SUPER-AMORTIZATION OF 250% ON "INDUSTRY 4.0" CAPITAL GOODS
Not only does the 2017 Financial Law extend to 2017 the super-amortization of 140% already in effect in 2016, but it also introduces two new instruments to promote the digital and technological transformation processes in line with the "Industry 4.0" model:
- super amortization of 250% for investments in "Industry 4.0" capital goods made until 31 December 2017, or until 30 June 2018 under the condition that the related purchase order is accepted by the supplier and that a down payment of at least 20% of the purchase price is made before 31 December 2017.
- increased amortization for software as well: buyers of capital goods that are amortizable with the 150% in-crease who also invest in immaterial capital goods specified in the Financial Law are entitled to amortize them for an additional 40%.
In order to claim the benefits relating to the increase of fiscal amortization on "Industry 4.0" material and immaterial capital goods, a self-declaration affidavit must be presented by the legal representative.
If the unit price of the purchased goods is higher than € 500,000, tax law provides for a sworn technical estimate – from an engineer or an industrial engineer enrolled in their respective professional associations, or from a licensed certifying institution – certifying that the technical features of the good justify its inclusion in the list of goods that are eligible for the lighter fiscal regime, and that the good itself is inter-connected with the company production management or supply network systems.
THE "VAT GROUP"
Businesses undertaking an enterprise, art or profession, who are located within national borders and are legally independent but strictly interconnected because of financial, economic and organizational ties, can opt for the establishment of a "VAT group" as a new and only subject liable for VAT.
If the option is exercised between 1 January 2017 and 30 September 2017, it will produce effects starting from 1 January 2018; if, instead, it is exercised between 1 October 2017 and 31 December 2017, it will produce effects starting from 1 January 2019.
After exercise of the option, it is binding for three years and is automatically renewed for each following year until revocation. The adherents to the group lose their own legal personality for purposes of VAT (in this case, the group is considered an ordinary taxable entity).
Intra-group sale of goods and supply of services will not be considered relevant for VAT application purposes. Active and passive operations between a component of the VAT group and an external entity are considered carried out by the VAT group.
BENEFITS FOR INVESTMENTS IN TECHNOLOGIES: THE "NEW" SABATINI ACT
The deadline for the granting of loans issued by financial leasing entities and banks for the purchase of new machinery, equipment and instrumentation by small and medium-sized enterprises, pursuant to article 2(2) of the Legislative Decree No. 69/2013, is extended to 31 December 2018.
Part of the allocated resources (20%) is meant to promote innovation and efficiency of the entrepreneurial productive sector, and thus the transition to what is known as "digital manufacturing", this meaning factory-new machinery, equipment and instrumentation with the purpose of investing in technology, including investments in big data, cloud computing, ultra wideband, cybersecurity, advanced robotics and mechatronics, augmented reality, 4D manufacturing, radio frequency identification ("RFID"), and garbage tracing and weighing systems.
State benefits are thus granted with a 30% increase com-pared to the maximum benefit provided for by the Legislative Decree No. 68/2013 to micro, small and medium-sized enterprises investing in the foregoing innovations.
NOVELTIES FOR INNOVATIVE START UP COMPANIES AND SMES
Enhancement of benefits for investments in innovative start-up companies and SMEs
The 2017 Italian Financial Law enhances fiscal incentives for entities investing in share capital of innovative start-up companies and SMEs:
- for individual income tax ("IRPEF") purposes, starting from 2017, the maximum deductible investment in innovative start-up companies is raised to € 1,000,000;
- for individual ("IRPEF") as well as corporate ("IRES") in-come tax purposes, the minimum period required to keep the investment in order to receive the benefit is increased to three years;
- tax credit rate for investors raises to 30% of the total investment.
At the same time, the 2017 Italian Financial Law extends tax benefits already in place for innovative start-up companies (pursuant to art. 29 of the Legislative Decree No. 179/2012) to all innovative SMEs, by removing the condition which al-lowed access to such benefits only upon the mandatory presentation of a development plan for products, services, or processes, which are entirely new or considerably improved compared to the state of the art of the relevant field.
Re-financing of self-entrepreneurship and innovative start-up companies
Several incentives destined to self-entrepreneurship have been introduced with the objective of supporting the establishment of small businesses, entirely or predominantly owned by young individuals or women, or for business development. In this view, benefits consisting in no-interest loans for a maximum of eight years covering up to 75% of total expenses are being granted.
The authorized budget for the foregoing enterprises is € 47,5 million for the year 2017 and € 47,5 million for the year 2018; the following amounts have also been allocated for the same purpose:
- one third of the financial resources available in the revolving fund established for self-entrepreneurship and self-employment; as well as
- returns on financing issued by the national Agency for the attraction of investment and business development.
In order to support the establishment and development of innovative start up companies, the allowance of the Fund for sustainable growth is increased by € 47,5 million for the year 2017 and € 47,5 million for the year 2018, to be used to provide benefits for business plans featuring considerable technological content and/or aimed at the development of goods or services in the field of digital economy.
Establishment of innovative start-up companies
The 2017 Italian Financial Law introduces new measures simplifying the incorporation of innovative start-up companies. In particular, deeds of incorporation can now be signed with the advanced authenticated electronic signature, in addition to the digital signature; the deed of incorporation is also exonerated from the related stamp duty and administrative fees.
Overture of the equity crowdfunding to all SMEs
The 2017 Italian Financial Law extends the framework concerning on-line collection of capital ("equity crowdfunding"), until now exclusively applied to innovative start-up companies and innovative SMEs, to all small and medium-sized businesses, as well as to investment organisms of collective savings or other corporate entities that mainly invest in SMEs, therefore eliminating the restrictive requirement of technological innovativeness.
