The main tax law energy measures enacted in 2022

Prepared by Franco Boga, Giuseppe Fortunato, Simona Vozza and Umberto Ricci 

The Italian Government has enacted over the first months of 2022 several new tax law measures in the energy sector. In addition to the extraordinary levy on the extra profits realized by the enterprises[1] operating in the energy and oil&gas sector, the main measures are represented by the extraordinary subsidies granted in the form of tax credits which can be summarized as follows:

  • Extraordinary contributions in favor of the so-called “energy-intensive” enterprises;
  • Extraordinary contributions in favor of the so-called “gas-intensive” enterprises;
  • Extraordinary contribution for the purchase of electricity in favor of all the enterprises (other than those “energy-intensive”);
  • Extraordinary contribution for the purchase of natural gas in favor of all enterprises (other than those “gas-intensive”).

The Circular Letter no. 13/E published by the Italian Revenue Agency on 13 May 2022 provided clarifications regarding some tax credits listed above.

Extraordinary contributions in favor of energy-intensive enterprises

The following table provides a summary of these contributions further commented below.

Tax credit for the electricity cost incurred in the first quarter 2022

Art. 15 of the Law-Decree n. 4 of 27 January 2022 (so-called “Sostegni-ter Decree”, subsequently converted into Law no. 25 of 28 March 2022) provides for an extraordinary contribution, in the form of a tax credit, equal to 20% of the cost incurred for the electrical power purchased and effectively consumed in the first quarter 2022 by energy intensive enterprises (as defined pursuant to the Ministerial Decree of 21 December 2017, hereinafter “2017 Ministerial Decree”). The tax credit is recognised as long as the average price of the electrical power per KW/h purchased in the last quarter 2021 is increased by more than 30% compared to the average price of the electrical power per KW/h of the last quarter 2019 (net of taxes and subsidies).

Energy intensive enterprises

This category includes enterprises that comply with the requirements referred to in Article 3 (1) of the 2017 Decree (first requirement) and fall in the list of the energy intensive enterprises according to Article 6 of the 2017 Decree for fiscal year 2022 (second requirement).

First requirement is met if (i) the average energy consumption of the enterprise is equal to at least no. 1 GWh per year and (ii) the same enterprise falls within the specific categories of Art. 3 (1) of 2017 Decree.

With reference to the second requirement, Circular Letter no. 13/E clarified that the enterprise must be definitively registered in the list of the energy intensive enterprises for the fiscal year 2022 being not sufficient a temporary inclusion in such a list.

Qualifying electricity power cost

Circular Letter no. 13/E specified that the qualifying electricity power cost per KW/h corresponds to the item usually reported in the invoice as “expenditure for electrical power” which does not include, for example, transport costs, financial coverage on electricity purchases, etc. Pursuant to the law provision, the average cost of relevant electrical power must be reduced by the related subsidies i.e., any economic benefit (having a tax or a non-tax nature).

For enterprises not incorporated yet as of 1 October 2019, Circular Letter no. 13/E provides specific guidance.

The computation of the tax credit

The tax credit is computed on the qualifying electricity power cost defined as commented in the paragraph above (e.g. “expenditure for electrical power”). The Circular Letter no. 13/E clarified that the qualifying electrical power cost shall be computed in accordance with the accrual basis principle provided by Art. 109 of the Presidential Decree n. 917/1986 (“Italian Tax Code”) and that it must be properly documented by the electricity purchase invoices.

Use of the tax credit

The tax credit can be used to offset other tax payments and is not subject to both the annual thresholds provided by Italian tax law provisions (Euro 250,000 and Euro 2 million thresholds).

It is also possible to transfer the tax credit to other subjects including credit institutions and financial intermediaries. Only two subsequent transfers of the tax credit (following the first one) are allowed on the condition that the buyer qualifies as a “supervised” subject (e.g. banks, financial intermediaries, insurance companies). It is provided by the law that, in case of transfer of the tax credit, the purchaser must request an authorized intermediary (i.e. chartered accountants, etc.) to issue a conformity mark (“visto di conformità”).

