NEWSLETTER TAX NOVEMBER 2020

by LDP | Nov 10, 2020 | newsletter

Legislative Decree no. 104 of 14.8.2020 (so-called “August Decree”)
Main changes made during the conversion into Law no. 126 of 13.10.2020 

 

 

Premise

 

With Legislative Decree no. 104 of 14.8.2020 (so-called “August Decree”), which came into force on 15.8.2020, further urgent measures were issued for companies, workers and families due to the epidemiological emergency caused by Coronavirus (COVID-19).

Decree-Law no. 104 of 14.8.2020 was converted into Law no. 126 of 13.10.2020, which came into force on 14.10.2020, providing for numerous changes concerning the original text.

 

Suspension of depreciation in the 2020 financial statements

 

During the conversion of Legislative Decree No. 104/2020, new paragraphs were added to art. 60 in which it is foreseen, for those persons who “do not adopt international accounting standards”, the possibility of not charging to the Profit and Loss Account of the 2020 financial statements the annual amortization charge (up to 100% of the same) relating to tangible and intangible fixed assets, “maintaining their book value, as resulting from the last regularly approved annual financial statements”, effectively extending the original amortization plan of the assets in question by one year

This measure, in consideration of the evolution of the economic situation following the current health emergency, could be extended to subsequent financial years by decree of the Minister of Economy and Finance.

The right of derogation, by the express regulatory provision, can be activated by those who apply the rules of the Civil Code and the national accounting standards issued by the OIC for the preparation of the financial statements, while the so-called subjects who prepare the financial statements according to international accounting standards are excluded.

The companies that apply the national accounting principles that will decide to activate the suspension (partial or total) of depreciation must allocate the corresponding amount to an unavailable profit reserve. If the profit for the year should be less than the deferred depreciation rate, it will be necessary to supplement this reserve through the use of retained earnings reserves or other available equity reserves. Any further shortfall will have to be filled through a specific allocation of profits for subsequent years.

In addition, the activation of the waiver and the related reasons shall be disclosed in the Notes to the 2020 financial statements, together with the quantification of the amortization and depreciation not accounted for (and the consequent impact on the balance sheet and financial position and the economic result for the year), as well as the recognition and the related amount of the corresponding unavailable reserve.

Those who make use of this option, as expressly provided for by law, may, in any case, deduct the portion of amortization not charged to the profit and loss account; this, the rule specifies, under the same conditions and with the same limits provided for in Articles 102, 102-bis and 103 of the Consolidated Income Tax Law.

 

 

Revaluation of company assets

 

As a result, there is a misalignment between the statutory and fiscal values, so that, in the tax return for the 2020 tax year, a downward adjustment must be made which, having a temporary nature, would result in the allocation of deferred tax liabilities in the 2020 financial statements.

The latter will then be used in the last year of statutory amortization since for the same tax period there will be no fiscally deductible amortization.

 

 

Sanitation tax credit – increase in resources

 

During the conversion of Legislative Decree 104/2020, the possibility of carrying out the “new” revaluation of company assets (with a 3% substitute tax, or only statutory tax) was “brought forward” for persons whose financial year does not coincide with the calendar year.

For such entities, the “new” revaluation may be carried out in the financial statements of the current financial year as at 31.12.2019 (such as, for example, the financial statements for the financial year from 1.7.2019 to 30.6.2020), provided that such financial statements are approved after 14.10.2020 (date of entry into force of the law converting Legislative Decree 104/2020).

For those whose financial year coincides with the calendar year, it is understood that the financial statements in which the revaluation is carried out are those as at 31.12.2020.

The new regime may have:

– statutory and accounting relevance only;

– or fiscal relevance through the payment of a 3% substitute tax on the higher values recorded.

In other words, by adopting the revaluation procedure in question, the recognition of higher values in the financial statements is not necessarily subject to a substitute tax. The fiscal relevance of the revaluation can be decided autonomously when it is intended to pay the tax to enforce the higher values also from a fiscal point of view.

As for the previous measures of this type, the revaluation is the responsibility of resident corporations and commercial entities that do not adopt IAS/IFRS for the preparation of the financial statements.

As a result of Art. 31, para. 4-ter of the converted Legislative Decree No. 104/2020, the resources allocated to the tax credit for the sanitation and purchase of protection devices, referred to in Art. 125 of the converted Legislative Decree No. 34/2020, increased by €403 million for the year 2020. Therefore, the percentage of the tax credit actually usable concerning available resources increases.

 

Tax credit for sponsorships of leagues, clubs and sports associations

 

As a result of Art. 31, para. 4-ter of the converted Legislative Decree No. 104/2020, the resources allocated to the tax credit for the sanitation and purchase of protection devices, as per Art. 125 of the converted Legislative Decree No. 34/2020, increased by €403 million for the year 2020. Therefore, the percentage of the tax credit actually usable concerning available resources increases

As a result of the changes made during the conversion, it is possible to benefit from the tax credit provided for in Article 81 of Legislative Decree 104/2020, equal to 50% of the expenses for investments in advertising campaigns and sponsorships in favor of leagues, clubs and sports associations, also concerning the Paralympic disciplines.

In addition, the minimum limit on revenues for the 2019 tax period of the recipients of advertising investments is reduced to 150,000.00 euros (instead of the previous limit of 200,000.00 euros).

It is specified that investments in advertising campaigns, including sponsorships, are excluded from the benefit concerning subjects who adhere to the regime provided for by Law no. 398/91.

 

Incentives for the purchase of low-carbon vehicles

 

Without prejudice to the incentives provided for by Article 1, paragraph 1031 of Law 145/2018, Article 74 of Law Decree 104/2020, converted into Law Decree 34/2020, reshaped the contribution, introduced by Article 44 of Law Decree 34/2020, due to persons who purchase a brand new M1 category vehicle by 31.12.2020.

In case of purchase and simultaneous scrapping, the contribution is equal to:

000.00 euros, with a number of grams (g) of carbon dioxide (CO2) emitted per kilometer (km) from 0 to 60;
750.00 euros, with CO2 emissions from 61 to 90 g/km;
500.00 euros, with CO2 emissions from 91 to 110 g/km.

In the absence of scrapping, the contribution is equal to:

000.00 euro, with CO2 emissions from 0 to 90 g/km;
750.00 euros, with CO2 emissions from 91 to 110 g/km.

 

 

LDP remains at your disposal for any further information or in-depth study of the above topics.

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