Prepared by Vitalba Passarelli, Giovanni Marra and Vanessa Zichichi
Article 26 of Legislative Decree 34/2019 introduced incentives to support R&D projects for the conversion of production processes within the circular economy. The following Decree of the Ministry of Economic Development (“MISE”) of 11 June 2020 (hereinafter the “Decree”), published in the Official Gazette on 15 July, established criteria, conditions and procedures for granting the incentives.
The budget available for this measure is € 140 million, of which € 100 million for the concession of subsidized loans and € 40 million in the form of direct contributions to the expenditure. The resources indicated above can be subsequently increased by MISE. Furthermore, it is provided that an annual share of 60% of the available resources is reserved for programs proposed by SMEs and business networks (among which 25% is destined for micro and small enterprises).
Beneficiaries of the incentives
Based on the Decree, beneficiaries of the incentives are:
- companies that mainly carry out the activities of (i) production of goods and services and (ii) transport activities by land, water and air, including artisan companies producing goods;
- agro-industrial enterprises that mainly carry out industrial activities;
- companies that mainly carry out ancillary activities, in favor of the companies referred to in letters a) and b) above;
- the research centers.
The beneficiaries, at the date of submission of the application, must meet the following requirements:
- be regularly constituted and registered in the chamber of commerce (enterprises register);
- not be subjected to insolvency proceedings;
- be in the ordinary accounting system and have approved and filed at least 2 financial statements or, for individual enterprises and partnerships, have filed at least 2 tax returns;
- not having received and subsequently not reimbursed or deposited in a blocked account, aids identified as illegal or incompatible by the European Commission;
- be in good standing with the repayment of sums due in relation to provisions for the revocation of subsidies granted by MISE;
- not fall within the definition of an enterprise in difficulty, as identified in EU regulation no. 651/2014.
These subjects can present projects, also jointly with other enterprise or with research organizations, through contractual forms of collaboration. The collaboration agreements must report the following aspects:
- division of competences, costs and expenses to be borne by each participant;
- definition of the aspects relating to ownership, use and dissemination of the results of the R&D projects;
- identification of the lead subject, who acts as representative of the participants, through the attribution of a collective mandate with representation for all relationships with MISE.
Research organizations can benefit the incentives only as co-proposers and, at the date of submission of the application, must meet, where compatible with their legal form, all the requirements indicated above, except for the ordinary accounting and the filing of financial statements.
In any case, the following are excluded from the incentives referred to in the Decree:
- subjects whose legal representatives or administrators, on the date of submission of the application, have been convicted of crimes involving exclusion from participation in a public tender or concession procedure;
- subjects against which the disqualification sanction has been applied.
Each participant, both individually and jointly, can submit only one application for access to the incentives, except for research organizations, which can participate in multiple joint projects. On the date of submission of the application, it is required that beneficiaries received a positive credit rating assessment by the lending bank.
The projects eligible for subsidies must focus on industrial research (hereinafter “IR”) and experimental development (hereinafter “ED”) activities, closely related to the goals of the projects. IR and ED must be aimed at the productive conversion of economic activities through the creation of new products, processes or services or to significant improvement of existing products, processes or services, through the development of the key enabling technologies referred to in annex 1 of the Decree, including:
- information and communication technologies;
- advanced materials;
- advanced manufacturing and processing;
- technologies for the achievement of the objectives of the “Challenges for the Company” priority.
The activities mentioned above must relate to:
- product and process innovations regarding the efficient use of resources and the treatment and transformation of waste, including the reuse of materials with a view to circular economy or “zero waste” and environmental compatibility (eco-compatible innovations);
- design and prototype testing of integrated technological models aimed at strengthening industrial symbiosis paths, though, for example, the definition of a systemic approach to the reduction, recycling and reuse of food waste, the development of integrated water cycle systems and the recycling of raw materials;
- systems, tools and methodologies for the development of technologies for the supply, rational use and sanitation of water;
- innovative technological tools able to increase the lifetime of products and to make the production cycle more efficient;
- testing of new intelligent packaging models (smart packaging) which also include the use of recovered materials;
- multi-light material selection systems, in order to increase the recovery and recycling quotas of small and light materials.
