ROME - Italy plans to extend by six months to the end of this year tax breaks for corporate mergers Rome had originally introduced in 2021 to entice buyers for state-owned Monte dei Paschi di Siena, two sources close to the matter told Reuters.

After a proposed sale of Monte dei Paschi to UniCredit fell through, the Treasury had introduced a 500 million euro ($535 million) cap which one of the sources said would remain in place in the extension.

In their current form, the tax breaks allow companies to pay a fee to turn into tax credits so-called deferred tax assets (DTAs) stemming from past losses in the case of merger deals approved by directors or shareholders by June 30, 2020.

Italy's fifth-largest bank BPER Banca earlier this year has agreed to buy troubled rival Carige, in a deal expected to have a neutral impact on its capital reserves thanks in part to the tax incentives.

Carlo Cimbri, the CEO of Italian insurer Unipol, which is the leading shareholder in BPER Banca, said on Tuesday he expected the Carige deal to close by the end of this year.

France's Credit Agricole also benefited from the tax scheme when it took over regional bank Creval in 2021.

(Reporting by Giuseppe Fonte and Valentina Za; Editing by Angus MacSwan)