An unseen change — but one that directly affects taxation

Tax policy does not always change through new laws. Often, substantive changes arise through interpretative circulars.

Circular E.2007/2026 is a characteristic example. Without expressly amending the institutional framework of the development laws, it materially changes the way business profits are taxed.

What applied until today under the development laws?

The development laws provided a clear and strong tax incentive:

  • Exemption from income tax
  • Creation of a special reserve from the tax not paid

The basic principle was clear: taxation is triggered only in the event of distribution or capitalisation of the reserve.

This allowed businesses to strengthen their liquidity and capital base without an immediate tax burden.

The critical change of Circular E.2007/2026

The new circular introduces a substantial shift in interpretation.

The tax administration no longer confines itself to the reserve, but extends its logic to the profits themselves from which it arose.

In practice:

In the event of distribution of profits from previous years, on which no tax had been paid due to a development incentive, those amounts may be deemed taxable.

Not because the reserve is being distributed, but because the profits that created it are being distributed.

Why is this a tax risk?

This approach creates a new level of uncertainty for businesses.

First, it does not arise expressly from the wording of the legislation.

Second, it alters the philosophy of development incentives, which are designed to encourage the reinvestment of capital.

Third, it creates practical difficulties, as most businesses have not separately accounted for these specific profits.

The result is a grey area, where the tax burden may arise retrospectively.

Which businesses are directly affected?

This change mainly concerns businesses that:

  • have made use of development laws
  • have formed tax-exempt reserves
  • plan dividend distributions
  • are in the process of investment or exit scenarios

In these cases, a mistaken approach may lead to unforeseeable taxation and affect the actual value of the business.

What should businesses do now?

In this new environment, a passive stance is not an option.

It requires:

  • review of reserves
  • analysis of the origin of the profits
  • careful planning of distributions
  • alignment of tax and business strategy
  • The management of the issue is not an accounting process. It is a strategic decision.

The next day in corporate taxation

It is possible that the matter will become the subject of judicial review in the future. Until then, however, businesses are called upon to operate on the basis of the new interpretative reality.

And in this environment, preparation makes the difference.

Conclusion: Taxation as a strategic tool

Taxation is not merely a matter of compliance. It is a tool for risk management and value creation.

Circular E.2007/2026 clearly highlights that details can turn into either a risk or a competitive advantage.

AFS’s approach

At AFS, we approach such developments not as mere information, but as the starting point for strategic restructuring.

For businesses that have made use of development laws, this period is a critical point for reassessment.

Because in taxation, the right interpretation at the right time determines the outcome.