The major recent changes in the Italian tax rules that occurred in the last 12 months are the following:
- Increase of the threshold to offset tax credits
- New 2021 tax deadlines.
- Extension of the tax credits provided by the National Plan 'Transizione 4.0' and reform of the Patent Box regime.
- Step-up of business assets.
- Italian anti-hybrid rule.
- Introduction of the 'super' allowance for corporate equity (ACE) for FY 2021.
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.
Please click here for a description of temporary tax measures in response to COVID-19.
Increase of the threshold to offset tax credits
The 2022 Budget Law increases the threshold to offset tax credits (including VAT) with other taxes or social contributions, via the F24 form, or through simplified tax refund procedure, up to 2 million Euro.
New 2021 tax deadlines
Some tax deadlines have been changed. In detail:
- Stamp duty on e-invoices: The amounts are due on a quarterly basis. Generally, the amounts have to be settled by the end of the second month following the quarter of reference, except for the second quarter, which deadline is scheduled by the end of September. However, possible postponements are applicable in case the amount due is lower than the relevant thresholds.
- Electronic filing of withholding tax (WHT) statement (so called 'Certificazione Unica') related to the simplified returns: The new ordinary deadline is scheduled on 16 March. By the same deadline, the WHT statement has to be made available to the recipient.
Extension of the tax credits provided by National Plan 'Transizione 4.0' and reform of the Patent Box regime
Law no. 234 of 30 December 2021 (so-called 'Budget Law 2022') introduced important changes in the field of tax incentives for enterprises. The law extended the measures of the National Plan 'Transizione 4.0' and modified the so-called Patent Box regime.
Step-up of the business assets
The Law Decree no. 104/2020 introduced a more favourable voluntary revaluation of the assets, with the application of a substitutive tax rate (3%) in case of election for the tax recognition of the higher values that shall be disclosed in the Financial Statements as at 31 December 2020.
In particular, the revaluation may be applicable, by the corporations and other public and private entities that carry out commercial activities, provided that they adopt the Italian Generally Accepted Accounting Principiles (ITA GAAP), to tangible and intangible assets with legal protection as well as to participation in controlled and associated companies, which are recorded among the fixed assets in the Financial Statements as at 31 December 2019.
Real estates and other immovable properties that are built or traded in the context of the business purpose of the owning taxpayers are excluded from the scope of the present provision.
The Decree recalls the discipline applicable to the previous revaluation’s law provisions of the business assets; however, unlike many of the previous versions of the same measure, each individual business asset may be the object of step-up without the obligation to extend the revaluation to all assets belonging to the same homogeneous category.
The beneficiary subjects of the measure may choose to carry out the revaluation only for statutory/accounting purposes with a consequent capital strengthening, or to opt also for the tax recognition of the higher values by means of payment of a substitutive tax equal to 3%, applicable both to the depreciable and non-depreciable assets. In both cases, the attribution of the higher values of the assets in the balance sheet will imply the recording of a corresponding revaluation reserve in the net equity.
Lastly, for those subjects who adopt the international accounting standards (the so-called 'IAS adopters'), the Decree provides for the possibility to step-up, for tax purposes only, any higher book value disclosed in the Financial Statements as at 31 December 2020 by means of payment of the substitutive tax equal to 3%.
The Law Decree no. 104/2020 also allows taxpayers to realign the tax value of the assets to their current accounting value, if higher. The substitute tax rate is the same as the one provided for the step-up regime for accounting purposes. The Budget Law 2021 also extends the same realignment option to the goodwill and other intangible assets.
The Law Decree no. 41/2021 (the so-called 'Sostegni Decree') extended the step-up regime to assets on the Financial Statements as at 31 December 2021 for statutory/accounting purposes only.
The 2022 Budget Law provided the extension of the amortisation period from eighteen years to fifty years for goodwill and trademarks stepped-up. Taxpayers can, anyway, elect either to (i) waive the step-up performed in FY 2020 crediting the 3% substitutive tax to be offset against other taxes or asking for refund or (ii) deduct over eighteen years paying an additional substitutive tax of 12-16%.
Italian anti-hybrid rule
The Italian anti-hybrid rules (hereinafter ‘Italian AHR’') were introduced by Legislative Decree no. 142/2018 (‘ATAD Decree?), Articles 6-11 (implementing EU Directive 2017/952 of 29 May 2017, also known as 'ATAD 2'). On 26 January 2022 Italy provided some clarifications with Circular Letter no. 2/2022 (hereinafter the “Circular”).
The Italian AHR entered into force starting from January 1st, 2020 for calendar year taxpayers (i.e., the tax period following the one in course as of December 31st, 2019), except for the specific reverse hybrid mismatch rule (Article 9 of the ATAD Decree), which applies starting from January 1st, 2022 (i.e., tax period following the one in course as of December 31st, 2021).
Besides, both the explanatory notes of the AHR and ATAD 2, as well as the Circular, refer to explanations and examples of the OECD Reports (i.e., HMA Report and BMA Report). Thus, they shall be regarded as a source of illustration and interpretation of the ATAD Decree to the extent that the mentioned OECD Reports are consistent with the ATAD Decree, ATAD 2 and EU law.
Generally, the AHR counteract hybrid mismatches arising from the interaction between taxpayers who are resident or located in Italy and taxpayers who are resident or located in a foreign Country (either a Member State or a third Country). From a subjective point of view, AHR apply to all taxpayers that are subject, in Italy, to income tax on business income, including permanent establishments in Italy of non-residents entities and individuals that carry out business activity in the Italian territory.
In a nutshell, AHR cover cross-border scenarios and seeks to prevent members of the same control group from exploiting inconsistencies in tax treatment of the same arrangement between different jurisdictions to achieve a cross border tax benefit.
Basically, the aim of the AHR is to deny, for tax purposes, the deductibility of negative item of income (otherwise deductible) or, alternatively, to force the inclusion of positive item of incomes (otherwise not recognized) in the taxable base of an entity, to the extent that:
- there is a cross-border mismatch (a Deduction /No Inclusion or Double Deduction);
- the mismatch is hybrid; hence it is attributable to the different tax qualification of a financial instrument (or related items of income, including hybrid transfers), of an entity (direct hybrid entity or reverse hybrid), or of a permanent establishment (including incoherent profit attribution) - hybrid element or origin test; and
- such mismatch involves related parties (including entities acting in concert) or parties under a structured arrangement (scope).
Following the OECD Recommendations, Italian AHR consist in “linking rules” that connect the tax treatment of a party to an arrangement to the tax treatment of the counterparty to the same arrangement. Additionally, to protect the integrity of Italian AHRs the ATAD Decree provides for imported mismatch rules whereby an offshore hybrid mismatch.
Introduction of the 'super' ACE for FY 2021
The Law Decree no. 73/2021 (the so-called 'Sostegni Bis Decree') introduced a measure aimed to strengthen the ACE benefit for the tax period 2021 only.
The actual rate of 1.3% has been increased to 15% on up to 5 million euros (EUR) of the 2021 net equity increases.