Budget Law 2021: the main changes from January 1, 2021
On December 30th, 2020, the Law no. 178/2020 (so called “Budget Law 2021”), concerning “Preliminary Budget for the 2020 fiscal year and multi-year preliminary Budget for the three-years period 2020-2022” was published in the Italian Official Gazette.
It contains provisions that are effective as of January 1st, 2021 (with some specific exceptions).
We report below a summary of the main news regarding the above-mentioned Budget Law 2021.
NEWS IN FISCAL AND FACILITATIVE MATTERS
EXTENSION OF THE TAX REGIME FOR IMPATRIATE WORKERS
Within the framework of the “inbound special regime” provided by the Art. 5 of the Law Decree no. 34/2019 (the so-called “Growth Decree”) as converted by the Law no. 58/2019 (see AP Updates no. 162/2019 and 230/2019), which updated the tax incentives for the so-called “expatriate workers” (Art. 16 of the Legislative Decree no. 147/2015), as well as for the so-called “teachers and researchers residing abroad” (Art. 44 of the Law Decree no. 78/2010), who have moved their residence to Italy, undertaking to reside there for at least two years while carrying out a work activity. The Italian Parliament has approved an extension of the recipients of the latter tax regime.
In particular, the paragraph no. 50 of the Art. 1 of the Budget Law 2021 (which introduces par. 2-bis, 2-ter and 2-quater to the Art. 5 of the Legislative Decree no. 34/2019) allows the possibility to decrease by 50% for five more fiscal years the tax base relevant for the personal income tax (i.e. extension of the provision of the Art. 5, paragraph 1 letter c) of the Legislative Decree no. 34/2019) for individuals enrolled in the Registry of Italians residing abroad (“AIRE”), or EU citizens that:
- have transferred their residence to Italy before January 1st, 2020;
- are beneficiaries as of December 31st, 2019 of the ordinary favorable tax regime (“inbound regime”) for the so-called “impatriate workers” (Art. 16 of Legislative Decree no. 147/2015).
The option for the extension of the above-mentioned regime can be exercised upon the payment of an amount equal to 10% or 5% of the tax base already subject to the inbound regime. The applicable percentage depends on the number of minor children and the ownership of a real estate property in Italy.
REVAMPING OF THE POSSIBILITY TO STEP-UP THE TAX VALUES OF LANDS AND UNLISTED EQUITY INVESTMENTS
The Budget Law has extended for the fiscal year 2021 the step-up regime of unlisted equity investments and lands provided by the Articles no. 5 and no. 7 of the Law no. 448/2001.
Individuals, non-commercial entities, and non-resident entities without a permanent establishment in Italy will be allowed to revalue the tax value of unlisted equity investments and/or lands held as of January 1, 2021. The equity investments and/or the lands to be stepped-up must have not been included in the assets relevant for the business tax regime (the so called “regime d’impresa”).
To fulfill the tax value step-up process, it will be necessary by 30.6.2021:
- to obtain an appraisal of the stepped-up value of the equity investments and/or of the lands from a qualified professional (i.e. a CPA or a legal auditor) draws up and certifies the;
- to pay the substitutive tax in its entirety (or at least the first of the three annual installments). The substitutive tax has a rate equal to 11% applicable on the stepped-up value.
PROVISIONS REGARDING THE STEP-UP OF GOODWILL AND OTHER INTANGIBLE ASSETS
The Budget Law 2021 provides the possibility to step-up the tax values of goodwill and other intangible assets recorded in the financial statements for the fiscal year in progress as of December 31, 2019.
The substitutive tax applicable on the stepped-up value has a rate equal to 3%.
In the previous regulatory framework, the benefit was reserved only to intangible assets (such as trademarks, patents, licenses, etc.).
DIVIDENDS AND CAPITAL GAINS OF FOREIGN OICR’S
The tax regime for dividends and capital gains on equity investments realized by the so-called collective investment funds (the“OICR”) established in the European Union or the European Economic Area (“EEA”) has been aligned with that already provided for such funds established in Italy for tax purposes.
In this respect, such non-resident funds are no longer subject to taxation on dividends distributed by Italian companies and on capital gains related to the trade of Italian equity investments.
It is provided that the withholding tax and the substitutive tax (both at 26%) are not applicable to the profits paid and the capital gains of foreign OICR that are respectively:
- compliant with the EU Directive 2009/65/EC (“UCITS Directive”);
- or, whose management is subject to the supervision of EU member states or EEA member states (Iceland, Liechtenstein, and Norway) in compliance to the Directive 2011/61/EU (“AIFM Directive”).
