Italian NPLs and UTPs: Conversion into tax credits of Deferred Tax Assets associated with tax losses carried forward and other deferred deductions

Executive summary

On 16 March 2020, the Italian Government, to counteract the current liquidity crisis following the spread of COVID-19, approved a Decree¹ that entitles companies (mainly banks and financial institutions) willing to dispose of NPLs² and UTPs³ by 31 December 2020 to claim a partial conversion into a tax credit of the existing, although possibly unrecognized, Deferred Tax Assets (DTAs) associated with:

1) Tax losses carried forward (TLCF)

2) Excess notional interest deduction ca…