Last January 17, 2023, the Internal Revenue Service by public notice made available for public consultation:
- A draft circular providing clarifications regarding the “new” Patent box regime introduced by Article 6 of Decree-Law No. 146 of October 21, 2021;
- An outline of a Provvedimento bearing some amendments to the Provvedimento of the Director of the Agency of February 15, 2022, which the draft circular already incorporates.
>> LEGGI GLI ARTICOLI DI LDP PER RIMANERE AGGIORNATO SULLE ULTIME NOVITÀ
Envolved parties, therefore, had the opportunity to send their comments and proposals for amendments or additions, as specified by special website of the Revenue Agency, by February 3.
Once the public consultation phase is over, the Revenue Agency will publish the comments received.
The Provvedimento’s draft contains some changes from the previous one (dated Feb. 15, 2022). This article focusing on the last part of the Circular, which deals with the document burden regime and the conditions for the application of the penalty exemption, places focus on the impact of the draft with reference to small and medium-sized enterprises (SMEs).
That’s a draft, clarifications are hoped for in the final version.
The Case Study
As stated in the draft Circular on page 43: “Microcompanies and small and medium-sized companies may prepare Sections A and B referred to in Section 7 in a simplified form, providing information equivalent to that specified therein, consistent with the size of their organizational and operational structure”.
Following this, it is clarified that “they may prepare a “lighter” information set, in view of the small size of the corporate structure, from the accounting, organizational and functional point of view”.
Having made clear, in point 1) of the Circular, the definition of “Micro, small and medium-sized companies” or “SMEs” as “entities qualifying as such pursuant to Recommendation of the Commission of the European Communities 2003/361/EC,” further clarification is needed regarding the simplified approach to be adopted by these entities in preparing the information set.
The concept of equivalence expressed in the Circular would be sufficient for those involved to find that the methods followed in determining the relief, and specifically, the downward variation made by the taxpayer, are correct.
There is no mention, however, of the type of detail that can actually be considered as equivalent and in accordance with the provisions of the draft Circular under review.
For greater clarity about this simplified approach, it would be necessary to provide an outline of points to be used as a guide in order to have adequate, clear and complete information also with reference to these subjects.
Think trivially, for illustrative purposes, of what is stated in the November 23, 2020 Provision of the Internal Revenue Service on transfer pricing in point 4) Suitable documentation for small and medium-sized enterprises in which details are given about the necessary points to be reported in documentation.
In fact, the Provision specifies in the point under consideration that “Small and medium-sized enterprises have the option not to update the data referred to in points 2.1.1 to 2.1.5 of paragraph 2 – Intragroup transactions – of the National Documentation with reference to the two tax periods following the one to which said documentation refers, if the comparability analysis is based on information obtained from publicly available sources and provided that the elements referred to in point 2.1.2 do not undergo significant changes in said tax periods.”
Conclusions
In these terms, specifying the “necessary” items to be presented in documentation would reduce the margin of error on the part of the taxpayer and result in greater reliability and compliance of any information provided. Therefore, hoping that this issue will be further investigated and clarified, we look forward to further clarification on this issue.