The above-mentioned regime is applicable to payments made after January 1st, 2021.
TAX INCENTIVES FOR BUSINESS COMBINATIONS
According to the Budget Law 2021, in the event of a merger, demerger, or a contribution of a going concern, resolved between January 1st, 2021, and December 31th, 2021, it is possible for the beneficiary or the receiving entities to convert the received deferred tax assets (“DTA”) into tax credits, even if not recorded in the financial statements. Such deferred tax assets must be related to tax losses carried forward and/or “ACE” surpluses
TAX CREDIT FOR INVESTMENTS IN NEW ASSETS
The Budget Law 2021 provides new tax credits for investments in new business assets that are related to productive plants and structures located in Italy starting from November 16th, 2020 until December 31st, 2022 (or June 30th, 2023, if specific conditions are met).
The provided tax credits are divided into two classes: “ordinary” tax credit for new investments and the so-called “Plan Industry 4.0” tax credit (see below).
The “ordinary” tax credit is equal to the 10% of the new investments made from November 16th, 2020 until December 31st, 2021 (15% for the investments related to the so-called “lavoro agile” or “smart working”). For the new investments made during the 2022 the tax credit is equal to 6%. The ordinary tax credit has a cap of 2 Mio Euro. Such incentives are applicable to Italian resident companies or Italian based permanent establishment of foreign entities and to individuals such as professionals or sole proprietorship.
The tax credit for investments in tangible assets “4.0”, included in Annex A to Law 232/2016, is recognized:
- for investments made from 16.11.2020 to 31.12.2021, to the extent of 50% for investments up to 2.5 million Euro, 30% for investments between 2.5 and 10 million Euro, and 10% for investments between 10 and 20 million Euro.
- for investments made in 2022, to the extent of 40% for the portion of investments up to 2.5 million Euro, 20% for investments between 2.5 and 10 million Euro, and 10% for investments between 10 and 20 million Euro.
For investments related to intangible assets included in Annex B to Law 232/2016, the tax credit is recognized for the entire subsidized period:
- to the extent of 20% of the cost;
- within the maximum limit of eligible costs equal to 1 Mio Euro.
The new investments are eligible for the incentive starting from the fiscal year of their actual use. The “4.0 investments”, instead, are relevant starting from the fiscal year of their effective “interconnection”.
The passive invoices related to the new investments shall report the reference of the applicable regulation for the tax incentive. For “4.0” assets with a unit cost higher than 300 K Euro it is required a specific appraisal.
Such tax credits can be used to offset taxes and contributions by means of the F24 payment form and shall be used in three equal annual installments (i.e., there is a cap equal to a one third of the comprehensive amount). The entities with a global turnover lower than 5 million Euro without the above-mentioned cap.
TAX CREDIT FOR RESEARCH, DEVELOPMENT, AND INNOVATION 4.0
The tax credit for investments in research and development, green transition, technological innovation compliant with the “Plan Industry 4.0”, and other innovative activities is extended from 2020 to 2022, with some changes regarding the amount of the benefit.
For eligible research and development activities, the tax credit is equal (without prejudice to the specific incentives provided for the activities fulfill in the Southern Italy):
- to the extent of 20% of its former calculation basis;
- up to a maximum of 4 million Euro.
For technological innovation activities, the tax credit is recognized:
to the extent of 10% of its former calculation basis, or 15% in case of an ecological transition or digital innovation 4.0;
up to a maximum of 2 million Euro.
For design and aesthetic ideation activities, the tax credit is recognized:
- to the extent of 10% of the relevant calculation base;
up to a maximum limit of 2 million Euro.
The tax credit is usable only by means of the F24 payment form and in three equal annual installments starting from the fiscal year following that in which it has been recognized.
The use of the tax credit is subject to completion of the relevant certification obligations.
TAX CREDIT FOR INVESTMENTS IN SOUTHERN ITALY
It is extended to 2022 the tax credit for companies that make new investments in assets that are relevant for production facilities and plants located in the assisted areas of the regions of Campania, Puglia, Basilicata, Calabria, Sicily, Molise, Sardinia and Abruzzo.
TAX CREDIT FOR THE IPO OF SMEs
The tax credit on consulting costs related to the listing of SMEs is extended to 2021.
