Prepared by Vitalba Passarelli, Giovanni Marra and Francesca Errico
Law no. 178 of the 30th December 2020 (so-called Budget law 2021), introduced important changes in the field of tax incentives for enterprises. The law extended the measures of the National Plan Transizione 4.0 and strengthened the intensity of the incentives. Below we analyze the main aspects of the new provisions.
Tax credit for investments in new capital assets (art. 1, par. 1051-1063)
Without prejudice to the changes introduced by Budget Law 2020 (analyzed in the newsalert published last 24th January 2020), Budget law 2021 recognizes a differentiated tax credit based on the type of investment made and on the fiscal year in which it is realized.
Based on par. 1052, all enterprises can benefit of this tax credit, regardless of the legal form, the economic sector in which they operate, the size and the regime applied for income determination, provided that such enterprises are compliant with the legislation on safety in the workplace and with the payment of the social security contributions. Enterprises subject to voluntary liquidation, insolvency procedures or subject to disqualification sanctions pursuant to art. 9 paragraph 2 of Legislative Decree 231/2001 are still excluded by the benefit.
According to par. 1053, as for 2020, the following assets are not eligible to access the tax credit: vehicles indicated in art. 164 CIT, assets for which the Ministerial Decree dated 12/31/1988 provides depreciation rates lower than 6.5%, buildings, constructions, pipelines and infrastructural networks, freely transferable assets of enterprises operating under public concession and with public tariffs in the fields of energy, water, transport, infrastructure, post, telecommunications, collection and purification of waste water and in the collection and disposal of waste.
“Ordinary” material assets
For enterprises and taxpayers operating arts and professions who make investments in tangible assets different by the ones included in Annex A of the Law 11th December 2016 n. 232, with a purchase cost not exceeding 2M€ and/or make an investment in intangible assets different by the ones included in Annex B of the Law n. 232 of 2016, with a purchase cost not exceeding 1M€, it is recognized a tax credit equal to:
- 10% of the purchase cost if the investments are made between the 16th November 2020 and the 31st December 2021, or within 30th June 2022, provided that within the 31st December 2021 the purchasing order is accepted by the seller and the buyer has paid an installment of at least 20% of the whole purchasing price. For investments made through financial leasing contracts, it is assumed the cost incurred by the lessor for the purchase of the asset. The intensity of the tax credit is increased up to 15% of the purchase cost for investments in technological tools and devices aimed to introduce agile working methods pursuant to Article 18 of the Law of 22nd May 2017, n. 81;
- 6% of the purchase cost if the investments are made between the 1st January 2022 and the 31st December 2022, or within 30th June 2023, provided that within 31st December 2022 the purchasing order is accepted by the seller and the buyer has paid an installment of at least 20% of the whole purchasing price.
Tangible assets “4.0”
For enterprises that invest in new tangible assets included in Annex A of Law n. 232/2016 (so called “assets 4.0”) different benefit rates are provided based on the tax period in which the investment is realized and based on the acquisition cost. Specifically, if investments are made between the 16th November 2020 and the 31st December 2021, or by the 30th June 2022, provided that by the 31st December 2021 the purchasing order is accepted by the seller and the buyer has paid an installment of at least 20% of the cost, the tax credit is recognized in the following measures:
- 50% of the cost for investments up to 2,5M€;
- 30% of the cost for investments between 2,5M€ and 10M€;
- 10% of the cost for investments between 10M€ and 20M€.
If such investments are made between the 1st January 2022 and the 31st December 2022, or by 30th June 2023, provided that by the 31st December 2022 the purchasing order is accepted by the seller and the buyer has paid an installment of at least 20% of the purchasing cost, the tax credit is recognized in the following measures:
- 40% of the cost for investments up to 2,5M€;
- 20% of the cost for investments between 2,5M€ and 10M€;
- 10% of the cost for investments between 10M€ and 20M€.
Intangible assets “4.0”
For enterprises that invest in intangible assets included in Annex B of the Law n. 232/2016 between the 16th November 2020 and the 31st December 2022, or by 30th June 2023, provided that by the 31st December 2022 the purchasing order is accepted by the seller and the buyer has paid an installment of at least 20% of the acquisition cost, it is recognized a tax credit equal to 20% of the purchase cost for investments up to 1M€ overall. In this case, the eligible period includes FYs 2021 and 2022, so the maximum expenditure ceiling must be considered over the entire period. The law includes in the eligible expenses those incurred for services relating to the use of the aforementioned assets through cloud computing solutions, for the portion attributable on accrual basis.
