1. Dott. Clemente Bianco Avv. Elio Sbisa’ GGI Italian Business Summit Tax Meeting, October 11, 2013, Rome Foreign Investments in the High Tech Sector in Italy: Case Study, Erzelli Technology Park, Genoa STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

2. Emerging High Tech Sector in Italy Erzelli, Technology Park in Genoa Financing the business Picking Up the Fruit of Your Investment Future Incentives to attract foreign Investors: Destination Italia List of topics for today’s presentation Today’s Topics Studio CTS BOLLA QUAGLIA & ASSOCIATI

3.  The project of the Science and Technology Park Leonardo or simply “Erzelli” dates back to 2004 and intends to gather in one area all high tech companies present in the Genoa geographic circuit. According to the masterplan, Erzelli Park will include: ◦ Engineering Department and laboratories, ◦ 208,300 sqm Research Institute and high tech production units, ◦ 104,000 sqm Residences ◦ 12,050 sqm Commercial Spaces, facilities and accommodation  Plus, play and sport grounds ( a 10-kms running track ) and other facilities (shops, post office, banks, infant school and entertainment places) will give the Erzelli Park the shape of a real city centered on high tech. STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

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8.  By offering value-added services and facilities to research centers, high tech companies, small start-ups and universities, the Erzelli Park aims at facilitating the creation and growth of innovation-based firms, support incubation and spin-offs and should stimulate and manage the flow of knowledge amongst universities, R&D institutions and companies. STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

9.  T he Genoa Area can count on a great variety of high-tech companies with manufacturing and non-manufacturing production; in terms of size they include large, middle, small size, and start-ups.  Their technology platform appears to have charateristics unique in Italy.  Finmeccanica, Ericsson and Siemens have already chosen Erzelli Park as their site of operations and researching activities. STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

10. Company Profile Number People Employed Large size Comanies (1) Mid-size Companies (2) Small companies (3) Mini Companies (4) TOTAL 9 25 50 66 150 9.850 3.120 1.200 330 14.500 Earnings – mil. € 4.350 High Tech % within the Manufacturing Industry Employment Rate28% Earnings Rate43% * Source: survey conducted by Confindustria, Italian Companies Association Genoa branch and Dixet, Club of high-tech companies, Genoa (1)> 500 employees; (2) 50 ÷ 499 employees; (3) 10 ÷ 50 employees; (4) < 10 employees STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

11. 20112021Variation Rate % 2011-2021 Companies150190+25% Employment14.50021.400+48% Earnings Expected in mln. Euro4.3506.500+50% * Source: survey conducted by Confindustria, Italian Companies Association Genoa branch and Dixet, Club of high-tech companies, Genoa STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

12. Issuing ”Mini Bonds” Lending at lower rate if invested in acquisition of high technology Financing with facilities, machineries and equipments as collaterals Crowd-funding for “Innovative Start- ups” STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

13. “Mini Bonds”  Introduced by “Decreto Sviluppo” (DL n 83/2012, art. 32) to create an alternative financing means to middle-small size firms, “PMI”, plagued by the current financial crisis  A company issuing mini bonds has no more than 250 employees and total earnings not exceeding 43 M  Allow fundraising on regulated public markets by unlisted companies at same cost conditions as bank lending: interests payment is deductible under article 96 of the Italian corporate taxation code (Tuir)  Are tradeable on regulated markets within EU Member States and “white listed” countries allowing exchange of information STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

14.  Mini Bonds can be subscribed by Foreign Professional Investors, provided that they do not own more than 2% of the issuer’s shares; and  The “Effective Beneficiary” of the interests payment is resident in a State allowing an exchange of information with Italian Tax Authorities.  Interests Payment to non-residents is exempted from taxation at source, likewise bonds by public companies (D.lgs. n. 239/96, art. 6 c.1; art. 32 c. 9 and 10 DL n. 83/2012) STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

15.  Funding and lower rate loans to promote acquisition of new technology: 2 M Euro available within December 2016 to each applying company to acquire new implants and equipments, as well as new hardware, software and other high tech investments (DL n. 69/2013, article 2 “Decreto del Fare”)  Funding available for R&D projects in ICT, advance material, and biotech covering up to 70% of all costs depending on the characteristics of applying company. Each project costs cannot exceed 3 M euro and 8-years term. Return rate 0,8% (DL n. 83/2013, article 23)  500 K euro by “Icapital” funds by the EU Commission to be granted to innovation projects (“Smart Cities” project conducted in Liguria to favor its citizenship) Studio CTS BOLLA QUAGLIA & Associates