To be eligible, projects must present a high content of technological innovation and sustainability, carried out in the context of issues relevant to the circular economy, as defined in annex 2 of the Decree. Therefore, for the purposes of eligibility, R&D projects must:
- be carried out by the beneficiaries within one or more of their local units located in the national territory;
- foresee eligible expenses and costs between 500 thousand and 2 million euro;
- be started after the submission of the incentives request and, in any case, under penalty of revocation, no later than 3 months from the date of the concession decree;
- have a duration of not less than 12 months and not more than 36 (with the grant of a possible extension of maximum 6 months);
- if submitted jointly by several parties, provide that each proposer bears costs and expenses of at least € 250 thousand in the case of enterprises, or at least 10% of the total eligible amount of the project in the case of research organizations.
Eligible expenses, incurred directly by the beneficiary, include those relating to:
- employees, collaborators or researchers, insofar they are employed in R&D activities, excluding personnel with administrative, accounting and commercial duties;
- newly manufactured tools and equipment, to the extent and for the period in which they are used for the R&D project. If the period of use is less than the entire useful life of the asset, only the ordinary tax depreciation allowances relating to the period of development of the R&D project are eligible;
- consultancy services and other services used for the purposes of the R&D projects, including the acquisition or licensing of research results, patents and know-how;
- general expenses calculated on a flat-rate basis equal to 25% of the direct eligible costs of the project, as established by art. 29 of Reg. (EU) no. 1290/2013;
- new materials used for the carrying out of the projects. In the case of use of existing materials store in warehouse, eligible costs are those registered in warehouse inventory, with the exclusion of any mark-up for general expenses.
The prototype or pilot product created in the context of IR and ED can be used for commercial purposes only if it is necessarily the final commercial product and the manufacturing cost is too high to be used only for demonstration purposes and of validation.
Separate P/L of the projects
The beneficiaries must prepare a separate accounting system or adequate accounting coding to keep all transactions relating to the subsidized projects separate. In addition, the costs incurred in the field of ED must be recognized separately from those incurred for IR. In any case, purchases whose amount is less than 500 euros net of VAT are not allowed.
The incentives that can be granted consist of a subsidized loan and a contribution to the expenses. The subsidized loan, granted by the lending bank, covers a nominal percentage of the eligible expenses equal to 50%, while the contribution, provided by Invitalia, is granted for a nominal percentage of the eligible costs divided as follows:
- 20% for research organizations, including the substitute incentive for the subsidized loan;
- 20% for micro and small size enterprises;
- 11% for medium-sized enterprises;
- 10% for large enterprises.
The subsidized loan, granted at an interest rate equal to 20% of the market rate, can only be granted in the presence of a bank loan. The duration of the subsidized loan is between 4 and 11 years, while the duration of the amortization period cannot exceed 8 years. The concessions are granted overall within the limits of the maximum aid intensities established by articles 4 and 25 of EC Reg. 651/2014.
It is established that the incentives granted in relation to circular economy R&D projects cannot be combined, with reference to the same expenses, with other public concessions that are configured as State aid or communicated pursuant to the Commission regulations including the “de minimis”, but with the exception of those obtained exclusively in the form of tax benefits and guarantees and in any case within the limits of the maximum intensities provided for by Reg. 651/2014. Therefore, R&D tax credit should be cumulated with the incentives on circular economy, on this point a clarification by MISE or the Revenue Agency would be desirable.
Procedure for access the incentives
The incentives are granted based on an evaluation front-office procedure. All aspects for the submission of the application will be defined by MISE by means of a subsequent provision. The preliminary evaluation consists of an administrative assessment carried out by Invitalia a the technical-scientific assessment carried out by ENEA.
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PwC TLS Avvocati e Commercialisti
PwC TLS Avvocati e Commercialisti