Under the Italian CFC rules, where an Italian shareholder has a controlling shareholding or a participation of more than 20% in the profits of a company resident or located in a country included in the blacklist, the profits of the foreign company are attributed to the Italian shareholder in proportion to the shareholding, irrespective the amount actually distributed by way of dividend. As a result of the removal, Italian owned foreign companies established in Cyprus are no longer subject to Italian CFC rules, and Italian individuals who move to Cyprus are no longer presumed to be resident in Italy for tax purposes unless they prove the contrary (the burden to prove that the move is fictitious and tax residency remained in Italy is upon the tax administration).
At the same time, Cyprus has been inserted in the white list for the purposes of the application of the portfolio income exemption exempting foreign source portfolio investment income from Italian 12.5 percent withholding or substituted tax.
Removal from the blacklists is an important recognition that companies and individuals with activities in Cyprus will now have totally ordinary fiscal status as far as the Italian tax system is concerned.