NEWSLETTER TAX N. 2 MAY 2021

by LDP | May 31, 2021 | new, newsletter

“Sostegni-bis” Decree – Decree-Law No 73 of 25th May 2021

 

Foreword

 

The decree referred to in the press as the “Sostegni-bis” decree (Decree-Law no. 73/2021) (the “Decree” or “Decreto Sostegni-bis”) was published in the Italian Official Gazette no. 123 of May 25th, 2021.

 

The Decree follows the economic support measures launched by the previous decree-law known as the “Sostegni Decree” (Decree-Law no. 41/2021, converted into law with amendments by Law no. 69/2021) and introduces new urgent measures to support the enterprises and workers, health and territorial services, connected with the Covid-19 emergency.

 

Overall, the value of the new provisions is approximately equal to €40 billion.

 

As far as we are concerned, this document highlights the measures relevant to taxation and, in general, the measures relevant to investments and financial support for businesses.

 

We refer you to our specific “Infoflash” for more details on measures aimed at start-ups and innovative SMEs.

 

Unless otherwise specified, the measures described are effective as of 26th May 2021.

 

 

Non-repayable grants – the new possibilities to access to the benefit provided by the “DL Sostegni-bis”

 

The Decree provides for:

  1. the re-proposition of the contribution provided by the first “Sostegni Decree”, addressed to entities that have suffered a drop in turnover of at least 30% between 2019 and 2020 (first component);
  2. a second component based on the average monthly drop in turnover in the period between 1st April 2020 and 31st March 2021.
  3. a third component, focused not on the drop in turnover, but determined on the basis of a comparison of net economic results. The contribution will take into account the relief and support already received in 2020 and 2021. This third component, however, is subject to authorisation by the European Commission (paragraph 27).

 

 

1 – First component – the second quota of the contribution referred to in the first “Decreto Sostegni” (Article 1, paragraph 1 et seq. of the Decree)

 

The first paragraph of article 1 of the Decree provides that the beneficiaries of the contribution provided by the previous “Sostegni Decree“ (Decree no. 41/2021) will be paid an additional amount equal to the same amount recognised by the previous decree.

 

The provision, therefore, “duplicates” the benefit already determined by following the calculations and limits provided by the previous provision.

 

Therefore, those who will be granted the non-repayable contribution under the first “Decreto Sostegni”, will automatically be entitled to the recognition by the Italian Tax Authority of the second quota of the contribution through direct accreditation.

 

If, when submitting the application under the first Support Decree, the option to receive a tax credit instead of a direct credit has been exercised, such option will be automatically considered valid also with reference to the second tranche of the grant.

 

In its literal wording, the Decree does not provide peremptory deadlines in favour of the taxpayer for the receipt of the credit by the Revenue Agency.

 

Please remember that the contribution in question cannot exceed €150,000 and cannot be less than €1,000 for individuals and €2,000 for other entities.

 

For entities who activated their VAT registration after January 1st, 2019, the contribution is also due in the absence of the requirement of the decrease of the turnover for FY 2020. For the calculation of the monthly average, the months following the month in which the VAT number was activated are relevant.

 

For further details on the first formulation of the contribution under analysis, please refer to our previous Infoflash Tax n. 2 March 2021.

 

 

2 – Second component – the new method of calculating the non-repayable grant (Article 1(5) et seq. of the Decree)

 

A – For entities benefiting from the non-repayable grant referred to in the first “Decreto Sostegni”

 

 

The entities that have benefited from the contribution of the previous “Decreto Sostegni”, as an alternative to the “automatic” contribution referred to in the preceding paragraph, may apply for the non-repayable contribution in accordance with the procedures set forth in the fifth paragraph and subsequent paragraphs of Article 1 of the Decree described below.

 

The eighth paragraph of Article 1 of the Decree provides that “provided that the average monthly amount of turnover for the period from April 1st, 2020, to March 31st, 2021, is at least 30% lower than the average monthly amount of turnover for the period from April 1st, 2019, to March, 31st, 2020“.