TAX CREDIT FOR ADVERTISING EXPENSES
The “extraordinary” tax credit regime for advertising expenses is revamped also for fiscal years 2021 and 2022.
The tax credit for advertising expenses is granted:
- to companies, self-employed workers, and non-commercial entities;
- in an amount equal to the 50% of the value of advertising expenses referred to daily newspapers and periodicals, including those in digital format. Radio and TV advertising expenses are not included;
The tax credit for advertising expenses has a limit of 50 million Euro for each year.
TAX CREDIT FOR THE PROMOTION OF MANAGERIAL SKILLS
A tax credit is provided for donations made in 2021 or 2022, in the form of scholarships, for training initiatives aimed at the development of management skills promoted by public and private universities, advanced training institutions, and public or private management schools.
The credit is recognized for donations made up to 100 K Euro and in an amount equal to:
- 100% for small and medium-sized enterprises;
- 90% for medium-sized enterprises;
- 80% for large enterprises.
CORPORATE AND PERSONAL INCOME TAX INCENTIVES FOR COMPANIES THAT UNDERTAKE NEW ECONOMIC INITIATIVES IN “SPECIAL ECONOMIC ZONES”
The Budget Law 2021 provides a decrease by 50% of the applicable tax rates for IRES or IRPEF purposes applicable to the companies that undertake new economic initiatives in the so-called “Special Economic Zones” (“ZES” defined by Law Decree 20.6.2017 n. 91). The incentive is applicable to the income tax base deriving from the activity carried out in the ZES starting from the fiscal year during which the new activity was undertaken and for the following six fiscal years.
It is also provided that the following requirement must be met:
- maintenance of the activity in the SEZ for at least ten years;
- the number of new jobs created by means of the new activity must be retained for at least ten years.
The tax incentive is subject to the limits and conditions provided by the “de minimis” EU state aid regulation.
DIGITAL CLEARING HOUSE PROVIDED BY THE ELECTRONIC INVOICING SYSTEM MANAGED BY THE ITALIAN TAX AGENCY
The Italian Tax Agency will set up a digital platform that will allow VAT taxpayers to offset credits and debits deriving from commercial transactions between them. The settlement of those will be based on the results reported in the electronic invoices transmitted via the “Interchange System”.
Thanks to this procedure it is possible to obtain the same effects of the extinction of the obligation provided for by the Italian Civil Code. The procedure cannot be carried out by entities that are undergoing bankruptcy or other debt restructuring procedures.
Government entities and public authorities are not included in the eligible parties for such procedure.
AMENDMENTS TO THE SO-CALLED “PLASTIC TAX”
The Budget Law for 2021 provides amendments to the regulations of the tax on the consumption of manufactured goods with single-use (the so-called “plastic tax”). Here below the main items:
- the inclusion of the intermediate purchaser (i.e. the person who intends to sell the aforesaid manufactured articles, obtained on his behalf in a production plant, to other domestic parties) to the entities subject to such tax;
- the inclusion of the so-called “preforme” (the Italian for an initial semi-finished) among the products subject to the tax;
- reduction of the applicable penalties;
- the postponement of the effectiveness of the provisions to July 1st, 2021.
MEASURES AGAINST COVID-19: VAT ZERO-RATED TRANSACTIONS
The VAT exemption regime with the right to deduct tax (so-called “zero-rated” transactions) was introduced for:
- the supply of COVID-19 diagnostic equipment and the provision of services closely related to said equipment, until December 31st, 2022;
- the supply of vaccines against COVID-19, authorized by the European Commission or by the EU Member States, and the provision of services closely related to said vaccines, from December 20th, 2022to December 31st, 2022.
JOINT OBLIGATION IN THE PAYMENT OF STAMP DUTY ON ELECTRONIC INVOICES
The supplier is jointly obliged together with the buyer to pay the stamp duty on electronic invoices transmitted through the Interchange System, even when the document is issued on his behalf by a third party.
The provision on joint obligation in the payment of stamp duty is in addition to the changes contained in the Ministerial Decree 4.12.2020, which became effective from 2021 (e.g., new payment deadlines, integration of the amount due, and collection procedures by the Italian Tax Agency).
NEW ANTI-VAT FRAUDS PROVISIONS
The Budget Law 2021 introduces new provisions to fight the VAT frauds carried out by abusive use of the VAT exemption threshold granted to usual exporters.
Risk analysis and substantive controls
The tax authorities will carry out enforced specific risk analyses and assessments to control the compliance with the requirements related to the usual exporter status for VAT purposes (art. 1, paragraph 1, letter a) of Legislative Decree 746/83).
