Giovedì 30 Marzo 2017 - Aggiornato alle 19:50
Brand-new fiscal opportunities make never so easy to invest in Italy-1
An overview on the most important measures to attract capitals
Italy has made important strides on the road of the attractiveness of foreign investments, recently approving fiscal measures to stimulate economic growth and competitiveness. Companies and individuals, wishing to invest in Italy, are now eligible for several tax allowances, such as the allowance for corporate equity, the tax credit on Research & Development activities and the patent box regime, the super and extra amortization, the Vat grouping rules and the new residents regime for individuals. Furthermore, running from fiscal year 2017, they will benefit of the reduction of Italian corporate tax rate from 27.5% to 24%. Moreover, foreign investors can count on a direct dialogue with the Italian Revenue Agency thanks to several initiatives to ensure certainty and compliance, such as the advance tax ruling on new investments, the general taxpayer’s advance ruling, the advance tax agreements for enterprises and to the cooperative compliance program. In this way investors will know in advance the correct taxation model. Let’s go into the new regulation and its advantages.
Allowance for corporate equity - It is a tax incentive, commonly named ACE, aimed at promoting the recapitalization of undertakings and to mitigate the different tax treatment applied to companies funded with debt and others funded with equity. Investors can count on a notional deduction from corporate income taxable base; the deduction corresponds to the net increase in the “new equity” employed in the entity multiplied by a rate yearly determined annually, which is 4,75% for FY 2016, 2.3% for FY 2017 and 2.7% for FY 2018 and thereafter.
Tax credit on research & development activities – For enterprises investing at least 30,000 euro per year in Research and Development activities, Italian law provides for an R&D tax credit up to 50% of the increase of annual R&D expenses, which is neither included in the income tax base nor in the regional tax on productive activities base. The maximum annual credit for each beneficiary is 20 million euros and taxpayers have to sustain R&D qualifying costs between 2015 and 2020.
Patent Box regime - It is a tax bonus introduced in order to improve the development of intellectual property, granting tax benefits to resident and non-resident taxpayers carrying out investments in research and development of intangible assets, such as software protected by copyright, patents, trademarks business and technical-industrial know how, designs and models. The “Patent Box businesses” shall be entitled to exclude from their income up to 50% of income derived from direct use or licensing of qualified intangible assets.
Super-Amortization and Extra-Amortization – These measures aim at facilitating business investments by allowing an extra-amortization on the purchase of certain tangible assets, in order to stimulate the renewal of capital goods. Under super-amortization rule, the increased amortization charge is fixed at 40% and is applicable in relation to purchases realized from 15 October 2015 to 31 December 2017. Another additional 40% super–amortization is also introduced for certain intangible assets such as software, IT systems and platforms related to the Government plan for industrial growth named “Industry 4.0 Plan”. Instead, under extra-amortization rule, the amortization charges are increased up to 150% of their value for some listed “smart equipment” which is allowed to benefit from specific digital and technological transformation processes under the model promoted by the Italian Government plan Industry 4.0.
Vat grouping rules - Running from FY 2018, this measure will simplify the application of Vat rules for company groups and will reduce fiscal burdens, considering the group as a single Vat taxable person. The option is reserved to company closely bound by specific financial, economic and organizational links. As a consequence of the application of this regime, transactions carried out between the companies of the group will not be subject to Vat and transactions carried out between a group member and a third party will be treated as being made by the group as an entity.
New Residents regime - Enanching investments and attracting to Italy high-net-worth individuals is the aim of this new fiscal rule. Foreign nationals wishing to transfer their tax residence to Italy will be enabled to apply a substitute tax to their foreign income and gains, in lieu of the Italian income tax, amounting to 100,000 euro for each fiscal year. This favorable tax regime is available for who have been non-tax resident in Italy for at least 9 years out of the 10 years preceding their transfer to Italy. The incentive regime may be also extended to the family members of these individuals, applying a substitute tax of 25,000 euro per member.
1. To be continued
The fight against Italy’s Vat evasion is increasingly relying on the split payment mechanism
The 2017-2018 Italy’s fiscal horizon will be marked by the extension and strengthening of the split payment tool
Following the enactment of the '2015 Stability Law', Italy has introduced a specific split-payment mechanism for VAT due on goods and services supplied to the majority of government and public sector bodies.
The “split-payment” fiscal tool, how does it works - The new so-called “split payment” mechanism is in force out from 1 January 2015. It applies only to domestic transactions carried out by suppliers for sales to eligible Italian public administrations.
According to the new provision, while the supplier is still required to issue invoices showing the relevant VAT due, the public administration purchaser is required to pay the VAT directly to the Italian Treasury and not to the supplier. It means that the public administration has effectively to “split” the payment by addressing the Vat sum due to the Treasury and the remaining compensation to the services or goods supplier. In this way, the input Vat is immediately and almost automatically secured from likely tax evasion manoeuvres.
Split-payment and Reverse Charge in tandem to curtail the evasion of Vat - The new mechanism, together with other recent measures expanding the scope of application of the domestic reverse charge, has been introduced to limit VAT evasion and prevent fraudulent tax practices. Put differently, the application of this new payment system has already contributed to reduce the risk of suppliers not paying VAT charged to public administrations because the tax due is transferred directly to the Treasury.
Working in this way, the new system has enabled the Revenue Agency to curb considerably the VAT evasion phenomenon and, at the same time, provide extra-funds to the Italian Treasury.
The Revenue Agency’s instructions on the new payment system – As clarified by the Revenue Agency in two Circulars, documents used to clarify how to apply in practice specific new fiscal rules, the new payment system applies to Italian public administrations as defined in the VAT law, but with additional interpretation (e.g., public universities, public hospitals and social security bodies). In addition, the Agency has clarified that the new payment system applies irrespective of whether the eligible public administration is acting in its commercial or institutional capacity in making the purchase. On the other hand, the split-payment mechanism does not apply to social security bodies that are not of a public nature, nor does it apply to noneconomic public entities.
Finally, the explanatory Circulars has also illustrated that the subjective requirement of the provision is fulfilled by the public nature of the body itself, and not by the type of service offered to it.
Supplies subject to the new payment system and eventual exceptions- The split-payment mechanism generally applies to all taxable supplies of goods and services supplied to eligible public administrations. However, specific exceptions apply, such as: transactions where the public administration is not liable for the payment of VAT (e.g., VAT-exempt supplies, supplies outside of the scope of VAT and supplies certified by a ticket or a simple receipt); supplies subject to the reverse-charge mechanism; supplies of professional services (e.g., services rendered by lawyers and engineers).