 

Access to this contribution is conditional on the presentation, exclusively in telematic way, of an application to the Italian Tax Authority, under penalty of forfeiture, within 60 days from the date of launch of the telematic procedure for the presentation of the same (yet to be defined).

 

The technical details and operating procedures for access to the benefit are delegated to the issuance of an ad hoc implementing measure of the Director of the Italian Tax Authority.

 

Despite the rule prescribes the necessary alternation between the benefit “replication” of the first “Decreto Sostegni” and the “new” non-refundable contribution referred to in paragraph 5, the Decree proposes a system in fact complementary, since:

 

taxpayers who have benefited from the first contribution may still obtain the positive differential relating to any greater value emerging from the calculation carried out according to the new method provided for by the fifth paragraph of the Decree. In this case, the contribution already granted will have to be deducted from the one to be granted pursuant to paragraph 5;

 

– Similarly, if the application to be prepared pursuant to paragraph 5 results in a lower contribution than the one due pursuant to paragraph 1, the Italian Tax Authority will not proceed with the application.

 

Turning to the method of calculating the subsidy pursuant to paragraph 5, with respect to entities that have benefited from the previous non-refundable subsidy under Decree Support-1, the benefit is determined to be equal to the amount obtained by applying a percentage to the difference between the average monthly amount of turnover for the period April 1st, 2020, to March 31st, 2021 and the average monthly amount of turnover for the period from April 1st, 2019, to March, 31st, 2020 according to the following brackets:

 

  1. a) 60% for parties with revenues not exceeding €100,000.
  2. b) 50% for parties with revenues exceeding €100,000 and up to €400,000.
  3. c) 40% for parties with revenues exceeding €400,000 and up to €1,000,000.
  4. d) 30% for entities with revenues exceeding €1,000,000 and up to €5,000,000.
  5. e) 20% for parties with revenues exceeding €5,000,000 and up to €10,000,000.

 

Numerical example – Benefit under paragraph 5 for entities who benefited from the non-repayable grant provided by the first “Decreto Sostegni”

 

Average monthly amount 2019: €180,000

Average monthly amount 2020: €120,000

Difference: €60,000

Revenues year 2019: €4,500,000

Calculation of contribution (“Decreto Sostegni”): 30% of €60,000 = €18,000

Average monthly amount 1.4.2019-31.3.2020: €200,000

Average monthly amount 1.4.2020-31.3.2021: €130,000

Difference: €70,000

Calculation of the contribution (paragraph 5, decree Sostegni bis): 30% of €70,000 = €21,000

The taxpayer will receive, in addition to the amount calculated using the “old” method referred to in the first paragraph, an additional €3,000 as a result of the “Sostegni-bis decree“ (art. 1. paragraph 5 et seq.).

 

 

B – For entities not benefiting from the non-repayable grant referred to in the first “Decreto Sostegni”

 

 

The same non-refundable contribution referred to in paragraph 5 described in the preceding paragraph, has a different calculation method for entities that did not benefit from the non-refundable contribution referred to in the first “Decreto Sostegni”.

 

In particular, the contribution in question is determined as equal to the amount obtained by applying a percentage to the difference between the average monthly amount of turnover and fees for the period from April 1st, 2020, to March 31st, 2021 and the average monthly amount of turnover and fees for the period from April 1st, 2019, to March 31st, 2020 according to the following:

 

  1. a) 90% for entities with revenues and remuneration not exceeding €100,000.
  2. b) 70% for entities with revenues or fees exceeding €100,000 and up to €400,000.
  3. c) 50% for parties with revenues or fees exceeding €400,000 and up to €1,000,000.
  4. d) 40% for entities with revenues or compensation more than €1,000,000 and up to €5,000,000.
  5. e) 30% for parties with revenues or fees exceeding €5,000,000 and up to €10,000,000.

