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Tax Alert No 1/2020 - Changes introduced by the Italian Finance Act 2020
The Finance Act 2020 (Law No 160 of 27 December 2019) was published in Italian Official Journal No 304 of 30 December and entered into force on 1 January 2020.
We bring to your attention the following new rules.
Tax credit for investment in capital assets - article 1(184 - 197)
A "new” tax credit for investments in capital assets has been introduced for 2020, replacing the super-depreciation and hyper-depreciation incentives. All companies are eligible for the tax credit, regardless of their legal form, size and method of determination of income.
There are three types of qualifying investments:
- new “ordinary” capital assets;
- the capital assets referred to in Annex A to Law 232/2016;
- the capital assets referred to in Annex B to Law 232/2016.
In order to qualify for the incentive, the investment must be made between 1 January and 31 December 2020, or until 30 June 2021, provided that the relevant order has been accepted by the seller by 31 December 2020 and advances of up 20% the purchase cost of the assets have been paid.
The amount of the tax credit differs by type of investment (for example, the investment in any of the assets referred to in Annex A to Law 232/2016 qualify for a 40% tax credit up to a 2.5 million Euro investment and for a 20% credit for investments between 2.5 and 10 million euro).
Tax credit for R&D and innovation - article 1(198 – 209)
The Finance Act introduced a tax credit for investments in R&D, ecological transition, technological innovation 4.0 and other innovations.
With regard to qualifying R&D activities, the tax credit amounts to 12% of the relevant costs, up to 3 million euro. For technological innovation activities, the tax credit amounts to 6% of the relevant costs, or 10% for ecological transition and technological innovation 4.0 activities, up to 1.5 million euro. For design and esthetic design activities , the tax credit amounts to 6% of the relevant costs, up to 1.5 million euro.
The tax credit is available in three equal annual installments.
Tax credit for Training 4.0 - article 1(210 - 217)
As part of the revision of the Industry 4.0 incentives, the law has extended the Training 4.0 tax credit to training costs incurred in 2020, with some changes (for instance, the maximum annual amount of credit by size of the company has been amended).
Additional measures are the extension of the tax credit for investments in Southern Italy (article 1(319), the extension of the tax credit for SMEs’ attendance at international trade fairs (article 1(300) and of the provisions of “Nuova Sabatini” (article 1(226 - 229)).
Aid to economic growth (ACE relief) - article 1(287)
The Aid to economic growth (ACE relief) (pursuant to article 1 of Decree Law 201/2011) was reintroduced with effect from FY 2019, when the “mini IRES” was concurrently abolished (in fact, the latter measure was never implemented in practice). The rate of return for new capital invested has been set at 1.3%.
Tax on digital services (Imposta sui servizi digitali – ISD) - article 1, comma 678)
A tax on digital services has been introduced with effect from 1 January 2020 and will apply to revenue from the following services: (i) dissemination of advertising content on a digital interface meant for users of such interface; (ii) providing a multilateral digital interface for users to be in contact and interact with one another, inter (alia to facilitate the direct provision of goods and services); (iii) transmission of data gathered by users and generated by the use of a digital interface.
The tax is charged on service providers conducting a business, which, individually or as a group, generates total worldwide revenue of no less than Euro 750,000,000, or Italian-source revenue from digital services subject to the tax of at least Euro 5,500,000,
Furthermore, the user of the service must be a person considered to be based in Italy in the calendar year in which the service is taxable.
The tax is charged at 3% of the taxable revenue realized by the taxable person in the calendar year.
Tax on single-use (disposable) plastic products - article 1 (634 - 658)
The Finance Act 2020 introduced a tax on single-use (disposable) plastic products used for the containment, protection, manipulation or delivery of goods or foods.
The following are liable to the tax:
- The manufacturer, for products manufactured in Italy;
- The purchaser of the products, or the seller if a private individual, for products originating from other EU Member States;
- The importer, for products originating from non-EU countries.
The tax amounts to 0.45 euro per kilogram of plastic contained in the disposable plastic products.
The new rules will become effective starting from the first day of the second month subsequent to the date of publication of the relevant implementation measure.
“Sugar tax” – Tax on the consumption of sugar-added non-alcoholic beverages - article 1(661 - 676)
The law introduced a tax on the consumption of sugar-added non-alcoholic beverages at the rate of 10 euro per one hundred liters of finished product, or 0.25 euro per kilogram for products to be diluted. The tax will apply from the first day of the second month subsequent to the publication of the relevant implementation decree.
Changes in the taxation of the car benefit - article 1(632 - 633)
The law amended article 51 of the Italian Income tax code concerning the determination of the car benefit in connection with the assignment to employees of a company car for mixed private and business use. In particular, for vehicles that will be assigned to employees as of 1 July 2020, the determination of the relevant fringe benefit will vary depending on the level of carbon dioxide emissions and will range between 25% and 60% of the amount obtained by multiplying the kilometer allowance set by ACI (the Italian automobile association) by the pre-established number of kilometers deemed to be driven in a year (15,000), after deduction any amounts withheld from the employee).
Increase in the percentage of deductibility of the Italian property tax (IMU) from personal income tax or corporate income tax - article 1(4 - 5 and 772 - 773)
IMU (on capital assets used in the course of business) will be deductible from business income and self-employment income as to 60% in fiscal years subsequent to those in progress at 31 December 2019 and 31 December 2020, and as to 100% upon full implementation of the rules (i.e., as of the fiscal year subsequent to that in progress at 31 December 2021).
Furthermore, the 2020 Finance Act has confirmed/amended the following provisions:
- Step-up of business assets: all assets carried to the financial statements at 31 December 2018 may be written up for tax purposes by paying substitute tax at the rate of 12% for depreciable assets and 10% for non-depreciable assets (article 1(696 - 704));
- Deductibility of write-downs of and losses on receivables of banks and insurance companies (article 1(712));
- Deductibility of expected losses on receivables for first-time adopters of IFRS 9 (article 1(713));
- Deductibility of amortization charges for goodwill and other intangibles (article 1(714 - 715)).