How to use the tax credit
The tax credit can only be used to offset tax payment in three annual installments of equal amount, starting from the year in which the “ordinary” assets enter in service, or starting from the year of interconnection for tangible and intangible assets 4.0. The Budget law confirmed that, if the interconnection of assets 4.0 occurs in a tax period following the one in which they enter in service, before the interconnection there is anyway the possibility to start benefiting of the tax credit provided for “ordinary” assets.
The Budget law introduced also the possibility to use the tax credit in a single annual installment for taxpayers with revenues lower than 5M€ that make investments in “ordinary” material assets between the 16th November 2020 and the 31st December 2021.
The Budget law confirmed that – whether by the 31st December of the second year following the year of entry in service or the interconnection the assets subject to the tax credit are sold or destined to foreign production facilities, even if they belong to the beneficiary – a consequent reduction of the tax credit applies.
In this case it is possible to pay back the undue portion of tax credit already used within the deadline for the payment of the balance income tax, without the application of penalties and interests. However, when the asset is sold, the residual portion of the tax credit is still due if, in the same period, the taxpayer:
- replaces the original asset with a new asset having similar or superior technological characteristics according to those provided by Annex A of the Law 11 December 2016, n. 232;
- certifies the replacement asset, its characteristics and the interconnection with the business system.
Instead, when the purchase cost of the new asset is lower than the one of the replaced asset, and provided that the conditions set out in letters a) and b) above are met, the use of the tax credit is allowed for the residual portion up to the purchase cost of the new asset.
Communications, documentations and checks
The Budget law 2021 confirms that the enterprises which benefit of the tax credit for investments in tangible and intangible assets “4.0” send a communication to the Ministry of Economic Development (MiSE) – provision already introduced by the Budget law 2020 – whose terms and conditions will be defined by means of a forthcoming decree. Based on the MiSE Note published the 29th December 2020, this communication is functional exclusively to the acquisition, by the Ministry, of the information necessary to evaluate progress, dissemination and effectiveness of such measures, and the information are sent by taxpayers on a voluntary basis and in a collaborative perspective. It is specified that the right to benefit of the tax credit is not subordinated to the filing of the communication.
All taxpayers benefiting from the tax credit must keep all the documentation supporting eligible costs incurred. For this purpose, the Law confirms that purchasing invoices relating to eligible assets must contain an explicit reference to the provisions of par. 1054 to 1058.
With regard to investments in assets “4.0” with a purchase cost exceeding 300K€, is confirmed that enterprises must obtain a technical report issued by an engineer or an industrial expert, or a certificate of conformity issued by an accredited certification body, certifying that the assets comply with technical characteristics required by annexes A and B of the law n. 232/2016 and that they are interconnected with the business system of production management or the supply network. For assets “4.0” with a purchase cost lower than 300K€, the Law confirms the possibility to prepare a declaration undertaken by the legal representative according to decree n. 445/2000 in place of the abovementioned technical report.
Tax credit for research and development, technological innovation, ecological transition and other innovative activities (art. 1, par. 1064, lett. a – h)
Without prejudice to the changes introduced by Budget Law 2020 (analyzed in the newsalert published last 28th January 2020), the Budget law 2021 extended for two years the application of the tax credit for research and development, technological innovation, ecological transition and other innovative activities, making eligible investments made up to the tax period in course on the 31st December 2022.
The Law strengthened such measures increasing the benefit rates and the annual amount. Moreover, has been clarified that such measures are applicable not only for commercial enterprises (which generate business income) but also for agricultural and individual enterprises that carry out activities that fall within the agricultural income, determined pursuant to art. 32 of the CIT.
Specifically, starting from the tax period following the one in course on the 31st December 2020, the tax credit is recognized in the amount of:
- 20% for investments in R&D, up to a maximum annual limit of 4M€;
- 15% for investments in 4.0 digital innovation projects or for projects aimed at achieving ecological transition objectives, up to a maximum annual limit of 2M€;
- 10% for investments in “ordinary” technological innovation or design and aesthetic activities, up to a maximum annual limit of 2M€.