16.  Movable tangible assets (i.e. plants, machinery, equipments and raw materials) can be used as collaterals to secure financing to firms when issuing bonds (amendment to art. 46, D.lgs. n. 385/1993 T.U.B. by DL n. 69/2013 “Decreto del Fare”)  A floating lien expands and covers present and additional assets bought through the funds granted in order to secure creditors’ rights to pay-off  Debt instruments issued are reserved to professional investors (art. 100 Dlgs n. 58/98 i.e. T.U.F.) and a security agent is appointed to the benefit of the bondholders  Benefit: additional funding without distracting instrumental assets from the ordinary course of business STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

17. Crowd-funding: Definition Crowd funding exists as donation to a certain initiative or project without expecting nothing in return (“donation-based”); or as financing a certain project in retun for a reaward, in cash or not (“reward based”). Equity crowd funding means an equity contribution to an “innovative start-up”. Innovative start-up:  Is a limited liability entity (i.e. S.p.a. or S.r.l);  Set up no more than 4 years ago;  Unlisted on a public market;  Is located in Italy;  With a annual production value no hogher than 5 M euro,  Does not distribute dividends (4-years lock-up);  Develops, or manufactures, or sells high tech products or services mostly or exclusively;  Has at least one of the following requirements: ◦ Investing in R&D at least 15% of its earnings; ◦ 1/3 of its personnel is graduated or engaged in researching ◦ Is IP owner of, at least, one patent or original software STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

18. Crowd-funding (Consob Reg. 29/3/2013)  Innovative Start-ups are allowed to raise capital contributions by public offering on specific investment web sites, namely “Portals”.  Equity contributions made on-line can reach up to 5 M euro  Portals are managed only: ◦ by Banks, Sim, and financial institutions already providing financial instruments and services; or ◦ By Other firms specifically authorized by the Consob  Portals must show investors all information to allow their investment decision process: for instance, costs of the offering, lock-up provision, business plan information, investment risks, rescission right within 7 days, tax relief, tag-along right provision.  After the execution of the offering, investors can monitor the growth of the company and check relevant information (e.g. financial information, key managers, and personnel) directly on the company web site updated on six months basis. STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

19. Taxation Patterns  Italian Residents are taxed on the income generated anywhere (i.e. worldwide taxation)  Non-resident Foreign Corporations with no PE in Italy are taxed based on the assets owned and income generated locally (i.e. source taxation). STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

20. Picking the fruit of your Investment Taxation of Outbound Payments to non-residents with no permanent establishment. Focus on “Passive Income”:  Dividends distributed by Italian incorporated companies to non resident shareholders  Interests paid out by Italian incorporated companies to non residents bondholders or creditors  Capital Gains paid after the sale of shares or quotas held in Italian incorporated companies to non resident shareholders STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

21.  Tax and filing obligations to the Italian Tax authorities are met by the Italian payer of the passive income, Withholding Agent  Withholding Agent is local entity, association or individual conducting business.  Tax treatment of the passive income varies depending on residence of the receiver of the passive income (UE vs outside UE) and on whether the applicable law (tax treaty vs EU Directives) reduces or exempts double taxation on the outbound payments of the passive income STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

22. Tax Treatment for Outbound Payments of Passive Income  Depending on the circumstances, tax laws applicable on the payments of passive income provide for different set of rules.  Domestic tax rules (T.u.i.r. and Dpr n. 600/73)  EU Directives on taxation of dividends and interests  International Tax Treaty (OECD Model)  Overlapping between them often occurs. STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