The law provides that the tax credit must be used by 31 December 2022 (both in the case of direct use and in the case of transfer to third parties).

The Circular Letter no. 13/E clarified that tax credit can be used soon after all the objective, subjective and documental requirements are met.

The tax credit must be reported in the RU Section of the income tax return.

Relevance for income tax purposes

It is provided that the contribution is not subject to income tax and regional tax. Furthermore, the tax credit can be cumulated with other benefits concerning the same cost provided that the overall benefit (considering also the deduction of the energy cost for income and regional taxes purposes) does not exceed the amount of the cost effectively incurred.

Tax credit for the cost incurred in the second quarter 2022

Article 4 of the Law Decree no. 17 of 1 March 2022 (the so-called “Energy Decree”, subsequently converted into Law no. 34 of 27 April 2022), introduced an extraordinary contribution, in the form of a tax credit, equal to 20% of the cost incurred for the electrical power purchased and actually used in the second quarter of 2022 by energy intensive enterprises (as defined by 2017 Ministerial Decree). The tax credit rate has been raised from 20% to 25% upon the amendments enacted by the “Taglia-prezzi Decree” (Law Decree no. 21/2022, converted into Law no. 51 of May 20, 2022).

The tax credit is recognized as long as the average price of the electrical power per KW/h purchased in the first quarter of 2022 is increased by more than 30% compared to the average price of the electrical power per KW/h of the first quarter of 2019 (net of taxes and subsidies). Furthermore, Art. 4 (2) of the “Energia Decree” (Law Decree no. 17/2022) provides that the tax credit is recognized also with reference to the electrical power self-produced and self-consumed in the second quarter 2022.

The use, transfer and cumulation of the tax credit are subject to specific provisions which are similar to those applicable to the tax credit recognized to the energy intensive enterprises for the first quarter 2022. Further clarifications are provided by the Circular letter no. 13/E.

Extraordinary contributions in favor of gas-intensive enterprises

The following table includes a summary of the contributions commented below (these law provisions are not commented by the Circular Letter no. 13/E).

Tax Credit for the cost incurred in the second quarter 2022

Art. 5 of the “Energy Decree” (Law Decree No. 17/2022) enacted an extraordinary contribution, in the form of a tax credit, equal to 15% of the costs incurred for the purchase of natural gas consumed in the second quarter 2022 (excluding the natural gas consumed for thermoelectric purposes) in favor of the “gas-intensive enterprises” (as identified by Annex 1 to Ministerial Decree no. 541 of 21 December 2021). The tax credit is recognized only if the natural gas quantity consumed for energy uses in the first quarter 2022 by the gas-intensive enterprise is not less than 25% of the natural gas quantity provided by Art. 3 (1) of the Ministerial Decree n. 541 of 21 December 2021 i.e., 94.582 Sm3 per year (excluding the natural gas consumed for thermoelectric purposes).

Furthermore, the tax credit is recognized on condition that the reference price of natural gas for the first quarter 2022 – calculated as the average of the prices on the Intra-day Market (MI-GAS) published by the Energy Market Operator (“GME”) – has undergone an increase greater than 30% of the corresponding average price referred to the first quarter 2019.

The rate of the tax credit was increased from 15% to 20% pursuant to Art. 5 of the so-called “Taglia-prezzi Decree” (Law Decree no. 21/2022, converted into Law No. 51 of May 20, 2022) and from 20% to 25% pursuant to the so-called “Aiuti Decree” (Law Decree no. 50/2022).

The use, transfer and cumulation of the tax credit are subject to specific provisions which are similar to those applicable to the tax credit recognized to the energy intensive enterprises.

 Tax credit for the cost incurred in the first quarter 2022

Art. 4 of the “Aiuti Decree” (Law Decree no. 50/2022) introduced an extraordinary contribution, in the form of a tax credit, equal to 10% of the costs incurred for the purchase of natural gas consumed in the first quarter 2022 (excluding the natural gas consumed for thermoelectric purposes) in favor of “gas-intensive” enterprises (as identified by Annex 1 to Ministerial Decree no. 541 of 21 December 2021).

