Italy to spread deductions of banks' tax assets for up to four years

ROME – Italian banks are poised to face a temporary hike in profit taxes as the government plans to mandate lenders to distribute tax deductions from past losses over a period of up to four years, according to the 2025 budget unveiled on Wednesday.

This strategy is expected to yield more than €2.5 billion ($2.70 billion) for Italy’s strained public finances, as stated by the government.

Under the new budget provisions, banks will be required to apply their 2025 tax credits, known as deferred tax assets (DTAs), to reduce their taxes over the four years spanning 2026 to 2029. Additionally, DTAs related to 2026 will be spread over the ensuing three years.

Among Italy’s largest banking institutions are Intesa Sanpaolo, UniCredit, Banco BPM, and the state-owned Monte dei Paschi di Siena (MPS).

The measure holds particular significance for MPS, which has substantial DTAs on its balance sheet following years of significant losses and had recently begun to benefit from its return to profitability.

To comply with re-privatization terms agreed upon with the European Union during a costly 2017 bailout, Italy’s Treasury must relinquish control of MPS by the end of this year, according to previous reports.

In addition, the Treasury expects to generate €1 billion from insurance companies by altering the payment terms of stamp duties for certain insurance policies within the budget.