23. Domestic Taxation rules Dpr n. 917/86 (Tuir )  Allows taxation at sorce on the dividends paid out to non residents  When the shareholder receiving the dividends is a non resident foreign corporation in another State, the Italy, as State at source, may apply a 20 % withholding tax (art.23, c 1, lett. b) Tuir and art 27 c. 3 Dpr n. 600/73) levied on the total amount of the dividends at the time of distibution of the dividends, unless a tax treaty provides otherwise.  However, the foreign recipient may claim from Italian authorities a partial refund of the 5% of the amount paid by demostrating with proper documentation by its local tax authorities that final payment of taxes on the same dividends income was made abroad. Note that this refund is not additional to other benefits under applicable tax treaty  When the recipient of the dividends is a foreign corporation within EU or in white listed countries, Italy, as state at source, may levy a 1,375% withholding tax (27,5%*5%) (art. 151, c 2 and art. 23 Tuir and art. 27 c 3-ter Dpr n. 600/73) at the time of the distribution of the dividends, provided that the recipient shows proof of:  i) being EU resident; ii) being incorporated under one of the legal forms listed in the EU parent-subsidiary Directive; iii) one year holding: iv) and being subject to corporate taxation. Form has to be submitted to the italian withholding tax agent prior to the dividends payment in order to benefit the lower tax rate.  Parent-Subsidiary Directive may apply, instead, if its conditions are met. STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

24. EU Law: Patent - Subsidiary Directive (Dir 2011/96/UE; art.27-bis dpr n. 600/73 ) Distibution of profits from an Italian subsidiary to its patent company in a EU Member State is exempt from withholding tax at source, if a) Each company is incorporated within EU Member States under local laws and under one of the legal forms to conduct business listed in the Directive; b) Each is subject to corporate taxation rules in each own country; c) Patent company holds at least 10% of shares of subsidiary; and d) 1 year continuos holding period In order to claim exemption right, the parent company has to provide its subsidiary with:  1) proof by its local tax authority certifying conditions a), b) and  2) an exemption notice certifying conditions c) and d). Upon application of the withholding tax, non resident may claim a refund by demostrating with proper documantation its right to tax exemption. In addition, claimant must certify being the “beneficial owner” of the dividends (not being a conduit). (art 27 bis c. 2 and c. 5, dpr n. 600/73). In lack of proof, 20% withholding tax applies again, unless a tax treaty provides otherwise. See Caselaw: CTP Turin 11/2/2010, n. 14/7/10 Note: Art 47, c 1 Tuir raises an unrebuttable assumption that the subsidiary is distributing taxable profits STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

25. ReceiverApplication quotaWithholding Tax (Dpr 600/73) Non resident Alien (except a bilateral tax treaty applies) 100%20% (art. 27 c 3) Entities within EU and White listed countries (except a bilateral tax treaty applies) 5%27,5% (art. 27, c. 3- ter) Entities outside EU e white list countries (except a bilateral tax treaty applies) 100%20% (art. 27, c 3)

26. Domestic Taxation Rules (art 44 c. 1 lett a) and art. 44 c1 lett. b c2 tuir) Interest income paid to non-resident as bondholders or creditors under the terms of bonds issue or a loan with an Italian incorporated company is subject to a 20% withholding tax levied at source at the time of payment. EU Law: Interest-Royalties Directive (Dir 2003/49/UE; art. 26 quater, c 8-bis Dpr n. 600/73 ) Payment of interest income between associated companies within EU Member States is exempted from withholding tax at source, if a) each company is incorporated within EU (according to local laws and under the forms to conduct business listed in the directive); b) each is subject to taxation rules in each own country; c) The payer directly holds at least 25% of the capital and/or of shares with voting rights in its subsidiary receiving the interest payment; or a third company directly holds at least 25% of the capital and/or of the shares with voting rights in each of them; d) 1 year holding period; e) The receiver of the interests is the effective benenficiary of the interest payment In order to claim exemption right, the beneficiary company has to provide the payer with: Form by its local tax authority certifying conditions a), b) and an exemption notice certifying conditions c), d) and e). However, in lack of proof of the above, 5% withholding tax applies, if the interest payment is directed to pay off holders of bonds issued on EU regulated markets or white list countries markets allowing exchange of information; and the bonds are guaranteed by the paying company, or the holding company or another subsidiary. STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

27. Tax Treatment for Outbound Payments of Capital Gains Capital gains paid to residents are generally treated as ordinary income and taxed at the 27.5% corporate income tax rate. If the shares sold were held for at least 3 years, the gain may be carried forward in equal installments up to 5 years. However, capital gains may be partially exempted from taxation (“PEX”) and subject to 5% withholding tax, if PEX conditions are met. Under domestic tax laws, capital gains paid to non residents arising from the sale of shares in a resident company may be subject to withholding tax varying (20% or ordinary rate) depending on partecipation to the capital and voting rights in the local company, unless an exhisting tax treaty provides otherwise. Exemption from taxation may apply on sale of unqualified shares if shares are traded on regulated markets and sold through local intermediaries. To benefit from the exemption, the seller must also declare to be resident in a foreign country with whom there is a agreement for exchange of information. STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