With reference to the tax credit recognition and use, similar provisions to those commented for the second quarter 2022 apply but a different time period is relevant for the first quarter tax credit. Indeed, it is provided that the tax credit is recognized only if the reference price of natural gas for the last quarter 2021 – calculated as the average of the reference prices of the Intraday Market (MI-GAS) published by the Energy Market Operator (“GME”) – has undergone an increase of more than 30% of the corresponding average price referring to the last quarter 2019.

With reference to both the procedures for using the tax credit and its cumulation with other favorable provisions, rules similar to those applicable to the tax credit granted to energy-intensive enterprises apply.

Extraordinary contributions in favor of the generality of the enterprises (i.e. other than energy-intensive/gas-intensive)

The Law Decree no. 21/2022 (“Taglia-prezzi Decree”) introduced additional extraordinary contributions aimed at mitigating the cost incurred by the enterprises for the purchase of natural gas and electricity power as summarized in the table below.

Extraordinary contribution for the purchase of electricity

Article 3 of the “Taglia-prezzi Decree” provides for a 12% tax credit on the costs incurred for the purchase of the electrical power used in the second quarter of 2022 (as documented by the relevant invoices). The tax credit rate has been increased from 12% to 15% pursuant to the “Aiuti Decree” (Law Decree no. 50/2022). The tax credit is recognized to the enterprises having meters with a power equal to 16.5 KW or more (other than the energy-intensive enterprises identified by the Ministerial Decree of December 21, 2017) provided that the average price of the electrical power per KW/h purchased in the first quarter of 2022 is increased by more than 30% compared to the average price of the electrical power per KW/h of the first quarter of 2019. The use, transfer and cumulation of the tax credit are subject to specific provisions which are similar to those applicable to the tax credit recognized to the energy intensive enterprises. Circular Letter no. 13/E has provided further clarification on such a tax credit.

Extraordinary contribution for the purchase of natural gas

Article 4 of the “Taglia-prezzi Decree” provides for a 20% tax credit on the costs incurred for the purchase of natural gas consumed in the second quarter of 2022 for energy uses (other than thermoelectric uses). The tax credit rate is increased from 20% to 25% pursuant to the “Aiuti Decree” (Law Decree no. 50/2022). The tax credit is granted to enterprises (other than the gas intensive enterprises as defined by Article 5 of the Energy Decree) as long as the price of natural gas of the first quarter of 2022 – calculated as the average of the price of the Infra-Daily Market (MI-GAS) published by the Energy Market Operator (“GME”) – is increased by more than 30% compared to the corresponding average price of the first quarter of 2019.

The use, transfer and cumulation of the tax credit are subject to specific provisions which are similar to those applicable to the tax credit recognized to the energy intensive enterprises

Extraordinary contribution on extra-profits

Article 37 of the “Taglia-prezzi Decree” (Law Decree No. 21/2022) introduced an extraordinary contribution, in the form of a solidarity levy, to be paid by the enterprises operating in the energy sector that realized extra-profits upon the increase of the energy prices and tariffs that affected the energy sector (hereinafter the “Extraordinary contribution”).

It is important to point out that the “Decreto Aiuti” (Decree Law No. 50/2022) provided for some amendments to the law provision including, among the other, the increase of the extraordinary contribution rate.

The subjective scope of such a new Extraordinary contribution includes:

  • enterprises carrying out in Italy, for the subsequent sale of goods, the activity of electricity power production;
  • enterprises engaged in the methane gas production or natural gas extraction;
  • resellers of electricity power, methane gas and natural gas;
  • enterprises engaged in the production, distribution and trade of petroleum products;
  • enterprises which permanently import electricity power, natural gas or methane gas, petroleum products or which introduce in Italy such goods from other EU states.

