The major recent changes in the Italian tax rules that occurred in the last 12 months are the following:
- Changes to allowance for corporate equity (ACE).
- Corporate income tax (imposta sul reddito sulle società or IRES) rate reduction.
- New tax deadlines.
- Super and hyper tax depreciation.
- New provisions to prevent undue tax credits offsetting.
- New value-added tax (VAT) fulfilments.
- Integrative return 'in favour' of taxpayers.
- Changes to option for special tax regimes.
- Introduction of the European VAT group.
- Broader application of the split payment.
- Reduction of timeline in order to deduct input VAT.
Please note that Italy tax updates are generally expected to occur between November and December in connection with the finance bill and approval of related laws.
Changes to allowance for corporate equity (ACE)
The rate applicable to ACE deduction has been changed from 4.75% in fiscal year (FY) 2016 to:
- 1.6% for FY 2017.
- 1.5% for FY 2018 and onwards.
IRES rate reduction
Starting from FY 2017, the standard IRES rate is reduced from 27.5% to 24%.
New tax deadlines
Starting from 1 January 2017, some tax deadlines are changed. In detail:
- Settlement and first advance payment for IRES and region production tax (imposta regionale sulle attività produttive or IRAP) purposes will be due by the last day of the sixth month following the year-end (previously, the 16th day of the sixth month following the year-end).
- VAT return will be filed on 28 February 2017 for FY 2016 and, for the following years, on 30 April (previously, 30 September).
Please consider that only for FY 2016 (corporations with calendar year):
- IRES and IRAP settlement and 2017 first advance payments are shifted to 20 July 2017.
- Withholding tax (WHT), IRES, and IRAP returns are shifted to 31 October 2017.
Super and hyper tax depreciation
For new investments on tangible assets, the additional IRES depreciation (so-called 'super depreciation') has been extended to FY 2017. In this respect, the purchase cost is increased by 40%, bringing the taxable basis of the asset to 140%.
For new investments carried out in FY 2017 in hi-tech, cloud, ultra-broad band, industrial robotics, digital manufacturing, IT security, etc., for tax depreciation, a notional increase of the purchase cost of 150% has been introduced, bringing the IRES base of the asset to 250% (so-called 'hyper depreciation'). Specific supporting documentation is required to benefit from this provision.
New provisions to prevent undue tax credits offsetting
As for the offsetting of tax liabilities with credits related to different taxes (IRES, IRAP, WHT, substitutive taxes, etc.), the threshold beyond which is required the so-called ‘conformity mark’ (visto di conformità) on the related tax return from which such credits arise is reduced from 15,000 euros (EUR) to EUR 5,000 on a yearly basis. In addition, there is the obligation to channel the filing of the F24 through the tax authorities system (so-called Entratel) in case of offsetting tax liabilities with other tax credits.
New VAT fulfilments
Starting from FY 2017, new obligations are introduced. In particular, the quarterly communications of:
- VAT balances and
- data of invoices issued and received
will have to be periodically filed to the tax authorities to allow advance controls over the taxpayers.
Integrative return 'in favour' of taxpayers
The possibility to file an integrative tax return in favour of taxpayers within the deadlines of tax assessment has been introduced.
Changes to option for special tax regimes
From FY 2017 onwards, the automatic renewal for special regimes, such as Domestic tax consolidation, is provided.
Introduction of the European VAT group
The European VAT group (art. 11 EU Directive no. 112/2006) has been introduced in Italy. In the case of election of the VAT group, transactions between taxable persons participating in the VAT group are considered as not relevant for VAT purposes, and the VAT group operates as a single VATable person.
Broader application of the split payment
Split payment is now extended to all the administrations, entities, and subjects included in the consolidated accounts of Public Administration. It is also extended to subsidiaries of some entities of Public Administration.
Reduction of timeline in order to deduct input VAT
The right to deduct input VAT may now be exercised at the latest with the VAT return related to the year in which the right arises and under the conditions existing at the time such a right has arisen.