 

Numerical example – Benefit under paragraph 5 for entities who did NOT benefit from the non-repayable grant provided by the first “Decreto Sostegni”

 

Average monthly amount 1.4.2019-31.3.2020: €200,000

Average monthly amount 1.4.2020-31.3.2021: €130,000

Difference: €70,000

Revenues year 2019: €4,500,000

Calculation of the contribution

New beneficiaries: 40% of €70,000 = €28,000

 

Irrespective of whether one has benefited from the non-repayable grant provided for in the first “Decreto Sostegni”, the amount of the grant provided for in paragraph 5 cannot in any case exceed €150,000 (Article 1, paragraph 11 of the Decree).

 

As was the case with the previous formulation of the first “Decreto Sostegni”, also the “Decreto Sostegni-bis” explicitly provides for the non-taxability of the recognised benefit for income tax (Personal Income Tax/Corporate Income Tax) and Regional tax purposes.

 

The Decree also provides the possibility for the taxpayer to opt, as an alternative to the request for direct crediting to the bank account, the possibility to use the benefit in the form of a tax credit that can be used to offset other tax debts in accordance with the usual procedures set forth in Article 17 of Legislative Decree No. 241/1997.

 

Pending the issuance of the implementing measure by the Italian Tax Authority, we report that, for those obliged to transmit the periodic communication of VAT settlements (the so-called “quarterly LIPE”), the sending of the LIPE communication relating to the first quarter of 2021 is a prerequisite for sending the application for the subsidy in question (Article 1, paragraph 13, last sentence of the Decree).

 

 

3 – Third component – non-repayable contribution based on the calculation of the decrease in the net economic result (Article 1(14) et seq. of the Decree)

 

 

As mentioned above, the Decree introduces an innovative contribution calculated on an income basis conditional on the worsening of the economic result of the financial year “relating to the fiscal year in progress on 31 December 2020, compared to that of the previous year”. In this case, reference is not made exclusively to a decrease in turnover, but to a decrease in the overall economic result.

 

In line with the other types of non-repayable contribution, this benefit is also addressed to professionals, self-employed workers and companies that are in business at the date of May 26th, 2021 and that have achieved revenues determined according to the relevant rules of the Italian Tax Code equal to or less than €10 million (the reference to be considered is the second fiscal year preceding the one in progress at May 26th, 2021, i.e., companies whose financial year coincides with the calendar year, the 2019 fiscal year).

 

However, we point out that the temporary EU framework on state aid currently provide for the loss of at least 30% of the turnover as a guideline, so the concrete application of the rules described below is still subject to the authorisation of the EU (which has not yet been received), as well as to the issuance of a detailed ad hoc implementing decree by the Italian Ministry of Economy and Finance (the “implementing decree”).

 

The Decree requires, as a prerequisite for access to the benefit, the submission of the income tax return for the fiscal year in progress as of December, 31st 2020 by September, 10th 2021 (an earlier deadline than the ordinary deadline of November, 30th 2021 for companies whose financial year coincides with the calendar year) and provides that the payment of the benefit shall be made net of the refunds and other contributions provided by other emergency relief measures provided by the Italian Government (including the benefits under the Decree described above).

 

Therefore, given the current lack of directly applicable legal provisions with reference to this calculation method for the benefit, we postpone further analysis to the future once the implementing decree will be issued and the compatibility of the benefit with the EU temporary framework on state aid will be clarified by the EU.

 

Finally, the last paragraph of Article 1 of the Decree provides that, in the event that the funds allocated for the disbursement of non-repayable contributions are in excess of actual requests, the surplus will be used for the inclusion in the list of potential beneficiaries also of companies and self-employed workers who have achieved revenues and remuneration higher than the current maximum threshold of €10 million (we recall once again that the fiscal year to be considered for the calculation of the revenue threshold is the second fiscal year preceding the one in progress at the date of entry into force of the Decree, i.e., for companies whose financial year coincides with the calendar year subjects, the 2019 fiscal year).

 

 

Recovery of VAT paid on uncollected receivables due from clients subject to insolvency proceedings

 

The Decree has brought domestic VAT legislation (article 26 of Presidential Decree no. 633/1972) in line with EU regulations regarding the recovery of VAT in the event of failure to collect, in whole or in part, receivables due from customers subject to insolvency proceedings.

 

The supplier can issue the invoice to carry out the variation of VAT taxable income as soon as the insolvency procedure is opened, without having to wait for its conclusion.