Among the amendments introduced by the Budget law there is the obligation to obtain an appraisal of the technical report illustrating the aims, contents and results of the eligible activities carried out. About this appraisal a clarification of the Revenue Agency will be necessary, but likely it should be in the get in the competent court.
In addition, among the eligible expenses for the purpose of the tax credit for investments in other innovative activities (i.e. design and aesthetic ideation activities), the Budget law includes the depreciation rates of software used in carrying out the eligible activities.
In relation to investments in technological innovation and ecological transition, the Law specifies that the expenses for consultancy and equivalent services are eligible for the tax credit up to the extent of 20% of both personnel costs and research or innovation contracts (so-called extra-muros) expenses.
Budget law clarifies also the eligibility of the following services purchased by foreign entities which fiscally resident or located in other Member States of the European Union or in States adhering to the agreement on the European Economic Area or in States included in the list referred to in the decree of the Minister of Finance of the 4th September 1996:
- for R&D tax credit, expenses for extra-muros research contracts and depreciation charges related to the purchase of industrial property rights;
- for technological innovation and ecological transition tax credit, expenses for contracts concerning the direct performance by the commissioner of the eligible activities;
- for other innovative activities, expenses for contracts concerning the direct performance by the commissioner of the eligible design and aesthetic ideation services and expenses for consultancy and equivalent services.
In relation to the tax credits under discussion, it should be noted that the Revenue Agency, with circular n. 31/E issued the last 23rd December 2020, provided important clarifications and “openings” regarding the applicable sanctions. In particular, it was specified that, if following the tax audit to verify the existence of the conditions to benefit of the tax credit, it is configured an hypothesis of use of a “non-existent” tax credit, for which in principle applies a sanction within 100% to 200% of the tax credit used, the competent Offices can reduce the sanction up to the half of the minimum, as provided by art. 7, co. 4, of the DL n. 472 of 1997, in the event of disproportion between the administrative sanction and the amount of the tax to which it refers to.
Tax credit for R&D activities in South of Italy (art. 1, par. 185-187)
The Budget law, at par. 185-187, extended by two years the increased benefit rates provided for if the R&D activities are carried out in the South Italy regions. Such increased rates were introduced by the Relaunch Decree (art. 244 of the Legislative Decree of the 19th May 2020, n.34).
Therefore, enterprises operating in Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia and Sicily, that carry out during FYs 2021 and 2022 R&D activities, including research and development projects in the field of COVID-19, the tax credit is recognized in the following measures:
- 25% for large enterprises, which employ at least 250 people, and which have an annual turnover of at least 50M€, and/or an annual balance sheet total of at least 43M€;
- 35% for medium-sized enterprises, which employ at least 50 people and have an annual turnover of at least 10M€;
- 45% for small enterprises, which employ less than 50 people and have an annual turnover or an annual balance sheet total lower than 10M€.
Tax credit for training 4.0 (art. 1 par. 1064, lett. i – l):
Budget law extended the application of this measure for three years, making eligible the investments incurred up to the tax period in course on the 31st December 2023, and increased the categories of eligible expenses. Actually at letter l) the legislator, introducing the new paragraph 210-bis in law no. 160/2019 (budget law 2020) refers to the tax period in course as of 31 December 2023, raising some doubts, which hopefully will be clarified by the circulars to be issued in the future, on the fact that the extension can be valid for three years.
Therefore, starting from “the tax period in course on the 31st December 2020 and up to the one in course on the 31st December 2023”, the following expenses set out by art. 31, par. 3, of Reg. n. 651/2014 of the EU Commission issued the 17th June 2014 are considered eligible for this tax credit:
- trainers’ personnel costs, for the hours during which the trainers participate in the training;
- trainers’ and trainees’ operating costs directly relating to the training project such as travel expenses, materials and supplies directly related to the project, depreciation of tools and equipment, to the extent that they are used exclusively for the training project (accommodation costs are excluded except for the minimum necessary accommodation costs for trainees’ who are workers with disabilities);
- costs of advisory services linked to the training project;
- trainees’ personnel costs and general indirect costs (administrative costs, rent, overheads) for the hours during which the trainees participate in the training.
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PwC TLS Avvocati e Commercialisti
PwC TLS Avvocati e Commercialisti