Italy

The major recent changes in the Italian tax rules that occurred in the last 12 months are the following:

• Review of the Italian tax system.

• Extension of temporary measures aimed to reduce tax disputes.
• Following flooding events that affected the northern Italian regions, the Government approved special measures to support local activities.
• Approval of different corporate income tax (CIT) provisions.
• Introduction of temporary measures aimed to reduce tax disputes.
• Confirmation of the increased threshold to offset tax credits.
• Introduction of several value-added tax (VAT) and other tax provisions. 
• Reduction of the threshold to file a tax ruling on new investments.
• Timeframe extension to benefit from different tax credits.

Please note that Italy tax updates are generally expected to occur between November and December in connection with the Budget Law and approval of related laws.

Review of the Italian tax system

On March 2023 the Government approved a provision authorising to implement a review of the Italian tax system. This proposal is linked to the three-year period 2023-2025 Budget Law. The main objectives to be achieved are i) the prevention and reduction of tax evasion and avoidance; ii) the rationalisation and simplification of the tax system, through the use of technologies; iii) the review of the formalities with a reduction of administrative costs; iv) the promotion of investments and capital transfers to Italy, in compliance with European legislation; v) the consistency with the OECD recommendations on BEPS.

Extension of temporary measures aimed to reduce tax disputes

Some measures related to the so-called ’tax break‘ (i.e. ‘tregua fiscale‘), aimed to reduce tax controversy by promoting the settlement of pending tax assessments and disputes, have been extended up to 30 September 2023.

Special measures to support local activites in northern Italian regions

On May 2023 with reference to the regions of Emilia-Romagna, Marche and Tuscany, the Government approved, among others, urgent measures to address the emergency caused by the flooding events as the suspension of deadlines related to tax and social security obligations and payments. The suspension has been approved for the deadlines related to obligations and payments, including those arising from tax collection notices, from 1 May to 31 August, 2023. 

Approval of different CIT provisions

The 2023 Budget Law introduced a number of different provisions on CIT matters for corporations. Below is a short selection:

• For large retail enterprises, the rate of amortisation of instrumental plants has been extended from 3% to 6% from fiscal year (FY) 2023 up to FY 2027.
• For a correction of an error related to previous tax periods, it is no longer necessary to file a corrective return where the detected item is properly registered for accounting purposes and the statutory financial statements are audited.
• To avoid the standard taxation on dividends originated by foreign entities resident in tax havens, provided that certain conditions are met, Italian parent companies may elect a new substitute tax regime (9% to 6% tax rates) on the amounts of profits and retained reserves distributed. The payment of the substitute tax allows for an increase of the tax value of the participation when assessing the taxable base for the determination of capital gain.
• Expenses borne for transactions with entities resident or located in non-cooperative tax jurisdictions are deductible for CIT purposes within the limit of their fair market value, unless actual evidence of their economic soundness and effective execution is provided to the tax authorities. Notwithstanding all the above, a proper disclosure of such transactions is to be provided in the tax return. Penalties for omitted disclosure are introduced. Corporations applying the cooperative compliance regime can define in advance with tax authorities the fair market value for the transactions at hand.

Confirmation of the increased threshold to offset tax credits

For FY 2023, it has been confirmed that 2 million euros (EUR) is the threshold to offset tax credits (including VAT) with other taxes or social contributions via a dedicated tax form (the so-called F24 form) or through a simplified tax refund procedure.

Introduction of several VAT and other taxes provisions

The following provisions have been introduced, among others:

• Issuance of credit note also applies to the procedures regarding the negotiated settlement of the crisis (i.e. “composizione negoziata della crisi”) referred to specific provisions of the «Code of business crisis and insolvency» (i.e. “Codice della crisi d'impresa e dell'insolvenza”).
• Thresholds to opt for the settlement of VAT on a quarterly basis, starting from 1 January 2023.
• To contrast tax evasion and VAT frauds:
• New administrative penalties for the omitted reverse charge.
• New reporting requirements to be borne by the electronic interface (i.e. marketplaces, digital platforms, digital portals, and similar), implying the communication of data of suppliers and of transactions carried out. 
• New measures to prevent the opening of fictitious Italian VAT numbers. In particular, tax authorities may invite taxable persons to produce the compulsory accounting records to verify the actual activity carried out and the absence of the risk profiles.

• New temporary solidarity contribution on corporation in the energy sector.
• Plastic tax and sugar tax have been deferred to 2024.

Reduction of the threshold to file a tax ruling on new investments

As of 2023, the threshold to file a tax ruling on new investments with the tax authority has been reduced to EUR 15 million.

Timeframe extension to benefit from different tax credits

The following provisions have been extended to FY 2023, among others:

• Small and medium-sized enterprises (SMEs) that initiate the listing procedure on a regulated market or multilateral trading systems of a European Union (EU) or European Economic Area (EEA) member state and are admitted to the listing may benefit from a tax credit equal to 50% of the consultancy costs incurred, up to EUR 500,000.
• To contain the increase in the cost of energy and gas, the 2023 Budget Law has confirmed the tax credits for the first quarter of 2023, enhancing the measures as follows:
• Energy-intensive companies are granted a tax credit equal to 45% of the expenses incurred for the energy component.
• Non-energy-intensive businesses, equipped with electricity meters with available power equal to or greater than 4.5 kW, are granted a tax credit equal to 35% of the expenditure incurred for the purchase of the energy component.

• High-gas and non-high-gas consumer companies are granted a tax credit equal to 45% of the expenditure incurred for the purchase of gas, consumed in the first calendar quarter of 2023, for energy uses other than thermoelectric uses. The bonus is due if the average reference price of gas for the fourth quarter of 2022, based on data from the intraday market (MI-GAS) published by the Energy Markets Operator (GME), has undergone an increase of more than 30% compared to the average for the same quarter of 2019.