 

The new provisions apply in cases where the assignee/acquirer is subject to bankruptcy proceedings after the date of the Decree (i.e., May 26th, 2021).

 

The obligation to re-pay the VAT remains unchanged if, following the issuance of the variation note, the credit is nevertheless collected.

 

From an operational point of view, the Decree, by introducing the new paragraphs 3-bis and 10-bis to the article 26 of the VAT Decree, explicitly defines the criteria for considering the debtor subject to a bankruptcy procedure, or a procedure like this.

 

Therefore, for the purposes of the rule in question, it is necessary to consider the following dates to be able to identify the moment from which the right to issue the variation note is valid:

– date of the decree approving the debt restructuring agreement pursuant to article 182-bis of Royal Decree 267/1942

– date of publication in the Companies’ Register of a certified plan pursuant to article 67, third paragraph, letter d) of Royal Decree 267/1942;

– date of the judgment declaring bankruptcy;

– date of the decree of admission to the arrangement procedure;

– date of the decree that provides for the extraordinary administration procedure for large companies in crisis.

 

It should be noted that the time references must be considered in a timely manner, as they trigger the start of the further terms provided for by administrative practice in terms of forfeiture of the right to rectification. In fact, the Italian Tax Authority, with several documents, links the right to issue the variation note to the right to deduct VAT pursuant to article 19 of Presidential Decree no. 633/72, requiring the creditor to be able to issue the variation note within and no later than the deadline for exercising the relative right to deduct VAT (typically within and no later than the deadline for submitting the declaration relating to the same year, i.e. April 30 of the following year).

 

To provide a practical example of a case requiring a particular timeliness on the part of the creditor: if the insolvent transferee/buyer will be subject to bankruptcy proceedings in December 2021, the supplier can issue the variation note no later than the deadline for submitting the VAT return for the same year, i.e., by 30th April 2022.

 

Support for economic activities closed because of emergency measures

 

 

Article 2 of the Decree provides for the allocation of €100 million to support economic activities that have been ordered to close between 1st January 2021 and the date of conversion of the Decree, for a period of at least four months.

 

Also, with respect to this provision, the Government has delegated the determination of the application profiles and the provisions for the determination of the beneficiaries to a specific implementing decree of the Ministry of Economic Development.

 

However, the general direction given by the Decree is to use criteria and methods of calculation like those provided by previous relief measures (including the non-repayable contributions provided for in Article 1 of the Decree).

 

 

Tax credit for capital buildings and business rentals

 

 

Article 4 of the Decree has extended the previous provisions on the granting of tax credits to self-employed workers, professionals and companies that have experienced a 30% drop in turnover by comparing the periods April 2020-March 2021 and April 2019 – March 2020.

 

For entities who started their activity after January 1st, 2019, the benefit is available regardless of the requirements relating to the drop in turnover referred to in the previous paragraph.

 

The reference rents for the calculation of the benefit refer to the months January 2021 – May 2021.

 

 

New tax credit for sanitation and purchase of PPE

 

 

The benefit defined by the Decree takes up the profiles of the corresponding tax credit provided by Article 125 of the Decree Law No. 24/2020, introducing, however, some changes to the types of eligible expenses, the size of the tax credit and how to use it.

 

The tax credit is available to businesses, artisans and professions, non-commercial entities, including third sector entities and civilly recognised religious entities.

 

Only expenses incurred in June, July and August 2021 are eligible.

 

Included in the tax credit are the expenses incurred for the sanitation of the environments in which work and institutional activities are carried out and the tools used in the context of these activities.

 

For example:

– the purchase of personal protective equipment, such as masks, gloves, face shields and goggles, protective suits and footwear, which comply with the essential safety requirements laid down by EU legislation.

– the purchase of safety equipment other than the above, such as thermometers, thermal scanners, decontamination and sanitization mats and tubs, which comply with the essential safety requirements laid down in European legislation, including any installation costs.

– the purchase of cleaning and disinfecting products.