On the other hand, enterprises which manage and operate platforms for the exchange of electricity, gas, environmental certificates and fuels are excluded from the subjective perimeter of the Extraordinary contribution.

After the amendments introduced by the Art. 55 of “Aiuti Decree”, now the taxable base the Extraordinary contribution is equal to the increase of (i) the balance of VAT sales and purchases carried out in the period between October 1, 2021 and April 30, 2022 compared to (ii) the same transactions period between October 1, 2020 and April 30, 2021 (the “Increase”). If this latter amount is lower than zero, it is assumed equal to zero for computation purposes (clarification introduced upon conversion of the Law Decree into Law No. 51/2022).

The balances of VAT sales and purchases that are relevant for the computation of the Increase are those resulting from the VAT transactions included in the Communication of the VAT settlements net of VAT that are filed with the Italian Revenue Agency by each enterprise on a quarterly basis. Specific provisions are provided for entities that opted for the VAT Group regime pursuant to Article 70-quater of Presidential Decree No. 633/1972.

The Extraordinary contribution is due only if the Increase exceeds both two thresholds i.e., it is greater than €5 million and higher than 10%. As long as both the thresholds are exceeded, the Increase is presumed to be the “Extra Profit” realized by the enterprises falling within the scope of the provision. Therefore, if the Increase is lower than €5 million or, alternatively, not higher than 10%, there will be no “Extra Profit”.

The Extraordinary contribution rate applicable to the “Extra Profit”, originally set at 10%, was raised to 25% by the “Aiuti Decree”.

As a result of the amendments made by Article 55 of the “Aiuti Decree”, the payment of the Extraordinary contribution is due in two tranches: an installment equal to 40% of the overall amount is due by June 30, 2022 and the balance equal to 60% is due by November 30, 2022.

It is also provided by the law that the Extraordinary contribution is not deductible for income tax and regional tax purposes.

Further operating guidance will be provided by the Italian Revenue Agency. For the purposes of assessment, penalties and collection of the Extraordinary contribution, the same provisions provided for VAT will apply insofar as they are compatible. Specific provisions are provided in order to prevent that the Extraordinary contribution will unduly affect consumer prices of energy products and electricity.

The measure under comment has been criticized from several quarters. In particular, the way in which the Extra Profit is determined raises serious concerns regarding the compatibility of the levy with the constitutional principles applicable to tax matters and, in particular, with Articles 3 and 53 of the Constitution. Indeed, an extraordinary levy – imposed to the enterprises of a specific sector and for a limited timeframe – shall be structured in accordance with the pronouncements of the Constitutional Court (see judgment of No. 10/2015 concerning the so-called Robin Hood Tax). Finally, it must be considered that the Extraordinary contribution is also due by renewable energy producers which were already obliged to retrocede to the Gestore dei Servizi Energetici (“GSE”) the revenues from the sale of energy exceeding a certain threshold (Decree-Law No. 4/2022).

Other energy sector law measures

In addition to the measures commented in the previous paragraph, other law provisions concerning the energy / oil&gas sector has been introduced including inter alia:

  • reduction of VAT rate to 5% to the supplies of methane gas for combustion for civil and industrial uses related to the second quarter 2022 (Art. 2 of Law Decree no. 17/2022);
  • tax credit granted for investments in the Southern Regions aimed at improving energy efficiency made until November 30, 2023 (Art. 14 of Law Decree no. 17/2022);
  • possibility to install photovoltaic plants on the facilities of agricultural enterprises even if the power plant exceeds the enterprises needs (art. 9 of Law Decree no. 50/2022);
  • possibility to set up the so-called “comunità energetiche” for the Ministry of Defence and Ports Authorities (art. 9 of Law Decree no. 50/2022).

[1] For the purpose of this document, “enterprises” include both companies and individual businesses. 

Let’s Talk

For a deeper discussion, please contact:

Franco Boga

PwC TLS Avvocati e Commercialisti

Partner

Rispondi

This site uses Akismet to reduce spam. Learn how your comment data is processed.