News – Law Decree n. 198 dated 29 December 2022

Decree-Law No. 198 of 29 December 2022, published in the Official Gazette No. 303 of 29 December 2022, introduced numerous extensions concerning various areas, including the economic-financial one.  

Among the main measures, it is worth highlighting the extension of two important measures adopted during the pandemic emergency: the suspension of depreciation and of statutory losses, analysed below.  

Decree-Law 198/2022 came into force on 30.12.2022, the day after its publication, and is currently being converted into law: its provisions are therefore subject to amendments and additions. 

SUSPENSION OD DEPRECIATION 

The Milleproroghe Decree, in Article 3, paragraph 8, amends the regulation of the suspension of depreciation pursuant to Article 60, paragraph 7-bis et seq. of Decree-Law 104/2020 (conv. L. 126/2020), providing for its extension to the Financial Statements in progress as at 31 December 2023.  

The provision was originally introduced in October 2020, when Decree-Law 104/2020 was converted into law, as part of the measures aimed at supporting businesses and relaunching the economy as a result of the COVID-19 epidemic emergency, and allowed entities that do not adopt international accounting standards to suspend the depreciation of tangible and intangible fixed assets in the financial year in progress as of 15 August 2020 (the date on which Decree-Law 104/2020 came into force) and, therefore, for entities with a financial year coinciding with the calendar year, in relation to the 2020 Financial Statements.  

Subsequently, Article 5-bis of Decree-Law No. 4/2022, converted into Law No. 25/2022 (the so-called “Sostegni-ter”), in force as of 29 March 2022, extended the derogatory regime to the financial years in progress as of 31 December 2021 and 31 December 2022. With this amendment, the framework of application of the rule on the suspension of depreciation is further broadened, providing for the possibility of its application also for the financial year in progress on 31 December 2023. In other words, also for this year, it will be possible not to depreciate up to 100 per cent of the annual cost of tangible and intangible fixed assets, maintaining their book value. 

However, with respect to previous years, it should be noted that the possibility of not depreciating in the 2023 Financial Statements should only concern special situations, since the negative effects in previous years (first and foremost the crisis caused by the pandemic), in many cases would seem to be behind us: companies affected by more recent events, e.g. the effects of the war in Ukraine, could currently be affected. Furthermore, it is important to emphasise that, unlike in previous years, for the year 2023 there will no longer be a waiver of the going concern assumption, which could have mitigated the Directors responsability. Therefore, in this case, the verification of this assumption is still required in order to allow for the suspension of depreciation. 

On the other hand, as in previous years, the procedures for the application of the derogating rule remain unchanged, with the result that the obligation to allocate profits to a non-distributable reserve in an amount corresponding to the portion of amortisation not carried out and specific disclosure obligations in the Notes to the Financial Statements continue to apply. 

From a tax point of view, the non-recognition in the financial statements of the depreciation amount does not affect its deductibility, which is in any case allowed (it is an option), both for IRES and IRAP purposes, regardless of the recognition in the Profit and Loss Account. 

FINANCIAL STATEMENTS LOSSES SUSPENSION  

Article 3, paragraph 9 of the Law Decree n.198/2022 broadens the scope of the provision set forth in Article 6 of Decree-Law 23/2020 and confirms the possibility of sterilising losses arising in the financial statements in progress as of 31 December 2022, postponing the obligation to write-off until the approval of the 2027 financial statements and de facto suspending certain provisions of the Italian Civil Code, as already occurred for losses in the 2020 and 2021 financial statements, which can be written off by the approval of the 2025 and 2026 financial statements, respectively. 

More specifically, the rule allows, for losses arising in the financial year underway as of 31 December 2022, the non-application of Articles 2446, paragraphs 2 and 3, 2447, 2482-bis, paragraphs 4, 5 and 6, and 2482-ter: in essence, the rules concerning the reduction of capital for losses (Articles 2446 and 2482-bis) and the reduction of share capital below the legal minimum (Articles 2447 and 2482-ter) for both joint-stock companies and limited liability companies are suspended. 

In particular, in the cases provided for in Articles 2447 or 2482-ter of the Italian Civil Code, the shareholders’ meeting convened without delay by the directors, as an alternative to the immediate reduction of the share capital and the simultaneous increase of the same to an amount not less than the legal minimum, may resolve to postpone these decisions to the shareholders’ meeting for the approval of the financial statements for the fifth financial year following (i.e., the 2027 financial year).  

The rule further specifies that until the date of this meeting, the cause for dissolution of the company due to reduction or loss of share capital pursuant to Art. 2484 para. 1 no. 4 will not apply. 

In any case, the assessment of the company’s ability to operate as a going concern remains unavoidable. As also observed by the National Council of Notaries in Study No. 88-2021/I, the directors’ choices, with respect to the suspension of losses, must take into consideration the actual prospects of their recovery within the five-year period, which must be at least probable on the basis of the elements available at the time when the decision is made. 

As in the previous versions of the rule, the obligation to separately disclose the losses in question in the notes to the financial statements, specifying, in appropriate schedules, their origin as well as the movements that occurred during the year (Article 6, paragraph 4 of Legislative Decree No. 23/2020) remains in place. 

LDP remains at your disposal for any further clarification you may need. 

Milano, January 2023