– the purchase of devices to ensure the interpersonal safety distance, such as barriers and protective panels, including any installation costs.

 

The current wording of the benefit also includes among the eligible expenses the costs incurred for the administration of swabs to entities working in the context of work and institutional activities.

 

The tax credit is available at a rate of 30% of the expenses incurred, up to a maximum amount of €60,000 for each beneficiary.

 

The compensation limits set out in Article 1, paragraph 53, of Law no. 244/2007 and in Article 34 of Law no. 388/2000 do not apply.

 

The tax credit:

– does not contribute to the formation of income or of the taxable base for Regional Tax;

– does not count for the purposes of determining the portion of interest expense deductible from business income pursuant to Article 61 of the Italian Tax Code;

– it is not relevant for the purposes of determining the portion of expenses and other negative components other than interest expense deductible from business income pursuant to Article 109, paragraph 5, of the Italian Tax Code.

 

The tax credit can be used in two alternative ways: either in the tax return for the fiscal year in which the expense was incurred or by offsetting, pursuant to Article 17 of Legislative Decree No. 241/1997. It is not possible to transfer the tax credit.

 

A provision of the Director of the Revenue Agency will establish the criteria and modalities for the application and use of the tax credit.

 

 

Measures to promote the capitalization of companies – changes to the “ACE” benefit

 

The Decree provides for a specific extraordinary transitional regime of the ACE (Aid to Economic Growth) rules for capital increases up to €5 million, introducing, in addition, the possibility of transforming the related tax benefit into a tax credit.

The transitional regime concerns the fiscal year following the one in progress on 31st December 2020 (i.e., for companies whose financial year coincides with the calendar year, the 2021 fiscal year). By express provision (Article 19.2 of the Decree), capital increases relevant for ACE purposes are computed starting from the first day of the relevant fiscal year.

 

Moreover, the Decree, with reference to the special transitional regime outlined above, sets the applicable rate for the calculation of the notional yield for ACE purposes at 15% with respect to new capital increases.

 

 

Measures to support investment by companies

 

 

To better understand the scope of the Decree, it should be noted that, with specific reference to investments in new capital goods (tangible and intangible) made from November 16th, 2020, to December 31st, 2021, the Budget Law for FY 2021 has provided for the entitlement to a tax credit that can be offset in a single annual instalment by entities with total revenues lower than €5 million.

 

The Decree extended this possibility also to entities with revenues exceeding the threshold of €5 million, but only for investments in new tangible capital goods other than those referred to in Annex A of Law No. 232/2016 made between November 16th, 2020, and December 31st, 2021.

 

Therefore, taxpayers with revenues or remuneration more than €5 million who invest in new intangible capital goods may benefit from the tax credit in the ordinary way (i.e., in three equal instalments).

 

 

New extension of the suspension of collection activities by the Italian Tax Authority

 

 

Article 9 of the Decree provides for the extension of the suspension of the collection activity by the Italian Tax Authority to June 30th, 2021.

 

As a result, the sending of new payment notices and the possibility for the Italian Tax Authority to initiate precautionary or executive collection procedures, such as administrative detentions, mortgages and seizures, are de facto suspended.

 

The Decree, however, provides for the validity of the acts and measures adopted by the collection agent in the period from May 1st, 2021, to the date of the validity of the Decree (May 26th, 2021). This is without prejudice to the effects produced and the legal relationships established based on such acts and measures.

 

About any payments made during the same period, any interest on arrears paid, as well as penalties and additional sums paid, shall remain acquired.

 

 

Increase to €2 million of the maximum threshold for the offsetting of tax credits

 

 

Article 22 of the Decree modifies the annual limit for tax credit offsets.

 

Specifically, the provision provides that for the year 2021 the maximum limit for the so-called “external” or “horizontal” offsets (i.e., offsetting a kind of tax credit with a tax debit of other kind, for example: offsetting a VAT credit with a CIT debt) and for cases of refunds related to this limit is increased up to a total of €2 million.

 

The provision amended by the measure in question is Article 34, first paragraph, of Law no. 388/2000.

 

 

 

LDP remains at your disposal for any further clarification.

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