aspects are certainly taken into account, but the complexity of the tax system is now very high. Moreover, during the startup phase, there may be no incentive to look at the tax variable as an opportunity. These two components can lead to an underestimation of some important financial aspects affecting the internationalization process.

Are there more or fewer difficulties for an Italian startup starting a process of internationalization, in terms of taxation, compared to the situation in other countries?

Generally speaking, I would say the situation is quite similar, at least if we compare it with other EU countries. The main tax issues affecting Italian startups engaged in the internationalization phase are basically the same as those affecting ones resident in other EU countries. The rules, always in the EU context, tend more and more to be shaped according to common evolutionary lines.

How can the situation be improved? Are there any countries to take as an example?

Stability, simplicity and reliability of the tax system are important values. This also applies in general to the rules and procedures to be applied in the process of internationalisation. It would, therefore, be helpful, for example, in the short term, to speed up the procedures for reaching an agreement with regard to transfer prices, such as APAs. In the medium to long term run, it would be important, at least at an EU level, to adopt a common tax base between the Member States, as provided for in a Directive which has been under discussion now for some time. This would give advantages in terms of simplification and could allow the overcoming of the complex rules of transfer pricing in relations between group subjects operating in the different Member States. This would reduce administrative costs and, of course, tax risks. Moreover, the approval of the proposed EU Directive on “significant digital presence”, with a multilateral amendment of the treaties against double taxation between member states would make a contribution in the direction of clarity in the taxation of the digital economy in general.

As far as the taxation issues you deal with are concerned, do you see any peculiarities in the fintech sector?

There are many special features in all areas of taxation, including VAT. There is also no lack of direct intervention by the legislator, who, for example, has regulated peer to peer lending from a fiscal point of view, with the introduction of a withholding tax applied directly by platform operators, on the income from this activity received by natural persons.

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Author: Tudor Sava

12 Settembre 2019