Different incentives have been established to attract new industry to southern Italy and certain depressed mountain areas in central and northern Italy.
The possibility of taking advantage of these rules, however, depends on the taxpayer fulfilling specific conditions and on the actual availability of financial resources by the Italian state. These financial resources generally are set in the annual financial bill.
Tax credit on training expenses for Industry 4.0 plan
A tax credit is granted that is equal to 40% of the expenses relating to costs of employees for the period in which they are employed in training activities and is recognised up to a maximum annual amount of EUR 300,000 for each taxpayer.
The tax credit can be offset in the F24 form starting from the following tax year in which the costs are incurred (therefore, for the expenses incurred in 2018, the credit may be used from 2019).
In order to be eligible for the tax credit, the costs must be certified by the statutory auditor or a professional listed in the register of statutory auditors, even for those companies without audited financial statements.
This certification must be attached to the financial statements.
A regulation will be enacted providing guidelines for the application of the tax credit.
Advertising campaign tax credit
This is a tax credit in favour of taxpayers who increase their investments in advertising means, such as daily press, magazines, local television, or radio.
The tax credit is calculated on the incremental investment in advertisements compared to the previous fiscal year; for example, between 24 June 2017 and 31 December 2017, compared to the same period of 2016.
The incremental investment has to be greater than or equal to 1%. The tax credit amounts to 75% of incremental investments and up to 90% for small, medium, and innovative start-ups.
As of FY 2018, the eligible investments include on-line press, daily press, and magazines.
A regulation is still to be issued providing guidelines for the application of the tax credit.
Patent box regime
Italian resident companies and PEs of non-resident entities that carry out research and development (R&D) activity, either directly or by outsourcing it to universities or other research institutes or equivalent institutes, may elect to apply the Italian patent box regime. The regime exempts a portion of the income derived from the exploitation, either directly or by licensing, of ‘qualifying intangible assets’.
The general exemption is 50%.
The regime can be applicable to PEs only if the non-resident entity resides in a country with which Italy has concluded a tax treaty and that allows adequate exchange of information.
The election is effective for five years and cannot be revoked during that period. Qualifying intangible assets include patents; know-how, such as industrial, commercial, or scientific information, formulas, and processes that are eligible for legal protection; and trademarks.
Taxpayers must request a specific ruling from the Italian tax authorities to benefit from the regime when the qualifying intangible is either used directly by the company or licensed to a related party.
Foreign tax credit
Where foreign-source income definitively is taxed abroad, a tax credit can be claimed for use against a company’s IRES liability. The amount of the tax credit that can be claimed is the lower of the foreign tax incurred and the proportion of the IRES liability related to the foreign-source income. For partially exempt income (e.g. dividends), the foreign tax credit is reduced in proportion to the amount of the income taxable in Italy.
If an Italian company receives foreign income from more than one country, this limitation is applied separately to each country.
Foreign taxes borne by the foreign PE of an Italian resident company are allowed to be offset against the overall consolidated tax liability (IRES).
Any excess of foreign tax credit over the maximum amount allowed for recovery in the same tax period can be carried back or carried forward for eight years and recovered if specific conditions are met (e.g. same source country of the income, occurring because of an excess of the IRES liability related to the foreign-source income).