28.  Tax Treaty aims at elimination or reduction of double taxation on the same income or the same taxpayer by redistributing taxing power between two contracting States.  While only an exemption eliminates the double taxation, most contracting states choose to tax an income payment to some extent in both states by applying a lower rate in source state and granting a tax credit for the taxes paid in the other contracting state.  Therefore, tax credit eliminates double taxation only. Tax credit granting is normally conditioned to certain requirements according to local laws in each country STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

29.  Under article 13 of the OECD Model capital gain income from the sale of stocks in a company located in a contracting state is generally taxed in the contracting State where the seller of the stocks recides and exempted in the other contracting State.  In 2003 the OECD Model was amended allowing now the state at source to tax gains from the sale of the shares in a company with most assets represented by immovable property. STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

30. Tax Treaty Network With Italy STUDIO CTS BOLLA QUAGLIA & ASSOCIATI Dividends art.10 % Interests art.11 % Capital Gains art. 13 Argentina1520 State of Residence Brasil155 Both may tax China10 In line with new article 13 of the OECD Model Russia150 No tax Switzerland1512.5 State of Residence United Kingdom5-15*0-10 State of Residence United States5-10-15**10 In line with new article 13 of the OECD Model Venezuela10 In line with new article 13 of the OECD Model * = 5% on the gross amount of the dividends income if the beneficiary company holds at least 10% of the shares with voting rights, 15% applies otherwise ** = 5% on the gross amount of the dividends income if the beneficiary company held over 50% of the shares with voting rights for 12 months; 10% in case of holding over 10 % of the shares with voting rights for 12 months, 15% applies otherwise

31. WHT 20% State A Recidence ITA Source State CIT 30% Dividends 1.000 € WHT 15% Company A High Tech Company 100% Dividends 10.000 € Domestic wht (20%) 2.000 € Treaty wht (15%) 1.500 € CIT State A (30%) 3.000 € Total tax 4.500 € State A grants tax credit d Tax Treaty btw State A - Ita Article 10: Withholding tax = 15% Exemption/Tax Credit STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

32. WHT 20% State A Recidence ITA Source State CIT 30% Interests 10.000 € WHT 10% Company A High Tech Company 100.000 € Financing Interests 10.000 € Domestic wht (20%) 2.000 € Treaty wht (10%) 1.000 € CIT State A (30%)3.000 € Total tax4.000 € State A grants tax credit d Tax Treaty btw State A - Ita Article 11: Withholding tax = 10% Exemption/Tax Credit STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

33. WHT 20% State A Recidence ITA Source State CIT 30% 10.000 € Capital Gains Company A High Tech Company 100% Capital Gains 10.000 € Domestic wht (27,5%) 2.750 € Treaty Exemption CIT State A (30%)3.000 € Total tax3.000 € State A does not grant tax credit d Tax Treaty btw State A - Ita Article 13: Typically capital gain are taxed in the state of residence Company B 100 % Stocks sale to Company B = 100 K €

34. D.M. 21/12/2012 exempts payments of interest and dividends to Venture Capital Funds provided that V.C. has invested in start-ups with capital contributions by 75% of their profits or debt contributions by 25% of their profits. Start-ups are defined as unlisted companies set up 36 months at latest 51 % of the shares or quotas are held by individual owners No holding period required, (lock-up period) Participation exemption applicable to both Italian and foreign VC Funds STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

35. Other Incentives to Abtract Foreign Investors: Destination Italia. A Bill Under discussion  Definition of Anti-Avoidance Rules  Reviewing Black Listed Countries  Advance Ruling with Italian authorities for investment beyond a certain threshold STUDIO CTS BOLLA QUAGLIA & ASSOCIATI

36.  Genoa  Piazza G. Alessi 2/7  16128 Genoa  Tel. +39.010.5705003  Fax +39.010.566758  Milan  V ia Ciovasso 4/3  Tel. +39.02.89013843  Fax +39.02.72013035  www.studiocts.com  professionisti@studiocts.com  Savona  Via Paleocapa 25/6  Tel. +39.019.890099  Fax +39.019.8487345 STUDIO CTS BOLLA QUAGLIA & ASSOCIATI