Edited by Energy team
The Italian Government has enacted in 2022 several new tax law measures in the energy sector.
In particular, the main measures aimed to mitigate the increase of the electricity costs are represented by the extraordinary subsidies granted in the form of tax credits which can be summarized as follows:
- Tax Credit in favor of the so-called “energy-intensive” enterprises;
- Tax Credit in favor of the so-called “gas-intensive” enterprises;
- Tax Credit for the purchase of electricity in favor of all the enterprises (other than those “energy-intensive”);
- Tax Credit for the purchase of natural gas in favor of all enterprises (other than those “gas-intensive”).
Italian Revenue Agency (“IRA”) has provided several guidance on the above tax credits (Circular Letters no. 13/E/2022, no. 20/E/2022 and no. 25/E/2022).
It is also worth mentioning that the Italian Government has also introduced a new extraordinary levy on windfall profits realized by the enterprises active in the energy and oil&gas sector (such a new levy has been commented by a separate newsalert available here: https://blog.pwc-tls.it/en/2022/07/18/extraordinary-contribution-on-windfall-profits-updated-framework-after-the-clarifications-published-by-the-italian-revenue-agency-and-critical-areas/)
Extraordinary contributions in favor of energy-intensive enterprises
The following table contains a summary of these contributions.
Tax Credit for the electricity cost incurred in the first quarter 2022
Article 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 Decree”). The tax credit is recognized 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 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 both the following conditions are met:
- the average energy consumption of the enterprise is equal to at least no. 1 GWh per year and
- 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). The Circular Letter no. 20/E issued by the IRA clarified that also enterprises enrolled in the register only starting from February 2022 are able to benefit from the tax credit also on the electricity costs incurred in January 2022.
Qualifying electricity power cost
The Circular Letter no. 13/E issued by IRA argued 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, by way of 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 some 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 according to 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 to an authorized intermediary (i.e. chartered accountants, etc.) to issue a conformity mark (so called “visto di conformità”).
The law provides that the tax credit must be used no later than 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 of the IRA clarified that tax credit can be used soon after all the objective, subjective and documental requirements are met. The tax credit must be reported and monitored in a specific section of the annual income tax return.
Relevance for income tax purposes
It is provided that the contribution is not subject to corporate income tax and regional tax. Furthermore, the tax credit can be cumulated with other benefits concerning the same electricity power 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 by the enterprise.
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 “Energia 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 2022 by energy intensive enterprises (as defined by 2017 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 2022 is increased by more than 30% compared to the average price of the electrical power per KW/h of the first quarter 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 issued by the IRA.
Tax credit for cost incurred in the third quarter 2022
Article 6 (1) of Decree-Law No. 115 of August 9, 2022 (the so called “Aiuti-bis Decree“) introduced a new extraordinary contribution, in the form of a tax credit, equal to 25% of the cost incurred for the energy component purchased and actually used in the third quarter 2022 in favor of “energy-intensive” enterprises (as defined by the Ministerial Decree of December 21, 2017). On the same basis as the subsidies provided for previous quarters, the tax credit for the third quarter is recognized provided that in the second quarter 2022 there was an increase in the cost of electricity per KW/h of more than 30% compared to the same cost incurred in the second quarter 2019 (net of taxes and any subsidies). The tax credit is also recognized in relation to the costs for the electricity produced by and self-consumed by the energy-intensive enterprises in the third quarter 2022. The tax credit can be used according to the same rules provided for the previous tax credits. The law provides that the tax credit must be used no later than 31 March 2023 (both in the case of direct use and in the case of transfer to third parties).
Tax credit for cost incurred in October and November 2022
Article 1 (1) of Decree-Law No. 144 of September 23, 2022 (the so called “Aiuti-ter Decree“) introduced a new extraordinary contribution, in the form of a tax credit, equal to 40% of the cost incurred for the energy component purchased and actually used in October and November 2022 in favor of “energy-intensive” enterprises (as defined by the Ministerial Decree of December 21, 2017). The tax credit is recognized provided that in the third quarter 2022 there was an increase in the cost of electricity per KW/h of more than 30% compared to the same cost incurred in the third quarter 2019 (net of taxes and any subsidies). The tax credit can be used according to the same rules provided for the previous tax credits; it must be used no later than 31 March 2023 (both in the case of direct use and in the case of transfer to third parties).
