Executive summary

On 17 June 2025, Law Decree n. 84 was published in the Official Gazette (Law Decree 84/2025). Among other things, Law Decree 84/2025 extends the deadline for preparing Italian hybrid documentation for fiscal years (FYs) 2020, 2021 and 2022. Previously, uncertainty had surrounded this deadline, specifically whether it should be 6 June or the end of June 2025. It has now been aligned to the 2024 tax return filing deadline, generally 31 October 2025 for calendar year companies, applicable as well for FY23 and FY24 tax-hybrid documentation.

Detailed discussion

On 20 December 2024, the Italian government issued a decree that implemented the penalty protection regime (formerly introduced by Legislative Decree n. 209 of 27 December 2023) pertaining to tax-hybrid mismatches (Implementing Decree). (For background, see EY Global Tax Alerts, Italy issues, implementing measure for penalty protection regime pertaining to anti-hybrid mismatch legislation, dated 11 December 2024, and Italian penalty protection regime for tax hybrids becomes effective, dated 7 January 2025.)

The new regime allows taxpayers to prepare qualifying documentation (Documentation) that can protect them from administrative penalties. In the event of a dispute concerning hybrid mismatch rules that lead to a higher tax being assessed, the penalty for an “unfaithful” tax return (ordinarily ranging from 90% to 180% for violations committed by the end of August 2024 and equal to 70% for violations committed starting from 1 September 2024) should not apply if, in the course of the field agents' activity, the taxpayer delivers Documentation that complies with the instructions contained in the Implementing Decree.

To serve as penalty protection, the Documentation must be prepared yearly in compliance with a number of instructions set forth by the Implementing Decree.

The penalty protection will apply only with respect to transactions duly described in the annual Documentation for which the taxpayer has truthfully and thoroughly disclosed any relevant element. As an alternative to this detailed annual documentation procedure, the Implementing Decree provides that penalty protection may be achieved with regard to “imported” hybrid mismatches (as opposed to those related to “direct” hybrid mismatches for which the ordinary documentation requirements apply) by adopting a substitute procedure represented by a general internal control framework aimed at detecting the existence of imported hybrids.

The documentation must be prepared in Italian and electronically signed with a timestamp showing a date not later than the filing date of the corporate income tax (CIT) return for the FY covered by the Documentation.

However, specific deadlines apply for FYs 2020–2023 as follows.

The timestamp deadline for a calendar year taxpayer that wants to benefit from the Documentation for FY 2023 and FY 2024, should be that for the filing of the 2024 CIT return (i.e., end of October 2025).

For prior FYs (i.e., 2020, 2021 and 2022) the Implementing Decree provided that the relevant Documentation should have been finalized (and timestamped) by June 2025 (with some uncertainty over whether the actual term was 6 June or the end of June).

Law Decree 84/2025 extends the deadline for preparing the Documentation for FYs 2020–2022 to that already in force for the Documentation for FYs 2023–2024 — i.e., by the deadline for filing the 2024 corporate income tax return.

The penalty protection regime is not available for transactions that tax authorities audited prior to 29 December 2023.

Although the Parliament will have 60 days to convert it into ordinary law, the Law Decree is immediately effective as of 18 June 2025.

Implications

Multinationals with Italian subsidiaries or Italian permanent establishments now have more time to consider the preparation of the tax-hybrid documentation for penalty protection or to reconsider and amend the documentation that has been already prepared in June 2025.