Amendments to the penalties framework and automatic control by means of the Interchange System
In case of a negative assessment, the taxpayer will not be allowed to issue new declarations of intent through the electronic system managed by the Italian Tax Agency. In this respect, the Interchange System will inhibit the issuance of the electronic invoice bearing the title of non-taxable VAT according to art. 8 paragraph 1 letter c) of Presidential Decree 633/72.
The other operative procedures will be defined by an ad-hoc regulation by the Italian Tax Agency.
FUND FOR CREATIVE SMEs
A “Fund for small and medium-sized creative businesses” has been set up in the MISE budget, with a budget of 20 million Euro for each of the years 2021 and 2022.
The aforementioned Fund is responsible for:
- the promotion of new entrepreneurship and the development of enterprises in the creative sector, using non-repayable contributions, subsidized financing, and their combinations;
- the promotion of the collaboration of companies in the sector with those in other productive sectors, as well as with universities and research bodies;
- the support of the growth of companies in the sector also through the subscription of participatory financial instruments, for the exclusive benefit of innovative start-ups and innovative SMEs, in the sectors identified by national strategic guidelines;
- the consolidation and the development of the entrepreneurial system of the sector through activities of analysis, study, promotion, and valorization.
It is up to the MISE, in agreement with the Minister of Culture and Tourism, to identify the ATECO/NACE codes of the activities involved as well as the determination of the procedures and criteria for the granting of benefits, in compliance with EU regulation on state aid.
INVESTMENT FUND FOR THE DEVELOPMENT OF SMES IN THE AERONAUTICAL SECTOR AND THE GREEN ECONOMY
An investment fund has been set up in the MISE budget for interventions in the risk capital of SMEs in the national aeronautical sector, green chemistry, and the manufacture of components for electric mobility and the production of energy from renewable sources.
In particular, these are interventions such as mergers, aggregations, acquisitions, reorganizations, restructuring, strengthening of capital for investments aimed at technological transition and ecological and environmental sustainability of production processes.
INTERVENTIONS TO FAVOUR SUCCESSION AND BUSINESS TRANSFER
Paragraph 270 amends article 23 of Law Decree no. 83/2012, adding among the purposes of the Sustainable Growth Fund the “interventions aimed at safeguarding employment and giving continuity to the exercise of entrepreneurial activities”.
According to the new paragraph 3-quater of article 23, also introduced by paragraph 270, for the aforesaid purpose, financing may be granted in favor of small enterprises in the form of cooperative societies constituted by workers from companies whose owners intend to transfer the same, in transfer or lease, to the same workers.
With one or more decrees issued by the Ministry of Economic Development, in agreement with the MEF, the methods and criteria for the granting, disbursement and repayment of the above loans are established, in compliance with EU regulations governing state aid.
TAX CREDIT IN RESEARCH AND DEVELOPMENT AND TAX CREDIT IN TRAINING 4.0
The tax credit, introduced by the Budget Law 2020, for investments in research and development, technological innovation and other innovative activities is extended until 2022. At the same time, amendments are made to the regulations in question, aimed at clarifying their scope of application.
The Training 4.0 tax credit is also extended to 2022.
Besides, the Fund for Ordinary Financing of the University is increased by 5 million for the year 2021. This amount will be allocated by the Minister of Universities and Research to the University Consortium for Socioeconomic Research and the Environment (CURSA) for the implementation of projects for the digitization of businesses according to the guidelines of the Industry 4.0 Program.
A sum of 1 million Euro has also been set aside for each of the years 2021 and 2022 to be allocated to the National Agency for New Technologies, Energy and Sustainable Economic Development-ENEA, to ensure, subject to agreement, technical support to the Ministry of Economic Development for the activities envisaged by the regulations governing the tax credit for capital goods and the tax credit for research and development.
TAX CREDIT FOR ADAPTING WORK ENVIRONMENTS
This provision intervenes in art. 120 of the Relaunch Decree (Law Decree no. 34/2020), providing that the tax credit for the adaptation of working environments, envisaged by the decree itself, can be used from January 1 to June 30, 2021 (and no longer only until December 31, 2021).
By the same date of June 30, 2021, the beneficiaries of this facilitation measure may opt for the transfer of the tax credit, according to article 122 of Law Decree no. 34/2020.
LDP remains at your disposal for any further information or in-depth study of the above topics.