Extraordinary contributions in favor of gas-intensive enterprises
The following table includes a summary of this category of extraordinary contributions.
Tax Credit for the cost incurred in the second quarter 2022
Article 5 of the “Energia 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). However, the tax credit rate has been increased from 15% to 20% and from 20% to 25% by the Government (Law Decree no. 21/2022 and Law Decree no. 50/2022).
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 use, transfer and cumulation of the tax credit are subject 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
Article 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. 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.
As regard 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.
Tax Credit for the cost incurred in the third quarter 2022
Article 6 of the Aiuti-bis Decree (Decree Law No. 115/2022) introduced an extraordinary contribution, in the form of a tax credit, in the amount of 25% of the expenditure incurred for the purchase of natural gas consumed in the third quarter 2022 (excluding the natural gas consumed for thermoelectric purposes).
Such a subsidy follows the same rules as the subsidies provided for the previous quarters. The only exception is the time period that is relevant for the determination of the minimum cost increase to obtain the tax credit; in fact, it is provided that the tax credit is recognized only if the reference price of natural gas referred to the second quarter 2022 – calculated as the average of the reference prices of the Infra-Daily Market (MI-GAS) published by the Gestore del Mercato Energetico (“GME”) – has undergone an increase of more than 30% of the corresponding average price referred to the second quarter 2019. As regard 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. The law provides that the tax credit must be used no later than 31 March 2023 (both in the case of direct use and in the case of transfer to third parties).
Tax Credit for the cost incurred in October and November 2022
Article 1 (2) of the Aiuti-ter Decree (Decree Law No. 144/2022) introduced an extraordinary contribution, in the form of a tax credit, in the amount of 40% of the expenditure incurred for the purchase of natural gas consumed in October and November 2022 (excluding the natural gas consumed for thermoelectric purposes). The tax credit must be used no later than 31 March 2023 (both in the case of direct use and in the case of transfer to third parties).
Such a subsidy follows the same rules as the subsidies provided for the previous quarters. The tax credit is recognized only if the reference price of natural gas referred to the third quarter 2022 – calculated as the average of the reference prices of the Infra-Daily Market (MI-GAS) published by the Gestore del Mercato Energetico (“GME”) – has undergone an increase of more than 30% of the corresponding average price referred to the third quarter 2019. As regards 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 and 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. Law no. 91/2022 provided a simplified procedure in order to calculate the tax credits.
Extraordinary contribution for the purchase of electricity (second and third quarters)
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 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 2022 is increased by more than 30% compared to the average price of the electrical power per KW/h of the first quarter 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.
The Aiuti-bis Decree (Article 6, paragraph 3 of Decree No. 115/2022) introduced a new extraordinary subsidy for enterprises other than those with high electricity consumption in the amount of 15% of the expenditure incurred for the purchase of the energy component actually used in the third quarter 2022. The tax credit is recognized if the average price of the energy component of the second quarter 2022 has increased in cost per kWh by more than 30% of the corresponding average price of the second quarter 2019. Since nothing new has been introduced, except for the period to which the subsidy refers, reference is made to what was indicated for the subsidy for the second quarter 2022. The tax credit must be used no later than 31 March 2023 (both in the case of direct use and in the case of transfer to third parties).
The so called Aiuti-ter Decree (Article 1, paragraph 3 of Decree No. 144/2022) introduced a new extraordinary subsidy for enterprises other than those with high electricity consumption in the amount of 30% of the expenditure incurred for the purchase of the energy component actually used in October and November 2022. The tax credit is recognized if the average price of the energy component of the third quarter 2022 has increased in cost per kWh by more than 30% of the corresponding average price of the third quarter 2019. Since nothing new has been introduced, reference is made to what was indicated for the subsidy for the second and third quarter 2022. The tax credit must be used no later than 31 March 2023 (both in the case of direct use and in the case of transfer to third parties).
Extraordinary contribution for the purchase of natural gas (second and third quarters)
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 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 Energia Decree) as long as the price of natural gas of the first quarter 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 2019.
