Italian Supreme Court decision no. 19140/2026 clarifies that the deductibility of interest expense for IRES purposes does not require a direct link to specific taxable revenues, but rather a connection with the business activity as a whole. Economic unreasonableness may be used as an indicator of lack of business purpose only where it is supported by a quantitative and comparative analysis based on the company’s financial data or market conditions, with the burden of proof resting on the Italian Revenue Agency. The principle is particularly relevant to intragroup transactions, leveraged acquisitions and corporate reorganisations.
Published in La Circolare Tributaria no. 27/2026 by Euroconference.