RESEARCH AND DEVELOPMENT BONUS: INNOVATIONS
Tax credit for investments in research and development activities is now extended to 31 December 2020.
The amount of the tax credit, with an upper limit of € 20 million per recipient, has been raised from 25% to 50% for all additional expenses suffered compared to the average investment of the same nature made in the three fiscal years prior to the one ongoing as of 31 December 2015.
ALLOWANCE FOR CORPORATE EQUITY ("ACE")
Under an ACE, companies are able to deduct a notional interest rate on equity. The applicable rates for the calculation of the defined yield for 2017 and 2018 are settled, respectively, at 2.3% and 2.7%.
INTRODUCTION OF A BUSINESS INCOME TAX ("IRI") FOR INDIVIDUAL ENTREPRENEURS AND PARTNERSHIPS IN ORDINARY ACCOUNTING REGIME
Italian Income Tax Law ("TUIR") is amended by the addition of a new article (55-bis), providing for a new corporate income tax ("IRI") for individual entrepreneurs and partnerships in ordinary accounting regime. The option for IRI's tax regime lasts for five tax periods and is renewable.
Corporate incomes, which are not distributed by individual enterprises or partnerships, to which ordinary regulation is applied, are not regarded as a part of the overall income of the relevant person and are subject to separate taxation (as "IRI") at a rate of 24% starting from 1 January 2017.
FISCAL LOSSES OF NEWLY ESTABLISHED BUSINESSES OWNED BY PUBLICLY LISTED COMPANIES
Companies whose shares are traded in a regulated marked or in a multilateral trading facility are allowed to use the fiscal losses of their subsidiaries related to the first three years of new businesses, as long as the following conditions are met:
- the transferring and receiving companies must have the same business year;
- ownership at the end of the tax period during which the fiscal losses are transferred must amount to 20%;
- the predominant area of activity of the transferring company must not be real estate;
- the entire amount of fiscal losses must be transferred;
- the transfer must be completed by the closing date for filing the related income tax return.
INVESTOR VISA – THE NEW RESIDENCY PERMIT FOR FOREIGN INVESTORS
The 2017 Italian Financial Law introduces, starting from 2017, an important innovation to the Consolidated Law on Immigration ("TUI") concerning foreign, and specifically extra-EU, investors who intend to invest, operate and obtain a residence permit in Italy.
In sum, extra-EU citizens are now given the possibility of obtaining residency permits in Italy based on investments in government bonds, equity of Italian corporations and/or start-up companies, or following a donation in support of an Italian project of public interest (culture, art, scientific research, etc.).
An authorization to reside in Italy may thus be obtained upon the condition of an investment of at least € 2 million in state bonds, or €1 million in equity representing the capital of a company incorporated and operating in Italy
The required amount drops to €500,000 for investments in the capital of an innovative start-up company, duly registered in the appropriate section of the Companies' Register. The permit may be granted, alternatively, upon a philanthropic donation of at least €1 million.
The residency permit will be initially valid for two years, but it can be renewed for an additional period of three years. Family members of the investor will also be allowed to entry and residence.
This novelty heralds new organizational prospects for those citizens of the world who plan on investing, operating and living in Italy.
OPTION FOR A SUBSTITUTE TAX ON FOREIGN INCOMES GAINED BY INDIVIDUALS SHIFTING THEIR FISCAL RESIDENCE TO ITALY
Starting from 2017, under certain conditions, individuals who move their fiscal residence to Italy can pay a substitute tax calculated with a flat rate (€ 100,000 for each fiscal year) on foreign income.
The option for the substitute tax, which may also be extended to one or more family members who meet certain conditions (in this case, the substitute tax shrinks to € 25,000 per family member) can be revoked and always ceases to produce effects 15 years after the first fiscal year under the option. When the regime is repealed or expires, it may not be chosen again.
Income obtained in one or more foreign countries can be exonerated from the application of the substitute tax.
The option may be exercised only after receiving positive response upon submission of a specific request directed to Italian Tax Authorities.
The election is granted only if individuals have not been resident in Italy for tax purposes for a period of at least 9 fiscal years of the 10 preceding the period of validity of the option.
VAT CREDIT NOTES
In case of invoices which have been issued to entities that are subject to insolvency proceedings, or are involved in debt-restructuring agreements, or have agreed on a repayment plan in accordance with specific rules, the issuance of a VAT credit note to detract VAT depends on the unsatisfactory pursuit of insolvency proceedings, from which the reduction of the taxable income stems from.
TAX STEP UP OF LAND AND PARTICIPATIONS
The rate of the substitute tax for tax step up of land and participations is the same one set for 2016 (8%).
STEP UP OF BUSINESS ASSETS
With the exception of real estate assets the production or exchange of which constitutes the purpose of the business activity, resident corporations, entities and resident trusts that carry out commercial activity (and which are not IAS-Adopters) can step up business assets for fiscal purposes at a rate of 16% (amortizable assets) and 12% (non-amortizable assets).
Assets must be of the same homogenous category as well as equity included in the financial year ongoing as of 31 December 2015, and are still present in the financial balance sheet following the one in which the step up takes place.
The surplus of the appreciation can be relieved by means of payment of a 10% substitute tax.
Concerning real estate exclusively, the higher values recorded in balance sheets are taken into account for fiscal purposes starting from the tax period ongoing as of 1 December 2018.
TRANSFER OF ASSETS TO SHAREHOLDERS
The preferential tax regime for transfers of assets to share-holders set by the 2016 Italian Financial Law can be extended to transfers taking place between 30 September 2016 and 30 September 2017 as well.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.