Circular No. 20/E, which comments on the main features of the tax credit in comment, expressly refers to the clarifications provided by the same Circular with reference to the tax credit in favor of gas-intensive enterprises.
The so called Aiuti-bis Decree (art. 6 (4) of Decree No. 115/2022) introduced a new extraordinary subsidy for enterprises other than gas-intensive in an amount equal to 25% of the expenditures incurred for the purchase of natural gas consumed for the third quarter 2022 for energy uses (other than thermoelectric). The tax credit is recognized if the reference price of natural gas referred to the second quarter 2022 – calculated as the average of the reference prices of the Infra-Daily Market (MI-GAS) published by the Gestore del Mercato Energetico (“GME”) – has increased by more than 30% of the corresponding average price referred to the second quarter 2019. The subsidy follows the same rules as the previous extraordinary subsidy for the generality of enterprises for the purchase of natural gas for the second quarter 2022. The tax credit must be used no later than 31 March 2023 (both in the case of direct use and in the case of transfer to third parties).
The so called Aiuti-ter Decree (art. 1 (4) of Decree No. 144/2022) introduced a new extraordinary subsidy for enterprises other than gas-intensive in an amount equal to 40% of the expenditures incurred for the purchase of natural gas consumed in October and November 2022 for energy uses (other than thermoelectric). The tax credit is recognized if the reference price of natural gas referred to the third quarter 2022 – calculated as the average of the reference prices of the Infra-Daily Market (MI-GAS) published by the Gestore del Mercato Energetico (“GME”) – has increased by more than 30% of the corresponding average price referred to the third quarter 2019. The subsidy follows the same rules seen before concerning the previous extraordinary subsidy for the generality of enterprises for the purchase of natural gas. The tax credit must be used no later than 31 March 2023 (both in the case of direct use and in the case of transfer to third parties).
Other energy sector law measures
In addition to the subsidies commented on above, the Law Decrees issued by the government have provided additional facilitation measures for economic operators; the main measures are briefly summarized below.
In particular, the so called Energia Decree (Decree Law No. 17/2022) provided for:
- the application of the 5% VAT rate to the supply of methane gas for combustion for civil and industrial uses for the months of April, May and June 2022 (Art. 2 Energia Decree). The measure was initially extended to July, August and September 2022 (Art. 2 Decree-Law No. 80 of June 30, 2022), and subsequently to October, November and December 2022 (Art. 5 Aiuti-Bis Decree). For further details please refer to the Circular Letters issued by the Internal Revenue Service (no. 17/E/2021 and no. 20/E/2022);
- the tax credit granted to companies that make investments in Southern Regions until November 30, 2023 aimed at improving energy efficiency (Art. 14 Energia Decree);
In addition, the so called Aiuti Decree (Decree Law No. 50/2022) provided for:
- the possibility to build photovoltaic systems on the roofs of the production facilities of agricultural enterprises having a power exceeding the average annual electricity consumption and to sell the energy produced to the grid (Art. 8);
- the possibility of establishing renewable energy communities by the Ministry of Defense and third party concessionaires of military state property also with other central and local public administrations (Art. 9); this possibility is also extended to Port System Authorities;
Finally, for the period between October 18, 2022 and October 31, 2022, art. 4 of Decree-Law No. 144/2022 (so called Aiuti-ter Decree) provided for:
- the reduction of excise tax rates applied to gasoline, LPG and diesel used as fuel;
- the reduction of the VAT rate to 5% on natural gas used for automotive purposes (Revenue Agency Circular No. 20 of June 16, 2022);
It should be noted that Law No. 51 of May 20, 2022 repealed Decree-Law No. 38/2022 but simultaneously reintroduced the rate reductions within the so called Taglia Prezzi Decree (Article 1-bis of Decree-Law No. 21/2022). These rate reductions were extended up to August 2, 2022 (MEF-MITE Inter-Ministerial Decree of June 24, 2022), then up to August 21, 2022 (MEF-MITE Inter-Ministerial Decree of July 19, 2022), and finally up to September 20, 2022 (Art. 8 of so called Decree-Law Aiuti-bis).
Let’s Talk
For a deeper discussion, please contact:
PwC TLS Avvocati e Commercialisti
Partner
PwC TLS Avvocati e Commercialisti
Senior Manager