Cross-border Mergers: prospects and limits

Abstract

The paper addressing the operations of cross-border merger as regulated by the recent Directive (EU) 2019/2121 and by the D. Lgs. 19/2023 in Italy, starts the analysis providing a framework on how the European Community rules on cross-border transactions and their transposition in Italy have evolved over the years, pointing out the main differential elements and features, highlighting the objectives of this legislative evolution. The paper then proceeds examining some classic merger cases: while at the level of general principles it is said that cross-border mergers should be tax neutral, in reality this neutrality is recorded only in the event that the incorporated company retains a permanent establishment in the state of origin (in case of transfer abroad of the company by incorporation, the same is subject to an exit tax on capital gains accrued until the transfer). It can therefore be stated that national merger is tax neutral for the companies involved, while the cross-border merger -in case of relocation- is tax neutral for the states but not for the company transferred, subject to exit tax. While European Community company law has evolved over time, in the sense of harmonising and emphasising the concept of freedom of establishment, the European Community tax policy has not moved in parallel (perhaps it has moved in the opposite direction), limiting or affecting in some way the freedom and ease of establishment and the principles laid down in EU Directive 2019/2021.